Team 2 Respondent E-Bundle

For hearing before the Moot Court of Final Appeal on 22 Feb 2021 at 1800 hours.
FACV XXXX/2021
Barry Chan (P, “the father”) v Annie Chan (D, “the daughter”)
LIST OF AUTHORITIES FOR THE DAUGHTER
(In the order of submission)
1. Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432
2. Lloyds Bank v Rosset [1991] 1 AC 107
3. Mo Ying v Brillex Development [2014] 3 HKLRD 224
4. Primecredit v Yeung Chun Pang Barry & Anor [2017] 4 HKLRD 327
5. Sky Heart Ltd v Lee Hysan Co Ltd (1997-98) 1 HKCFAR 318
6. Hong Kong Civil Procedure 2021, §E2/17/1
7. Re Superyield Holdings Ltd [2000] 2 HKC 90
8. British Airways Board v Lakers Airways Ltd [1985] AC 58
9. Clerk & Lindsell on Torts, 23rd Ed, §18-27 and §28-06
10. Snell’s Equity, 34th Ed, §§18-026, 18-033 and 18-034
11. Fu Wan Sang v Fu Man Kwong (unrep., HCA 16108/1000, 31 Mar 2003)
12. Chen Yu Tsui v Tong Kui Kwong [2006] 1 HKC 23
13. Khan v Mansoori [2012] 5 HKLRD 637
1
432
Stack v Dowden (HL(E)) [2007] 2 AC
House of Lords A
Stack v Dowden
[2007] UKHL 17
2007 Feb 5, 6, 7; Lord Ho›mann, Lord Hope of Craighead,
April 25 Lord Walker of Gestingthorpe, Baroness Hale of Richmond B
and Lord Neuberger of Abbotsbury
Trust of land ! Family home ! Joint interest ! Man and woman living in property
purchased in joint names ! Both parties contributing to purchase price !
Woman contributing substantially more than man ! No express agreement as to
respective bene"cial interests ! Whether man entitled to equal division of
proceeds of sale C
The parties began a relationship in 1975 and in 1983 the defendant bought a
house in her sole name in which the parties lived together as man and wife and had
four children. The defendant, who throughout their time together earned more
money than the claimant, and sometimes almost twice as much, made all the
payments due under the mortgage and paid the household bills. The parties did a
great deal of work in improving the house and in 1993 it was sold for three times the
D
!gure the defendant had originally paid for it. The parties then bought another
property, which was conveyed into their joint names, as their family home. Over
65% of the purchase price was paid out of funds from a building society account held
in the defendant"s sole name, funds which included the equity liquidated from the
sale of the previous house. The balance of the purchase price was provided by a loan
secured by a mortgage in the parties" joint names and two endowment policies, one in
their joint names and one in the defendant"s sole name. The claimant paid the
mortgage interest and the premiums due under the endowment policy in their joint E
names and the defendant paid the premiums due under the endowment policy in her
sole name. The parties kept separate bank accounts and made separate savings and
investment. Over the course of their years in the house together the mortgage loan
was paid o› by a series of lump sum payments of which the defendant provided just
under 60% of the capital. The parties separated in 2002 and the claimant left the
property while the defendant remained there with the children. The claimant
successfully applied to the judge for, inter alia, an order for sale of the property and F
an equal division of the proceeds. The Court of Appeal allowed the defendant"s
appeal and ordered that the net proceeds of sale be divided 65% to 35% in the
defendant"s favour.
On appeal by the claimant#
Held, (1) (Lord Neuberger of Abbotsbury dissenting) that where a domestic
property was conveyed into the joint names of cohabitants without any declaration
of trust there was a prime facie case that both the legal and bene!cial interests in the G
property were joint and equal; that the onus of proof lay upon any party seeking to
establish that equity should not follow the law; that such a party had to prove that the
parties had held a common intention that their bene!cial interests be di›erent from
their legal interests, and in what way; that in order to discern the parties" common
intention the court should look at the parties" whole course of conduct in relation to
the property; that the law had moved on from the presumption of a resulting trust
and many more factors other than the parties respective !nancial contributions might H
be relevant to divining their true intentions; and that when all relevant factors had
been taken into account, cases in which the joint legal owners were to be taken to
have intended that their bene!cial interests should be di›erent from their legal
interests would be very unusual ( post, paras 1, 4—5, 12—14, 26, 31, 33—34, 36, 39, 54,
56, 58, 60—61, 65—66, 68—70).
2
433
[2007] 2 AC Stack v Dowden (HL(E))
A Dicta of Chadwick LJ in Oxley v Hiscock [2005] Fam 211, paras 47—48, 69, CA
approved.
Walker v Hall [1984] FLR 126, CA and Springette v Defoe [1992] 2 FLR 388, CA
disapproved.
(2) Dismissing the appeal (Lord Neuberger of Abbotsbury concurring in the
result), that the defendant had contributed far more to the acquisition of the house
than had the claimant; that the parties had never pooled their separate !nancial
B resources for the common good and everything, apart from the house and associated
endowment policy, had been kept strictly separate; that the case was, therefore,
highly unusual as there could not be many unmarried couples in the parties" situation
who had kept their a›airs so rigidly separate; that those factors were strongly
indicative that the parties had not intended their shares in the property to be equal;
and that, accordingly, the defendant had made good her case for a 65% share of the
bene!cial interest ( post, paras 1, 11—14, 39, 86—87, 89—92, 95, 122, 137, 147, 158).
C Decision of the Court of Appeal [2005] EWCA Civ 857; [2006] 1 FLR 254
a–rmed on di›erent grounds.
The following cases are referred to in the opinions of their Lordships:

Bedson v Bedson [1965] 2 QB 666; [1965] 3 WLR 891; [1965] 3 All ER 307, CA
Bernard v Josephs [1982] Ch 391; [1982] 2 WLR 1052; [1982] 3 All ER 162, CA
Crabb v Arun District Council [1976] Ch 179; [1975] 3 WLR 847; [1975] 3 All
D ER 865, CA
Crossley v Crossley [2005] EWCA Civ 1581; [2006] 2 FLR 813, CA
Denvir v Denvir 1969 SLT 301
Drake v Whipp [1996] 1 FLR 826, CA
Dyer v Dyer (1788) 2 Cox Eq Cas 92
Eves v Eves [1975] 1 WLR 1338; [1975] 3 All ER 768, CA
Galloway v Galloway 1929 SC 160
Gissing v Gissing [1971] AC 886; [1970] 3 WLR 255; [1970] 2 All ER 780, HL(E)
E
Goodman v Gallant [1986] Fam 106; [1986] 2 WLR 236; [1986] 1 All ER 311, CA
Grant v Edwards [1986] Ch 638; [1986] 3 WLR 114; [1986] 2 All ER 426, CA
Harwood v Harwood [1991] 2 FLR 274, CA
Hine v Hine [1962] 1 WLR 1124; [1962] 3 All ER 345, CA
Huntingford v Hobbs [1993] 1 FLR 736, CA
Jones v Maynard [1951] Ch 572; [1951] 1 All ER 802
Lloyds Bank plc v Rosset [1989] Ch 350; [1988] 3 WLR 1301; [1988] 3 All ER 915,
F CA; [1991] 1 AC 107; [1990] 2 WLR 867; [1990] 1 All ER 1111, HL(E)
McFarlane v McFarlane [1972] NI 59, CA(NI)
McKenzie v Nutter 2007 SLT (Sh Ct) 17
Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549; [1986] 2 WLR 590;
[1986] 1 All ER 711, PC
Midland Bank plc v Cooke [1995] 4 All ER 562, CA
Mortgage Corpn v Shaire [2001] Ch 743; [2001] 3 WLR 639; [2001] 4 All ER 364
G Muschinski v Dodds (1985) 160 CLR 583
Newgrosh v Newgrosh (1950) 100 LJ 525, CA
Oxley v Hiscock [2004] EWCA Civ 546; [2005] Fam 211; [2004] 3 WLR 715; [2004]
3 All ER 703, CA
Pettitt v Pettitt [1970] AC 777; [1969] 2 WLR 966; [1969] 2 All ER 385, HL(E)
Rimmer v Rimmer [1953] 1 QB 63; [1952] 2 All ER 863, CA
Rogers#s Question, In re [1948] 1 All ER 328, CA
H Royal Bank of Scotland plc v Etridge (No 2) [2001] UKHL 44; [2002] 2 AC 773;
[2001] 3 WLR 1021; [2001] 4 All ER 449, HL(E)
Satchwell v McIntosh 2006 SLT (Sh Ct) 117
Springette v Defoe [1992] 2 FLR 388, CA
Steadman v Steadman [1976] AC 536; [1974] 3 WLR 56; [1974] 2 All ER 977, HL(E)
Stokes v Anderson [1991] 1 FLR 391, CA
2 AC 2007#17
3
434
Ulrich v Ulrich and Felton [1968] 1 WLR 180; [1968] 1 All ER 67, CA A
Walker v Hall [1984] FLR 126, CA
Weissenbruch v Weissenbruch 1961 SC 340
Westdeutsche Landesbank Girozentrale v Islington London Borough Council [1996]
AC 669; [1996] 2 WLR 802; [1996] 2 All ER 961, HL(E)
White v White [2001] 1 AC 596; [2000] 3 WLR 1571; [2001] 1 All ER 1, HL(E)
Yaxley v Gotts [2000] Ch 162; [1999] 3 WLR 1217; [2000] 1 All ER 711, CA
B
The following additional cases were cited in argument:
Baumgartner v Baumgartner (1987) 164 CLR 137
Burns v Burns [1984] Ch 317; [1984] 2 WLR 582; [1984] 1 All ER 244, CA
CGU International Insurance plc v AustraZeneca Insurance Co Ltd [2006]
EWCA Civ 1340; [2007] Bus LR 162, CA
Clarke v Harlowe [2005] EWHC 3062 (Ch); [2006] BPIR 636
Gorman (A Bankrupt), In re [1990] 1 WLR 616; [1990] 1 All ER 717, DC C
Le Foe v Le Foe [2001] 2 FLR 970
Wilcox v Tait [2006] EWCA Civ 1867; [2007] BPIR 262, CA
APPEAL from the Court of Appeal

This was an appeal by the claimant, Barry Alan Stack, with leave of the
House (Lord Scott of Foscote, Lord Walker of Gestingthorpe and Lord
Brown of Eaton-under-Heywood) given on 15 December 2005 from a D
decision of the Court of Appeal (Chadwick, Carnwath and Smith LJJ) given
on 13 July 2005 allowing an appeal by the defendant, Dehra Ann Dowden,
and varying an order made by Judge Levy QC at the Central London County
Court on 6 October 2004 so that, inter alia, the proceeds of sale of the
property the parties had occupied should be divided 65% to the defendant
and 35% to the claimant. E
The facts are stated in the opinion of Baroness Hale of Richmond.
Lucy Theis QC, Francis Wilkinson and Miriam Shalom for the claimant.
The declaration in the transfer deed that $$the purchasers declare that the
survivor of them is entitled to give a valid receipt for capital money arising
from a disposition of all or part of the property"" constitutes an express
declaration of trust by the parties that they held the bene!cial interest in the F
property as joint tenants in equity and that, therefore, on severance they
were each entitled to a half share. Trusts for sale are not only created by
statute: see Halsbury#s Laws of England, 4th ed, vol 48 (2000 reissue),
para 650 and Ferris & Battersby, $$The General Principles of Overreaching
and the Reforms of 1925"" (2002) 118 LQR 270, 289. If the survivor can
give a valid receipt that must mean a trust. Harwood v Harwood [1991] G
2 FLR 274 and Huntingford v Hobbs [1993] 1 FLR 736 were wrongly
decided. The approach of Vinelott J in In re Gorman (A Bankrupt) [1990]
1 WLR 616 is to be preferred: see also Mortgage Corpn v Shaire [2001]
Ch 743.
Where there is a sole legal owner the court must search for the parties"
intentions as to bene!cial ownership. Where there are joint legal owners the
parties may be presumed, at the time of purchase, to have intended that they H
both have bene!cial shares. That presumption re%ects the legal position
agreed between the parties. What the claimant contends for, however, is
that there is a presumption that joint tenants in law hold the bene!cial
interest as joint tenants in equity which can only be displaced by clear
4
435
A evidence to the contrary: see Pettitt v Pettitt [1970] AC 777, 813 and
Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549, 559. That is a
reasonable presumption from a decision to hold as joint legal owners. It is at
the very least consistent with such a decision and arguably, in the absence of
some written evidence to the contrary, not consistent with any other
decision. It is open to the court to infer from the fact of cohabitation that
during the period of cohabitation it was the common intention of the parties
B
that neither should have to account to the other in respect of expenditure
incurred by the other on the property for their joint bene!t: see Wilcox v Tait
[2007] BPIR 262, para 66.
Such a presumption would provide a much needed increased degree of
certainty for separating cohabitants. It would give the proper weight to legal
co-ownership otherwise lost if, as in many cases, an express trust is not
C found and the matter falls to be dealt with on constructive trust principles, in
which case the fact of legal co-ownership is, on the authorities, given no
weight. Without such a presumption the extent of a bene!cial share of a
cohabitant who is a legal co-owner is determined in the same way as that of a
cohabitant who is not a legal co-owner, and this would fail to re%ect the
obligations of ownership which have been assumed by both parties.
The presumption of bene!cial joint tenancy for joint legal owners re%ects
D
the reality of their situation, and in particular their obligations, only if it is a
strong presumption. This would be consistent with the use, in a case where
such a presumption is made, of equitable accounting relating to the period
following separation and, exceptionally, during cohabitation if one of the
parties had failed to discharge their ownership: see Clarke v Harlowe [2006]
BPIR 636 which was approved in Wilcox v Tait [2007] BPIR 262.
E The e›ect of the presumption that bene!cial interest should follow the
legal interest is to place the onus of proving otherwise upon the defendant.
In order to do so the defendant would need to establish on a balance of
probabilities primary facts from which it would be right to infer a contrary
intention. The presumption is not displaced by evidence of unequal
contributions. It can be displaced where: (a) there was a deed to the e›ect
that the parties were to hold bene!cially in unequal shares; (b) there was an
F
arrangement between the parties whereby all contributions towards the
property were accounted for with the intention that the parties should be
able to see, on a resulting trust basis, what their contributions had been if
and when the time came to divide the equity in the property; (c) there was
evidence of contribution to the purchase price by a third party, other than
gift. That list is not closed, other circumstances will arise.
G [Submissions were made on the facts.] The Court of Appeal ought to have
held that (i) there was a presumption that the parties held the bene!cial
interest in the property as joint tenants which arose from the fact that the
parties held legal title as joint tenants and that (ii) that presumption was not
displaced on the evidence.
In the event that the House !nds against the claimant on the above issues,
the parties" shares would fall to be determined on the principles of
H
constructive trust. The case law regarding the principles applicable to
determine the extent of a bene!cial interest under a constructive trust can be
summarised as follows: the court is entitled to undertake a survey of the
whole course of dealings between the parties in assisting the court to arrive
at a fair result. It is only if no inference can be drawn as to the probable
5
436
common understanding about the amount of the shares that the court is A
driven to apply as a rule of law the maxim $$equality is equity"": see Gissing v
Gissing [1971] AC 886, 908—909; Grant v Edwards [1986] Ch 638, 654;
Midland Bank plc v Cooke [1995] 4 All ER 652; Oxley v Hiscock [2005]
Fam 211 and Douglas, Pearce & Woodward, $$Dealing with Property Issues
on Cohabitation Breakdown"" [2007] Fam Law 36.
The essential matters which are to be taken into account by the courts are: B
(i) legal ownership of the property; (ii) the nature of the parties" relationship:
see, for example, Bernard v Josephs [1982] Ch 391; (iii) cash contributions
to the property purchase, direct or indirect; (iv) the undertaking to pay the
mortgage; (v) substantial direct contributions to mortgage payments and
endowment policies; (vi) one party paying household expenses so that the
other can pay the mortgage: see, for example, Le Foe v Le Foe [2001] 2 FLR
970; (vii) child bearing and rearing contributions, which should not result in C
a reduced share; (viii) sharing funds; (ix) contributions by way of labour;
(x) the entire course of conduct.
[Submissions were made on the facts, on whether the Court of Appeal had
been right to reverse certain of the judge"s !ndings and on whether the
claimant had been entitled to occupation rent under sections 12—15 of the
Trusts of Land and Appointment of Trustees Act 1996. Submissions were D
also made as to whether the House had jurisdiction to hear an appeal on
whether funds held in a building society account in the defendant"s sole
name were in fact joint assets. Reference was made to CGU International
Insurance plc v AstraZeneca Insurance Co Ltd [2007] Bus LR 162.]
[Lord Hoffmann. The House is against the claimant on that point.]
Christopher Lundie and Emily Saunderson for the defendant. E
[Lord Hoffmann. The House does not need to hear argument on
whether the declaration in the transfer deed constituted an express
declaration of trust.]
There should be no presumption of a bene!cial joint tenancy from joint
ownership. Since 1926 the manner in which legal title is held has been
dictated by Parliament. The starting point should be a presumption that the
parties hold as tenants in common. Any presumption of bene!cial joint F
tenancy is readily rebutted by evidence of contrary intention. Evidence
su–cient to support a resulting trust is itself su–cient to rebut the
presumption: see per Lord Upjohn in Pettitt v Pettitt [1970] AC 777,
813—814.
When it comes to the quanti!cation of the bene!cial interest, %exibility is
essential. It is legitimate to have recourse to each and every concept which G
may assist in dealing with particular facts presented to the tribunal.
Ownership depends on intention. Where the parties have agreed their
bene!cial interest that will generally be conclusive. Where there is no such
agreement the court will have to attribute to the parties a particular intent,
which may arise by presumption or inference. A good starting point is that
bene!cial interest mirrors the !nancial contributions of the parties. The
H
nature of the relationship between the parties and the manner in which each
party"s bene!cial interest arose may indicate that an $$expectation"" based
approach may be more appropriate than a $$contribution"" based approach
(in some respects some assistance may be drawn from cases concerning
proprietary estoppel.).
6
437
A A constructive trust can arise by express agreement or by inference from

conduct which manifests the common intention. It is a vindicatory institution
which equity imposes to preclude the retention or assertion of bene!cial
ownership of property: see Muschinski v Dodds (1985) 160 CLR 583;
Baumgartner v Baumgartner (1987) 164 CLR 137 and Underhill & Hayton,
Law Relating to Trusts and Trustees, 17th ed (2007), paras 3.7—3.8. An
inferred common intention trust may arise from direct contributions but not
B
from indirect contributions without some actual agreement or arrangement.
Lord MacDermott LCJ"s reasoning in McFarlane v McFarlane [1972] NI 59 is
adopted. That reasoning clearly had an impact on Lord Bridge of Harwich in
Lloyds Bank plc v Rosset [1991] 1 AC 107.
Proprietary estoppel is not a panacea. It is a useful tool in certain
circumstances. Whilst proprietary interests may be determined by intention
C there is no reason why an adjustment to those interests should not be made
through the operation of proprietary estoppel if the relationship breaks
down in circumstances not contemplated by both parties. With regard to the
elements of proprietary estoppel the submissions of Michael Crystal QC in
Lloyds Bank plc v Rosset [1991] 1 AC 107, 113—115 are adopted. The link
between the equity established and the relief is made clear by the maxim $$the
minimum equity required to do justice to the claimant"".
D
The resulting trust is the appropriate default or $$long stop"" position
because it does not depend on a !nding of a common intent. It is the
absence of intent on the part of the donor which gives rise to the resulting
trust: Underhill & Hayton, Law Relating to Trusts and Trustees, 17th ed,
paras 3.4—3.5. It arises by presumption not inference. Under a resulting
trust the bene!cial shares are proportionate to the direct contributions made
E towards the purchase price. The resulting trust may be displaced or
modi!ed by evidence of a contrary intention. There is no need for a !nding
that the contributor intended that his or her share should be limited to that
proportionate interest.
The terms of a trust must be justiciable. A trust which is de!ned by
reference to what the court considers fair in all the circumstances. For the
general principles to be applied: see Underhill & Hayton, Law Relating to
F
Trusts and Trustees, 17th ed, paras 1.1(1), 1.94, 1.95(e), 5.1.
Pettitt v Pettitt [1970] AC 777 and Gissing v Gissing [1971] AC 886 must
be looked at together. Pettitt v Pettitt [1970] AC 777 is authority for the
propositions that there is no doctrine of $$family assets"" and that carrying out
works of improvement on a property does not of itself give rise to a
bene!cial interest. There has been a tendency in later cases to treat Lord
G Diplock"s speech in Gissing v Gissing [1971] AC 886 too reverentially,
almost as if it were a statute, particularly the passage at p 909d—e. However
that passage needs to be interpreted in the light of earlier parts of his speech.
The situation which he describes (the parties intending that their interest
should be determined at a later date) arises only upon a !nding by the court
from their conduct that that is what they intended. It is not the default
position and no indication is given as to the conduct from which one could
H
make the inference. Nor is any indication given as to how the court would
give e›ect to this inferred intention. The later application by the Court of
Appeal of this passage has led to some confusion and inconsistency: see
Burns v Burns [1984] Ch 317; Stokes v Anderson [1991] 1 FLR 391;
Midland Bank plc v Cooke [1995] 4 All ER 562; Drake v Whipp [1996]
7
438
Lord Hoffmann
1 FLR 826 and Oxley v Hiscock [2005] Fam 211. The law seems to have A
gone astray and the results in the decisions in Stokes v Anderson [1991]
1 FLR 391 and Drake v Whipp [1996] 1 FLR 826 are not capable of rational
justi!cation.
The claimant"s approach leads to great uncertainty. The value judgments
which are required in the weighing and quantifying of ten di›erent factors
means an objective valuation is not possible. This was recognised by the
B
Law Commission in abandoning a broad based contribution assessment: see
Sharing Homes, A Discussion Paper (2002) (Law Com No 278) (Cm 5666).
The trial judge sought to short cut the inquiry by use of a $$partnership""
concept which is analogous to the $$family asset"" concept rejected in Pettitt v
Pettitt [1970] AC 777 and Gissing v Gissing [1971] AC 886. The Court of
Appeal did not reject speci!c !ndings of fact made by the judge but
conclusions which he reached because he did not apply the correct legal C
principles. [Submissions were made on the facts and on whether the
claimant had been entitled to occupation rent under sections 12—15 of the
Trusts of Land and Appointment of Trustees Act 1996. Reference was made
to Transfer of Land: Trusts of Land (1989) (Law Com No 181).]
Theis QC in reply. Pettitt v Pettitt [1970] AC 777 and Gissing v Gissing
[1971] AC 886 are entirely di›erent situations where one party was trying to D
establish a bene!cial interest. Here there is no doubt that the claimant has
one. Referring back to the original contributions is relevant when one party
is trying to establish a bene!cial interest. Proprietary estoppel is not helpful
in this context: see Grant v Edwards [1986] Ch 638.
The correct approach is that of Chadwick LJ in Oxley v Hiscock [2005]
Fam 211. That is the benchmark in a situation where there is an express
E
agreement that there is a shared bene!cial interest. Chadwick LJ"s approach
should not be limited to the initial cash contribution. The ten points
suggested as relevant is not a closed list of factors which should be taken into
consideration.
[Submissions were made on the facts.]
Their Lordships took time for consideration. F
25 April. LORD HOFFMANN

1 My Lords, I have had the advantage of reading in draft the opinion of
my noble and learned friend, Baroness Hale of Richmond, and for the
reasons she gives I too would dismiss the appeal.
LORD HOPE OF CRAIGHEAD G

2 My Lords, as my noble and learned friend, Baroness Hale of
Richmond, whose speech I have had the privilege of reading in draft,
indicates, this case is about the property rights of a cohabiting couple in a
house which they occupied together as their home until the breakdown of
their relationship. They have an obvious interest in the determination of
their respective property rights in such a valuable asset. But the issue
H
between them is a matter of general public interest too. It has become an
increasingly pressing social problem, as house prices rise and more and more
people are living together without getting married or entering into a civil
partnership. The situation is complicated by the fact that there is no single,
or paradigm, set of circumstances. The only feature which these cases have
8
439
Lord Hope of Craighead
A in common is that the problem has not been solved by legislation. The
legislation which enables the court to reallocate bene!cial interests in the
home and other assets following a divorce does not apply to cohabiting
couples. Otherwise the circumstances which de!ne relationships between
cohabiting couples and their property interests are in!nitely various.
3 The key to simplifying the law in this area lies in the identi!cation of
the correct starting point. Each case will, of course, turn on its own facts.
B
But law can, and should, provide the right framework. Traditionally,
English law has always distinguished between legal ownership in land and
its bene!cial ownership. The trusts under which the land is held will
determine the extent of each party"s bene!cial ownership. Where the parties
have dealt with each other at arms length it makes sense to start from the
position that there is a resulting trust according to how much each party
C contributed. Then there is the question whether the trust is truly a
constructive trust. This may be helpful in their case but in others may seem
to be a distinctly academic exercise, as my noble and learned friend, Lord
Walker of Gestingthorpe, points out. But cohabiting couples are in a
di›erent kind of relationship. The place where they live together is their
home. Living together is an exercise in give and take, mutual co-operation
and compromise. Who pays for what in regard to the home has to be seen in
D
the wider context of their overall relationship. A more practical, down-to-
earth, fact-based approach is called for in their case. The framework which
the law provides should be simple, and it should be accessible.
4 The cases can be broken down into those where there is a single legal
ownership and those where there is joint legal ownership. There must be
consistency of approach between these two cases, a point to which my noble
E and learned friend, Lord Neuberger of Abbotsbury, has drawn our attention.
I think that consistency is to be found by deciding where the onus lies if a
party wishes to show that the bene!cial ownership is di›erent from the
legal ownership. I agree with Baroness Hale that this is achieved by taking
sole bene!cial ownership as the starting point in the !rst case and by taking
joint bene!cial ownership as the starting point in the other. In this context
joint bene!cial ownership means property is assumed to be held by the
F
bene!cial owners equally. So in a case of sole legal ownership the onus is on
the party who wishes to show that he has any bene!cial interest at all, and if
so what that interest is. In a case of joint legal ownership it is on the party
who wishes to show that the bene!cial interests are divided other than
equally.
5 The advantage of this approach is that everyone will know where they
G stand with regard to the property when they enter into their relationship.
Parties are, of course, free to enter into whatever bargain they wish and, so
long as it is clearly expressed and can be proved, the court will give e›ect to
it. But for the rest the state of the legal title will determine the right starting
point. The onus is then on the party who contends that the bene!cial
interests are divided between them otherwise than as the title shows to
demonstrate this on the facts.
H
6 It is worth noting how the solution which Baroness Hale proposes !ts
in with how the problem would be addressed in Scotland, had the dwelling
which the parties purchased in joint names in 1993 been situated in, say,
Eyemouth#a few miles north of Berwick-upon-Tweed. The social
problems under which cohabiting couples live together in England and
9
440
Wales are, in general, no di›erent from those that exist in Scotland. Can it A
be said that the problem would be solved in much the same way both north
and south of the border? I think that it can. The law of property in Scotland
is, of course, di›erent and so also are Scots family law and the Scots law of
obligations. But in the case of cohabiting couples the facts would be
examined from a similar starting point.
7 Scots family law does not provide the answer to how the value of the
B
home of a cohabiting couple is to be divided between them when their
relationship terminates. Section 27(3) of the Family Law (Scotland) Act
2006 excludes a residence used by cohabitants as the sole or main residence
in which they live (or lived) together from the general rule which that section
lays down that, subject to any agreement between them to the contrary,
money derived from any allowance made by either cohabitant for their joint
household expenses or for similar purposes or any property acquired out of C
such money is to be treated as belonging to each cohabitant in equal shares.
So the solution in their case must, in the !rst instance, be found in Scots
property law. Except in cases where it can be shown that a title was held in
trust although it is ex facie absolute, Scots property law does not distinguish
between the legal and the bene!cial interests in heritable property.
8 Where the title to a dwelling house is taken in one name only, the
D
presumption is that there is sole ownership in the named proprietor. Where
it is taken in joint names those named are common owners and, if the grant
does not indicate otherwise, there is a presumption of equality of shares:
Kenneth G C Reid, The Law of Property in Scotland (1996), para 22. The
rights that are thus divided from the outset between those named in the title
in the Land Register are rights of ownership. There are no intervening
equitable interests. The presumption that the common owners are entitled E
to share the value of the property equally is however capable of being
displaced by evidence to the contrary. The analysis now moves from the law
of property to the law of obligations. This opens the door to evidence of an
agreement that the title was to be held in trust or to an examination of the
contributions which each party made to the purchase of the house and to its
upkeep and improvement during their relationship: Galloway v Galloway
F
1929 SC 160; Weissenbruch v Weissenbruch 1961 SC 340 and Denvir v
Denvir 1969 SLT 301. Proof of these matters has been made easier by the
abolition of the requirement of proof by writ or oath by section 11 of the
Requirements of Writing (Scotland) Act 1995. But cases where this exercise
is attempted are rare, in view of the weight that is attached to the state of the
title as evidence of the bene!cial ownership of the property.
9 More recently resort has been had to restitutionary remedies. In G
McKenzie v Nutter 2007 SLT (Sh Ct) 17 the title was taken in joint names.
The intention of the cohabiting couple was that they would live together as a
couple in the property, and that they would both sell their own separate
houses and apply the proceeds towards the purchase of their new home. In
the event only one party contributed the proceeds of his house towards its
purchase and paid the costs associated with maintaining and improving the
H
property. The other party continued to reside in her own house, which due
to her bad faith she did not sell. She then insisted on a division and sale of
the property. Following the state of the title, the expectation was that when
the property was sold the proceeds would be paid to the parties equally. But
an order was made that the party who had contributed everything towards
10
441
A its purchase and upkeep was to be entitled to recover the other party"s share
of the proceeds. As Sheri› Principal Lockhart explained in his judgment,
this was on the ground that she had been unjustly enriched because the
condition on which the enrichment was given, due to her bad faith, did not
materialise.
10 The law of unjust enrichment has also been invoked where the title
was taken in the name of one of the cohabitants only and they subsequently
B
separated. It was held that the other cohabitant was entitled to the return
of sums which he contributed to the purchase of the house and its
refurbishment while the parties were living there: Satchwell v McIntosh
2006 SLT (Sh Ct) 117. The problems which these very unusual cases create
are for the most part problems of fact. The law that is to be applied, now
that the former restrictions on the mode of proof have been abolished, is
C relatively uncomplicated.
11 In a case such as this, where the parties had already been living
together for about 18 years and had four children when 114 Chatsworth
Road was purchased in joint names and payments on the mortgage secured
on that property were in e›ect contributed to by each of them equally, there
would have been much to be said for adhering to the presumption of English
law that the bene!cial interests were divided between them equally. But I do
D
not think that it is possible to ignore the fact that the contributions which
they made to the purchase of that property were not equal. The relative
extent of those contributions provides the best guide as to where their
bene!cial interests lay, in the absence of compelling evidence that by the end
of their relationship they did indeed intend to share the bene!cial interests
equally. The evidence does not go that far. On the contrary, while they
E pooled their resources in the running of the household, in larger matters they
maintained their !nancial independence from each other throughout their
relationship.
12 The result might have been di›erent if greater weight could have
been given to the inclusion in the transfer of the standard-form receipt
clause. But English property law does not permit this, for the reasons
F
explained in Mortgage Corpn v Shaire [2001] Ch 743, 753. I think that
indirect contributions, such as making improvements which added
signi!cant value to the property, or a complete pooling of resources in both
time and money so that it did not matter who paid for what during their
relationship, ought to be taken into account as well as !nancial
contributions made directly towards the purchase of the property. I would
endorse Chadwick LJ"s view in Oxley v Hiscock [2005] Fam 211, para 69
G that regard should be had to the whole course of dealing between them in
relation to the property. But the evidence in this case shows that there never
was a stage when both parties intended that their bene!cial interests in the
property should be shared equally. Taking a broad view of the matter,
therefore, I agree that the order that the Court of Appeal made provides the
fairest result that can be achieved in the circumstances.
H
13 For these reasons, and those given by Baroness Hale, with which
I am in full agreement, I would dismiss the appeal.
LORD WALKER OF GESTINGTHORPE

14 My Lords, I have had the advantage of reading in draft the opinion
of my noble and learned friend, Baroness Hale of Richmond. Having done
11
442
Lord Walker of Gestingthorpe
so I have set aside as redundant most of the opinion which I had prepared. A
I cannot usefully add to, still less improve upon, her account of the human
and social issues involved, the practicalities of registered conveyancing, and
the particular (and in some ways unusual) facts that have led to this appeal
reaching your Lordships" House. I am in full agreement with the
observation in para 68 of Lady Hale"s opinion, which I take to be of central
importance to her reasoning and conclusions, that in cases where a house or
B
%at has been registered in the joint names of a married or cohabiting couple
(but with no express declaration of trust) there will be a considerable burden
on whichever of them asserts that their bene!cial interests are unequal, and
do not follow the law.
15 I am not sure that I can usefully add anything at all to Lady Hale"s
opinion. But it may be worth saying something, as a sort of extended
footnote, about the theoretical underpinning of this area of the law, and its C
development since those issues were considered by this House in Pettitt v
Pettitt [1970] AC 777; Gissing v Gissing [1971] AC 886 and Lloyds Bank plc
v Rosset [1991] 1 AC 107. Those cases shared three features not present in
this case: 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
D
work and expenditure on the property. This last feature made them (as Lord
MacDermott LCJ said of the !rst two in McFarlane v McFarlane [1972]
NI 59, 66) $$not such as to facilitate or encourage a comprehensive statement
of this vexed branch of the law.""
16 Until the end of the 1960s most of the reported cases are concerned
with disputes between married couples, and many of them focus on the issue
of whether section 17 of the Married Women"s Property Act 1882 (45 & 46 E
Vict c 75) was purely procedural, or gave the court a discretion to vary the
parties" bene!cial interests to accord with the court"s view of what was fair.
The controversy is well illustrated by Bedson v Bedson [1965] 2 QB 666, in
which Russell LJ di›ered from Lord Denning MR. That section 17 is only
procedural, and does not confer any wide discretion, was !nally and
unanimously settled by this House in Pettitt v Pettitt [1970] AC 777. The
F
House was also unanimous in the view that the actual disposal of the appeal
(absent a wide discretion under section 17) presented few di–culties. It was
almost unanimous in rejecting any general doctrine of $$family assets"" and in
the view that (at least as between husband and wife) the presumption of
advancement was no longer appropriate for determining property disputes.
17 There was however little else on which the House agreed, either in
Pettitt v Pettitt [1970] AC 777 or in Gissing v Gissing [1971] AC 886. G
Revisiting these cases with hindsight derived from a further 35 years or so of
reported decisions, we can discern that of all the questions to be asked about
$$common intention"" trusts as they emerge from Pettitt v Pettitt and Gissing
v Gissing, the most crucial is whether the court must !nd a real bargain
between the parties, or whether it can (in the absence of any su–cient
evidence as to their real intentions) infer or impute a bargain.
H
18 In seeking to answer that question we must, I think, focus on the two
speeches of Lord Diplock, since these (and especially his later speech in
Gissing v Gissing) have been hugely in%uential in the later development of
the law. In Pettitt v Pettitt [1970] AC 777, 822e, Lord Diplock saw the
court"s task as being to ascertain the $$common intention"" of the parties. He
12
443
A saw this as a task to be carried out, not by reference to the old presumptions
of advancement and resulting trust, but by examining the facts and imputing
an intention to the parties. He saw this as a $$familiar legal technique,""
comparable to !nding an implied term in a contract. Lord Diplock used the
word $$impute"" (in various parts of speech) at least eight times in the crucial
passage, between pp 822h and 825e.
19 Pettitt v Pettitt was decided in April 1969. It was followed by
B
Gissing v Gissing [1971] AC 886, decided in July 1970. Three of the
Appellate Committee, Lord Reid, Lord Morris of Borth-y-Gest and
Lord Diplock, had sat on Pettitt v Pettitt. In his speech Lord Diplock
acknowledged, at p 904e—f, that he had been in a minority in Pettitt v Pettitt
and that $$I must now accept the majority decision that, put in this form at
any rate, this is not the law."" But then having in Pettitt v Pettitt dismissed the
C resulting trust as old-fashioned and inappropriate, in Gissing v Gissing
[1971] AC 886, 905, Lord Diplock apparently equated it to a constructive
trust:
$$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
D 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 bene!cial
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 bene!cial interest in the land.""
E
20 Lord Diplock then proceeded to explain the circumstances in which
the court would !nd a $$resulting, implied or constructive trust"", and in
particular when the court would $$infer [the parties"] common intention from
their conduct"": p 906b. The very important passage which follows, at
pp 906b—910a, uses the word $$infer"" (in various parts of speech) at least
23 times. But for the substitution of the word $$infer"" for $$impute"" the
F
substance of the reasoning is, it seems to me, essentially the same (although
worked out in a good deal more detail) as Lord Diplock"s reasoning in Pettitt
v Pettitt [1970] AC 777, when he was in the minority.
21 Since then Lord Diplock"s speech in Gissing v Gissing has dominated
this area of the law. It was seized on with particular enthusiasm by Lord
Denning MR (see for instance his observations in Eves v Eves [1975] 1 WLR
G 1338, 1341: $$Lord Diplock brought it into the world and we have nourished
it""). Other judges have been less enthusiastic, being oppressed by the $$air of
unreality about the whole exercise"": Gri–ths LJ in Bernard v Josephs [1982]
Ch 391, 404. The whole problem is very helpfully discussed in chapter 10
of Gray & Gray, Elements of Land Law, 4th ed (2005), especially (as to
the lack of reality of the bargain requirement) paras 10.92 to 10.99. Your
Lordships may think that only a judge of Lord Diplock"s stature could have
H
achieved such a remarkable reversal of the tidal %ow of authority as has
followed on his speech in Gissing v Gissing [1971] AC 886. But it might
have been better for the long-term development of the law if this House"s
rejection of $$imputation"" in Pettitt v Pettitt [1970] AC 777 had been openly
departed from (under the statement as to judicial precedent made by the
13
444
Lord Chancellor in 1966) rather than being circumvented by the rather A

ambiguous (and perhaps deliberately ambiguous) language of $$inference.""
22 In Pettitt v Pettitt [1970] AC 777 there was a clear majority as to the
need for an actual bargain, however imprecisely expressed: see Lord Morris
of Borth-y-Gest, at p 804e—g, Lord Hodson, at p 810e—f and Lord Upjohn,
at p 817g. Only Lord Reid, as I understand his speech, at p 795d and
p 796d, showed some sympathy for Lord Diplock"s views on $$imputation."" B
In Gissing v Gissing [1971] AC 886 Lord Reid"s opinion was again
inconclusive, as I understand it but, paradoxically, Lord Reid, at p 897f—g,
seems to have found $$imputation"" a more readily acceptable solution than
$$inference"" (which is the recurring theme of Lord Diplock"s speech). Lord
Morris, at p 898c, and Viscount Dilhorne, at p 900e—f considered that the
court could not construct a bargain for the parties if they had not made one.
Lord Pearson, at p 902g—h, like Lord Reid, favoured imputation, apparently C
equating it with inference.
23 Lord Diplock"s insouciant approach to legal taxonomy in the
passage which I have quoted above has attracted a good deal of attention
from legal scholars, but relatively little judicial comment. In Gissing v
Gissing [1971] AC 886 itself Lord Reid, at p 896f, Lord Morris, at p 898b,
and Viscount Dilhorne, at p 901a, simply repeated the formula which D
appears in section 53(2) of the Law of Property Act 1925, $$resulting, implied
or constructive trust."" Lord Pearson, at p 902b, speci!ed a resulting trust as
the correct basis (so had Lord Upjohn in Pettitt v Pettitt [1970] AC 777,
813g—815g, with great emphasis and at some length; he had also referred to
estoppel, but only to exclude it). In Pettitt v Pettitt Lord Reid had made a
passing reference to unjust enrichment, at p 795g—h, but found it unhelpful.
E
The law of Scotland has developed the principle of unjust enrichment in
this area, as my noble and learned friend, Lord Hope of Craighead, has
explained. So have some Commonwealth jurisdictions. But neither side
urged it on your Lordships, and I think it would be unwise for the House
to make such a signi!cant change of course in advance of the Law
Commission"s proposals. A signi!cant judicial comment on the importance
of taxonomy in this area was made by Peter Gibson LJ in Drake v Whipp F
[1996] 1 FLR 826, a case which was discussed at length by Chadwick LJ in
Oxley v Hiscock [2005] Fam 211, 242—245. But before coming to that
I must refer to the third of the trio of cases in this House, Lloyds Bank plc v
Rosset [1991] 1 AC 107.
24 In Lloyds Bank plc v Rosset [1991] 1 AC 107 the Appellate
Committee (no doubt conscious of the widely di›ering views expressed in G
Pettitt v Pettitt [1970] AC 777 and Gissing v Gissing [1971] AC 886)
concurred in a single speech by the presiding Law Lord, Lord Bridge of
Harwich. The wife claimed (against a bank which was her separated
husband"s secured creditor) an interest in the matrimonial home (which had
been purchased ten years after the marriage and was held in the husband"s
sole name). She relied on a common understanding or intention arising out
of her own e›orts in arranging for extensive renovation works and herself H
carrying out some redecoration: the judge"s !ndings on this are at [1991]
1 AC 107, 129f—131b. At !rst instance she succeeded on the issue of
bene!cial interest but failed on a conveyancing issue. She won her appeal
[1989] Ch 350; Purchas and Nicholls LJJ, Mustill LJ dissenting on a
14
445
A conveyancing issue. The House of Lords allowed the bank"s appeal on the
short ground expressed by Lord Bridge, at p 131f:
$$The judge"s view that some of this work was work $upon which she
could not reasonably have been expected to embark unless she was to
have an interest in the house" seems to me, with respect, quite untenable.""
25 Lord Bridge then asked himself whether it was worthwhile to add
B
any general remarks by way of illumination of the law. He limited himself to
drawing attention to one $$critical distinction"". If, at p 132e—g, there is to be
a !nding of an actual $$agreement, arrangement, or understanding"" between
the parties it must $$be based on evidence of express discussions between the
partners, however imperfectly remembered and however imprecise their
terms may have been"". Lord Bridge continued, at pp 132—133:
C
$$In sharp contrast with this situation is the very di›erent one where
there is no evidence to support a !nding 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 to
the basis from which to infer a common intention to share the property
D bene!cially 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.""
E In concurring in this passage the House was unanimously, if unostentiously,
agreeing that a $$common intention"" trust could be inferred even when there
was no evidence of an actual agreement. Apart from two bare references,
at p 132g and p 133f, to $$a constructive trust or a proprietary estoppel""
Lord Bridge did not refer to the elaborate arguments of counsel, at
pp 110—125, addressed to him as to the varieties and interaction of these two
concepts.
F
26 Lord Bridge"s extreme doubt $$whether anything less will do"" was
certainly consistent with many !rst-instance and Court of Appeal decisions,
but I respectfully doubt whether it took full account of the views (con%icting
though they were) expressed in Gissing v Gissing [1971] AC 886 (see
especially Lord Reid, at pp 896g—897b, and Lord Diplock, at p 909d—h). It
has attracted some trenchant criticism from scholars as potentially
G productive of injustice: see Gray & Gray, Elements of Land Law, 4th ed,
paras 10.132—10.137, the last paragraph being headed $$A More Optimistic
Future"". Whether or not Lord Bridge"s observation was justi!ed 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.
H
27 Any new legislation is likely to give the court new statutory
discretions comparable to (but probably less far-reaching than) those
exercisable under the Matrimonial Causes Act 1973 (as amended). The law
would then become more %exible (and so better able to avoid injustice) but
at the price of uncertainty and a possible increase in the volume of litigation
15
446
costs falling on parties with limited resources. But already there is a good A
deal of uncertainty and the possibility of high litigation costs, as this
regrettable case shows. Lady Hale"s opinion points the way to making the
outcome of this type of case more predictable, so that parties can be advised
with more con!dence as to appropriate terms of settlement. Of course there
will always remain the risk that ill-feeling between a separated couple will
cloud the view of one or both of them as to where their best interests lie.
B
28 On the assumption that there is not to be some dramatic extension of
the law of unjust enrichment, it is reasonably clear that the correct approach
to this area lies not in contract law but in looking for a bene!cial interest
under a trust of some sort (or, possibly, an equity of some sort under a form
of proprietary estoppel#but I shall put that on one side for a moment).
Whether the trust should be regarded as a resulting trust or a constructive
trust may seem a distinctly academic inquiry, especially as there is so much C
debate as to the true nature of a resulting trust (for a recent summary of the
debate: see Underhill & Hayton, Law relating to Trusts and Trustees, 17th
ed (2007), paras 3.3—3.5). But it is of some importance in understanding the
signi!cance of direct or indirect contributions to the acquisition of the
property in question.
29 In Drake v Whipp [1996] 1 FLR 826, 827 (a cohabitation case in
D
which the property was in the man"s sole name, though both had made direct
contributions both to the purchase of a barn and to its expensive conversion
into a home) Peter Gibson LJ observed:
$$A potent source of confusion, to my mind, has been suggestions that it
matters not whether the terminology used is that of the constructive trust,
to which the intention, actual or imputed, of the parties is crucial, or that
E
of the resulting trust which operates as a presumed intention of the
contributing party in the absence of rebutting evidence of actual
intention.""
30 Drake v Whipp was an odd case because Mrs Drake"s argument was
that there was no common intention and that the judge should simply apply
the presumption as to a resulting trust by reference to the barn"s initial
F
purchase costs (of which she paid just over 40%) and not by reference to the
total costs of purchase and conversion (of which her share was just under
20%). But the judge found, at p 829, that there was a common intention:
$$To purchase the property and carry out a conversion in accordance with
plans earlier approved and that each should contribute, according to his or
her ability, to the ultimate cost."" He treated this as giving rise to a
constructive trust in the proportions of about 80% for Mr Whipp and 20% G
for Mrs Drake.
31 Peter Gibson LJ (with whom Hirst LJ and Forbes J agreed) said,
at p 830, that it would $$be arti!cial in the extreme to proceed to decide this
appeal on the false footing that the parties" shares are to be determined in
accordance with the law on resulting trusts"". On the facts of that case,
applying the doctrine of a resulting trust in the way that Mrs Drake
H
proposed would have been doubly arti!cial, as it would have unnaturally
split the project into two elements, only one of which was to be taken into
account in the resulting trust exercise; and it would have ignored the parties"
actual common intention for the project as a whole. Their common
intention, as found by the judge, was for bene!cial ownership in shares
16
447
A corresponding to their overall contributions. In a case about bene!cial

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 signi!cant contributions, direct or indirect, in
cash or in kind) happen to be re%ected in the parties" common intention.
32 I would (at the risk of confusion) add one quali!cation. The doctrine
B
of a resulting trust (as understood by some scholars) may still have a useful
function in cases where two people have lived and worked together in what
has amounted to both an emotional and a commercial partnership. The
well-known Australian case of Muschinski v Dodds (1985) 160 CLR 583 is
an example. The High Court of Australia di›ered in their reasoning, but
I !nd the approach of Deane J, at p 623, persuasive:
C
$$That property was acquired, in pursuance of the consensual
arrangement between the parties, to be held and developed in accordance
with that arrangement. The contributions which each party is entitled to
have repaid to her or him were made for, or in connection with, its
purchase or development. The collapse of the commercial venture and
the failure of the personal relationship jointly combined to lead to a
D situation in which each party is entitled to insist upon realisation of the
asset, repayment of her or his contribution and distribution of any
surplus.""
However, Deane J described this as a constructive trust, and he had earlier,
at p 612, treated a resulting trust as excluded by evidence of the parties"
common purpose (building and running an arts and crafts centre), even
E though that purpose had failed. Professor Birks would have treated this as a
resulting trust: see Restitution and Equity (ed Birks & Rose), vol 1 (2000),
pp 275—279. Other scholars disagree. Drake v Whipp [1996] 1 FLR 826
might have been analysed in this way so as to produce the same result, but
only if the whole of each party"s contribution had been taken into account in
applying the resulting trust.
33 In the ordinary domestic case where there are joint legal owners
F
there will be a heavy burden in establishing to the court"s satisfaction that an
intention to keep a sort of balance-sheet of contributions actually existed, or
should be inferred, or imputed to the parties. The presumption will be that
equity follows the law. In such cases the court should not readily embark on
the sort of detailed examination of the parties" relationship and !nances that
was attempted (with limited success) in this case. I agree with Lady Hale
G that this is, on its facts, an exceptional case.
34 In those cases (it is to be hoped, a diminishing number) in which such
an examination is required the court should in my opinion take a broad view
of what contributions are to be taken into account. In Gissing v Gissing
[1971] AC 886, 909g, Lord Diplock referred to an adjustment of
expenditure $$referable to the acquisition of the house."" $$Referable"" is a
word of wide and uncertain meaning. It would not assist the development of
H
the law to go back to the sort of di–culties that arose in connection with the
doctrine of part performance, where the act of part performance relied on
had to be $$uniquely referable"" to a contract of the sort alleged: see Steadman
v Steadman [1976] AC 536. Now that almost all houses and %ats are bought
with mortgage !nance, and the average period of ownership of a residence is
17
448
a great deal shorter than the contractual term of the mortgage secured on it, A
the process of buying a house does very often continue, in a real sense,
throughout the period of its ownership. The law should recognise that by
taking a wide view of what is capable of counting as a contribution towards
the acquisition of a residence, while remaining sceptical of the value of
alleged improvements that are really insigni!cant, or elaborate arguments
(suggestive of creative accounting) as to how the family !nances were
B
arranged.
35 That is in my view the way in which the law can be seen developing
through a considerable number of decisions of the Court of Appeal, of which
I would single out Grant v Edwards [1986] Ch 638 (before Lloyds Bank plc
v Rosset [1991] 1 AC 107) and then Stokes v Anderson [1991] 1 FLR 391,
Midland Bank plc v Cooke [1995] 2 All ER 562 and Oxley v Hiscock [2005]
Fam 211. In the last-mentioned case Chadwick LJ summarised the law as C
follows, at para 69, Lord Bridge"s $$second category"" cases):
$$But, in a case where there is no evidence of any discussion between
them as to the amount of the share which each was to have#and even in a
case where the evidence is that there was no discussion on that point#the
question still requires an answer. It must now be accepted that (at least in
this court and below) the answer is that each is entitled to that share D
which the court considers fair having regard to the whole course of
dealing between them in relation to the property. And, in that context,
$the whole course of dealing between them in relation to the property"
includes the arrangements which they make from time to time in order to
meet the outgoings (for example, mortgage contributions, council tax and
utilities, repairs, insurance and housekeeping) which have to be met if
E
they are to live in the property as their home.""
36 That summary was directed at cases where there is a single legal
owner. In relation to such cases the summary, with its wide reference to $$the
whole course of dealing between them in relation to the property"", is in my
opinion a correct statement of the law, subject to the quali!cations in
paras 61 et seq of Lady Hale"s opinion. I would only add that Chadwick LJ
F
did not refer to contributions in kind in the form of manual labour on
improvements, possibly because that was not an issue in that case. For
reasons already mentioned, I would include contributions in kind by way of
manual labour, provided that they are signi!cant.
37 I add a brief comment as to proprietary estoppel. In paras 70 and
71 of his judgment in Oxley v Hiscock [2005] Fam 211 Chadwick LJ
considered the conceptual basis of the developing law in this area, and G
brie%y discussed proprietary estoppel, a suggestion !rst put forward by Sir
Nicolas Browne-Wilkinson V-C in Grant v Edwards [1986] Ch 638, 656.
I have myself given some encouragement to this approach (Yaxley v Gotts
[2000] Ch 162, 177) but I have to say that I am now rather less enthusiastic
about the notion that proprietary estoppel and $$common interest""
constructive trusts can or should be completely assimilated. Proprietary
H
estoppel typically consists of asserting an equitable claim against the
conscience of the $$true"" owner. The claim is a $$mere equity"". It is to be
satis!ed by the minimum award necessary to do justice (Crabb v Arun
District Council [1976] Ch 179, 198), which may sometimes lead to no more
than a monetary award. A $$common intention"" constructive trust, by
18
449
A contrast, is identifying the true bene!cial owner or owners, and the size of
their bene!cial interests.
38 Your Lordships have in this case had the bene!t of well-focused
written and oral submissions from counsel, and helpful citation of relevant
academic material. In addition to those mentioned by Lady Hale I have
found a good deal of food for thought in chapter 10 (the divisions of assets
B
on the breakdown of intimate relationships) of Craig Rotherham,
Proprietary Remedies in Context (2002).
39 For the reasons given by Lady Hale, to which the above reasons are
merely a supplement, I would dismiss this appeal.
BARONESS HALE OF RICHMOND

40 My Lords, the issue before us is the e›ect of a conveyance into the
C joint names of a cohabiting couple, but without an explicit declaration of
their respective bene!cial interests, of a dwelling house which was to become
their home. This is, so far as I am aware, the !rst time that this issue has
come before the House, whether the couple be married or, as in this case,
unmarried. The principles of law are the same, whether or not the couple are
married, although the inferences to be drawn from their conduct may be
D
di›erent: Bernard v Josephs [1982] Ch 391, 402, per Gri–ths LJ.
How does this problem come about?

41 It may be that, in practice, this is a temporary and transitional
problem. It has come about because of developments over the last few
decades which would not have been foreseen when the applicable principles
and presumptions were !rst devised. The !rst development is, of course, the
E
huge expansion in home ownership which has taken place since the Second
World War and was given a further boost by the $$right to buy"" legislation of
the 1980s. Coupled with this has been continuing house price in%ation,
albeit with occasional interruptions such as occurred at the end of the 1980s.
This has meant that it is almost always more advantageous for someone who
has contributed to the acquisition of the home to claim a share in its
F ownership rather than the return of the money contributed, even with
interest.
42 Another development has been the recognition in the courts that, to
put it at its lowest, the interpretation to be put on the behaviour of people
living together in an intimate relationship may be di›erent from the
interpretation to be put upon similar behaviour between commercial men.
G To put it at its highest, an outcome which might seem just in a purely
commercial transaction may appear highly unjust in a transaction between
husband and wife or cohabitant and cohabitant. This recognition developed
in a series of cases between separating spouses, beginning with In re Rogers#s
Question [1948] 1 All ER 328; Newgrosh v Newgrosh (1950) 100 LJ 525;
Jones v Maynard [1951] Ch 572 and Rimmer v Rimmer [1953] 1 QB 63.
There was a period during which it was thought that the problem might be
H solved by resort to the power contained in section 17 of the Married
Women"s Property Act 1882, in disputes between husband and wife as to the
title to or possession of property, to make such order $$as it thinks !t"". The
high-water mark of this approach was Hine v Hine [1962] 1 WLR 1124,
1127—1128, in which Lord Denning MR held that this discretion
2 AC 2007#18
19
450
Baroness Hale of Richmond
$$transcends all rights, legal or equitable"". That section 17 conferred any A

discretion to interfere with established titles was !rmly rejected by this
House in Pettitt v Pettitt [1970] AC 777. Nevertheless, the opinions in that
case and in Gissing v Gissing [1971] AC 886 contain vivid illustrations of
how di–cult it is to apply simple assumptions to the complicated,
interdependent and often-changing arrangements made between married
couples. As Lord Reid famously put it in Gissing v Gissing, at p 897a, $$It
B
cannot surely depend on who signs which cheques"".
43 As between married couples, the problem has been addressed (if not
solved) by the comprehensive redistributive powers in the Matrimonial
Causes Act 1973, if the couple divorce, and in the Inheritance (Provision for
Family and Dependants) Act 1975, if one of them dies. The question of who
owns what takes second place to the statutory criteria and the approach to
those criteria established in cases such as White v White [2001] 1 AC 596. C
The 1975 Act also gives some more limited help to the survivor of an
unmarried cohabiting couple. (Neither, of course, is of any assistance in
third party challenges, for example from other relatives.)
44 Inter vivos disputes between unmarried cohabiting couples are still
governed by the ordinary law. These disputes have become increasingly
visible in recent years as more and more couples live together without
D
marrying. The full picture has recently been painted by the Law
Commission in Cohabitation: The Financial Consequences of Relationship
Breakdown#A Consultation Paper, (2006) Consultation Paper No 179,
Part 2, and its overview paper, paras 2.3—2.11. For example, the 2001
Census recorded over 10m married couples in England and Wales, with over
7.5m dependent children; but it also recorded over 2m cohabiting couples,
with over 1.25m children dependent upon them. This was a 67% increase in E
cohabitation over the previous ten years and a doubling of the numbers of
such households with dependent children. The Government Actuaries
Department predicts that the proportion of couples cohabiting will continue
to grow, from the present one in six of all couples to one in four by 2031.
45 Cohabitation comes in many di›erent shapes and sizes. People
embarking on their !rst serious relationship more commonly cohabit than
F
marry. Many of these relationships may be quite short-lived and childless.
But most people these days cohabit before marriage#in 2003, 78.7% of
spouses gave identical addresses before marriage, and the !gures are even
higher for second marriages. So many couples are cohabiting with a view to
marriage at some later date#as long ago as 1998 the British Household
Panel Survey found that 75% of current cohabitants expected to marry,
although only a third had !rm plans: John Ermisch, Personal Relationships G
and Marriage Expectations (2000) Working Papers of the Institute of Social
and Economic Research: Paper 2000—27. Cohabitation is much more likely
to end in separation than is marriage, and cohabitations which end in
separation tend to last for a shorter time than marriages which end in
divorce. But increasing numbers of couples cohabit for long periods without
marrying and their reasons for doing so vary from conscious rejection of
H
marriage as a legal institution to regarding themselves $$as good as married""
anyway: Law Commission, Consultation Paper No 179, Part 2, para 2.45.
There is evidence of a wide-spread myth of the $$common law marriage"" in
which unmarried couples acquire the same rights as married after a period
of cohabitation: Anne Barlow, et al, $$Just a Piece of Paper? Marriage and
20
451
A Cohabitation"", in Alison Park, et al (eds), British Social Attitudes: Public

policy, social ties. The 18th Report, (2001), pp 29—57. There is also
evidence that $$the legal implications of marriage are a long way down the
list of most couples" considerations when deciding whether to marry"": Law
Commission, Consultation Paper No 179, Part 5, para 5.10.
46 The history of attempts at law reform is another illustration of the
complexity of the problem. Under item 1 of its Eighth Programme of Law
B
Reform (2001) (Law Com No 274), the Law Commission set out to review
$$the law as it relates to the property rights of those who share a home"" (the
Commission had in fact been working on the problem for some time). This
therefore covered $$a broad range of people, including friends and relatives
who share a home as well as unmarried couples and married couples (other
than on the breakdown of the marriage)"". It commented that
C
$$It is widely accepted that the present law is unduly complex, arbitrary
and uncertain in its application. It is ill-suited to determining the
property rights of those who, because of the informal nature of their
relationship, may not have considered their respective entitlements.""
In 2002, however, the commission published Sharing Homes, A Discussion
Paper (2002) (Law Com No 278). Unlike most Law Commission
D
publications, this did not contain even provisional, let alone !nal, proposals
for reform. Its principal conclusion was that:
$$It is quite simply not possible to devise a statutory scheme for the
ascertainment and quanti!cation of bene!cial interests in the shared
home which can operate fairly and evenly across the diversity of domestic
circumstances which are now to be encountered."" (Para 1.31.)
E
While this conclusion is not surprising, its importance for us is that the
evolution of the law of property to take account of changing social and
economic circumstances will have to come from the courts rather than
Parliament.
47 It may be otherwise with the law of personal relationships. The Law
Commission"s Ninth Programme of Law Reform (2005) (Law Com No 293)
F
announced, at Part 3, para 3.6, a project focusing $$on the !nancial
hardship su›ered by cohabitants or their children on the termination of the
relationship by breakdown or death"". Thus it was considering whether
de!ned relationships might give rise to discretionary remedies to make
speci!c capital or income provision on separation or death. Provisional
proposals, not unlike those which have been enacted in the Family Law
G (Scotland) Act 2006, were made in Consultation Paper No 179 (referred to
in para 44 above) and the Commission intends to publish its !nal report by
August 2007. As the Commission undertook this project at the invitation of
the Government, there may be a real chance that its proposals will be
implemented. But, unlike most Law Commission reports, this one will not
contain a draft Bill. Implementation will therefore depend, not only upon
whether its proposals !nd favour with Government, but also on whether the
H
resources can be found to translate them into workable legislative form.
48 It is fair to assume, therefore, that the questions with which the
courts are confronted in these cases will continue to be with us for some time
to come. Nor will the Commission"s proposals provide a solution to the
precise question which arises in this case#the e›ect of a conveyance into
21
452
joint names without express declaration of the bene!cial interests. A

However, there is some reason to hope that, just as this problem may have
arisen because of changes in conveyancing practice over recent decades, it
may eventually be resolved in the same way.
49 In the olden days, before registration of title on certain events,
including a conveyance on sale, became compulsory all over England and
Wales, conveyances of unregistered land into joint names would in practice
B
declare the purchasers" bene!cial as well as their legal interests. No one now
doubts that such an express declaration of trust is conclusive unless varied by
subsequent agreement or a›ected by proprietary estoppel: see Goodman v
Gallant [1986] Fam 106. That case also establishes that severance of a
bene!cial joint tenancy results in a bene!cial tenancy in common in equal
shares. Lord Denning MR"s attempt in Hine v Hine [1962] 1 WLR 1124, to
use section 17 of the Married Women"s Property Act 1882 to interfere even C
with express declarations of trust was !rmly rejected by this House in Pettitt
v Pettitt [1970] AC 777; his suggestion, in Bedson v Bedson [1965] 2 QB
666, that severance might not automatically lead to a tenancy in common in
equal shares was rightly rejected in Goodman v Gallant [1986] Fam 106.
The e›ect of such a conveyance is clear, irrespective of why the property was
conveyed into joint names and of the parties" later dealings in relation to it.
D
50 The question with which we are concerned has become apparent
with the spread of registration of title. The formalities required for the
transfer of registered land were designed to meet the concerns of the Land
Registry rather than the parties. The Land Registry is not concerned with the
equities. It is concerned with whether the registered proprietor or
proprietors can give a good title to a later transferee. This is entirely
consistent with the simpli!cation of conveyancing in the 1925 property E
legislation, which was designed to allow the legal owners of land to pass a
good title to bona !de purchasers for value without notice of the equities
existing behind the legal title. But it meant that the form of transfer
prescribed by the Land Registry did not require, or even give an obvious
opportunity to, the transferees to state their bene!cial interests as well as
their legal title. When this house was bought in 1993, all that the form
F
required was all that the Land Registry needed to know. This was whether
the survivor of joint proprietors was able to give a valid receipt for the
capital moneys received on sale: see Form 19(JP) prescribed under rules 98,
109 or 115 of the Land Registration Rules 1925 (SR & O 1925/1093). The
version of this form in use from 1995 to 1998 did not even require this;
indeed, it did not require execution by the transferee(s) at all but only by the
transferor(s). G
51 The argument that declaring that the survivor $$can give a valid
receipt for capital money arising on a disposition of the land"" in itself
amounts to an express declaration of a bene!cial joint tenancy was rightly
rejected by the Court of Appeal in Harwood v Harwood [1991] 2 FLR 274
and again in Huntingford v Hobbs [1993] 1 FLR 736; see also Mortgage
Corpn v Shaire [2001] Ch 743. However appealing the proposition might at
H
!rst sight appear, choosing $$can"" rather than $$cannot"" on the form is
consistent with other intentions. The transferees may hold on trust for a
third person or they may intend that, while the survivor can give a good title
to a third party without appointing a new trustee, the capital moneys
received should be subject to di›erent trusts. Whether the declaration (one
22
453
A way or the other) is some indication of what the parties did intend is another
matter, to which I must return.
52 The Land Registry form has since changed. Form TR1, in use from
1 April 1998, provides a box for the transferees to declare whether they are
to hold the property on trust for themselves as joint tenants, or on trust for
themselves as tenants in common in equal shares, or on some other trusts
B
which are inserted on the form. If this is invariably complied with, the
problem confronting us here will eventually disappear. Unfortunately,
however, the transfer will be valid whether or not this part of the form is
completed. The form itself states that the transferees are only required to
execute it $$if the transfer contains transferee"s covenants or declarations or
contains an application by the transferee (e g for a restriction)"". So there
may still be transfers of registered land into joint names in which there is no
C express declaration of the bene!cial interests. However desirable such a
declaration may be, it is unrealistic, in the consumer context, to expect that
it will be executed independently of the forms required to acquire the legal
estate. Not only do solicitors and licensed conveyancers compete on price,
but more and more people are emboldened to do their own conveyancing.
The Land Registry form which has been prescribed since 1998 is to be
D applauded. If its completion and execution by or on behalf of all joint
proprietors were mandatory, the problem we now face would disappear.
However, the form might then include an option for those who deliberately
preferred not to commit themselves as to the bene!cial interests at the outset
and to rely on the principles discussed below.
The applicable legal principles

E
53 I say all this, partly to urge the Land Registry further to review its
practice, but mainly to illuminate the factual context in which transfers such
as the one with which we are concerned were executed. In what
circumstances should it be expected that, independently of the information
required by the Land Registry forms, joint transferees would execute a
declaration of trust? Is it when they intend that the bene!cial interests
F should be the same as the legal interests or when they intend that they should
be di›erent?
54 At !rst blush, the answer appears obvious. It should only be
expected that joint transferees would have spelt out their bene!cial interests
when they intended them to be di›erent from their legal interests.
Otherwise, it should be assumed that equity follows the law and that the
G bene!cial interests re%ect the legal interests in the property. I do not think
that this proposition is controversial, even in old fashioned unregistered
conveyancing. It has even more force in registered conveyancing in the
consumer context.
55 Of course, it is something of an over-simpli!cation. All joint legal
owners must hold the land on trust (before the Trusts of Land and
Appointment of Trustees Act 1996, there was a debate about whether or
H
not this was always a trust for sale, but that is another matter).
Section 53(1)(b) of the Law of Property Act 1925 requires that a
declaration of trust respecting any land or any interest therein be
manifested and proved by signed writing; but section 53(2) provides that
this $$does not a›ect the creation or operation of resulting, implied or
23
454
constructive trusts"". The question is, therefore, what are the trusts to be A
deduced in the circumstances?
56 Just as the starting point where there is sole legal ownership is sole
bene!cial ownership, the starting point where there is joint legal ownership
is joint bene!cial ownership. The onus is upon the person seeking to show
that the bene!cial ownership is di›erent from the legal ownership. So in sole
ownership cases it is upon the non-owner to show that he has any interest at
B
all. In joint ownership cases, it is upon the joint owner who claims to have
other than a joint bene!cial interest.
57 While there is no case in this House establishing this proposition in
the consumer context, this is $$Situation A"" referred to by Lord Brightman in
Malayan Credit Ltd v Jack Chia-MPH Ltd [1986] AC 549, 559: $$The lessees
at the inception of the lease hold the bene!cial interest therein as joint
tenants in equity. This will be the case if there are no circumstances which C
dictate to the contrary."" The issue in that case was whether there were only
three quite narrowly de!ned situations in which the contrary could be found
or whether there were other circumstances which could lead to a contrary
conclusion. Their Lordships !rst observed that it was improbable that joint
tenancy in equity was intended where joint tenants in law held commercial
premises for their separate business purposes. This is a reminder that the
D
parties may not intend survivorship even if they do intend that their shares
shall be equal. In many commercial contexts, and no doubt some domestic
ones, it will be highly unlikely that the parties intend survivorship with its
tontine $$winner takes all"" e›ect. Their Lordships went on to point out that
there was no fundamental distinction between buying a lease at a premium
with a token rent and taking a lease at a rack rent with no premium. In the
latter case the rent is equivalent to the purchase money. This is a reminder E
that property is often acquired over time, so that payment of mortgage
instalments is the equivalent of payment of the purchase price. Finally, their
Lordships identi!ed, at p 561, the features of the case before them which
appeared to them $$to point unmistakably towards a tenancy in common in
equity, and furthermore towards a tenancy in common in unequal shares"".
Amongst these were not only that the parties had paid the refundable
F
deposit, stamp duty, survey fees, rent and service charges in unequal shares,
but also that those shares were proportionate to the actual square footage
which each of them occupied.
58 The issue as it has been framed before us is whether a conveyance
into joint names indicates only that each party is intended to have some
bene!cial interest but says nothing about the nature and extent of that
bene!cial interest, or whether a conveyance into joint names establishes a G
prime facie case of joint and equal bene!cial interests until the contrary is
shown. For the reasons already stated, at least in the domestic consumer
context, a conveyance into joint names indicates both legal and bene!cial
joint tenancy, unless and until the contrary is proved.
59 The question is, how, if at all, is the contrary to be proved? Is the
starting point the presumption of resulting trust, under which shares are held
H
in proportion to the parties" !nancial contributions to the acquisition of the
property, unless the contributor or contributors can be shown to have had a
contrary intention? Or is it that the contrary can be proved by looking
at all the relevant circumstances in order to discern the parties" common
intention?
24
455
A 60 The presumption of resulting trust is not a rule of law. According to

Lord Diplock in Pettitt v Pettitt [1970] AC 777, 823h, the equitable
presumptions of intention are $$no more than a consensus of judicial opinion
disclosed by reported cases as to the most likely inference of fact to be drawn
in the absence of any evidence to the contrary"". Equity, being concerned
with commercial realities, presumed against gifts and other windfalls (such
B
as survivorship). But even equity was prepared to presume a gift where the
recipient was the provider"s wife or child. These days, the importance to be
attached to who paid for what in a domestic context may be very di›erent
from its importance in other contexts or long ago. As Kevin Gray and
Susan Francis Gray, in Elements of Land Law, 4th ed (2005), point out,
at p 864, para 10.21:
C
$$In recent decades a new pragmatism has become apparent in the law
of trusts. English courts have eventually conceded that the classical
theory of resulting trusts, with its !xation on intentions presumed to have
been formulated contemporaneously with the acquisition of title, has
substantially broken down . . . Simultaneously the balance of emphasis
in the law of trusts has transferred from crude factors of money
contribution (which are pre-eminent in the resulting trust) towards more
D subtle factors of intentional bargain (which are the foundational premise
of the constructive trust) . . . But the undoubted consequence is that the
doctrine of resulting trust has conceded much of its !eld of application to
the constructive trust, which is nowadays fast becoming the primary
phenomenon in the area of implied trusts.""
There is no need for me to rehearse all the developments in the case law since
E Pettitt v Pettitt [1970] AC 777 and Gissing v Gissing [1971] AC 886,
discussed over more than 70 pages following the quoted passage, by
Chadwick LJ in Oxley v Hiscock [2005] Fam 211, and most importantly by
my noble and learned friend, Lord Walker of Gestingthorpe, in his opinion,
which make good that proposition. The law has indeed moved on in
response to changing social and economic conditions. The search is to
F 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.
61 Oxley v Hiscock was, of course, a di›erent case from this. The
property had been conveyed into the sole name of one of the cohabitants.
The claimant had !rst to surmount the hurdle of showing that she had any
bene!cial interest at all, before showing exactly what that interest was. The
G !rst could readily be inferred from the fact that each party had made some
kind of !nancial contribution towards the purchase. As to the second,
Chadwick LJ said, at para 69:
$$in many such cases, the answer will be provided by evidence of what
they said and did at the time of the acquisition. But, in a case where there
is no evidence of any discussion between them as to the amount of the
H
share which each was to have#and even in a case where the evidence is
that there was no discussion on that point#the question still requires an
answer. It must now be accepted that (at least in this court and below) the
answer is that each is entitled to that share which the court considers fair
having regard to the whole course of dealing between them in relation to
25
456
the property. And in that context, $the whole course of dealing between A
them in relation to the property" includes the arrangements which they
make from time to time in order to meet the outgoings (for example,
mortgage contributions, council tax and utilities, repairs, insurance and
housekeeping) which have to be met if they are to live in the property as
their home."" (Emphasis supplied.)
Oxley v Hiscock has been hailed by Gray & Gray, Elements of Land Law, B
4th ed, p 931, para 10.138, as $$an important breakthrough"". The passage
quoted is very similar to the view of the Law Commission in Sharing
Homes, A Discussion Paper, para 4.27 on the quanti!cation of bene!cial
entitlement:
$$If the question really is one of the parties" $common intention", we
believe that there is much to be said for adopting what has been called a C
$holistic approach" to quanti!cation, undertaking a survey of the whole
course of dealing between the parties and taking account of all conduct
which throws light on the question what shares were intended.""
That may be the preferable way of expressing what is essentially the same
thought, for two reasons. First, it emphasises that the search is still for the
result which re%ects what the parties must, in the light of their conduct, be D
taken to have intended. Second, therefore, it does not enable the court to
abandon that search in favour of the result which the court itself considers
fair. For the court to impose its own view of what is fair upon the situation
in which the parties !nd themselves would be to return to the days before
Pettitt v Pettitt [1970] AC 777 without even the !g leaf of section 17 of the
1882 Act. E
62 Furthermore, although the parties" intentions may change over the
course of time, producing what my noble and learned friend, Lord
Ho›mann, referred to in the course of argument as an $$ambulatory""
constructive trust, at any one time their interests must be the same for all
purposes. They cannot at one and the same time intend, for example, a joint
tenancy with survivorship should one of them die while they are still
together, a tenancy in common in equal shares should they separate on F
amicable terms after the children have grown up, and a tenancy in common
in unequal shares should they separate on acrimonious terms while the
children are still with them.
63 We are not in this case concerned with the !rst hurdle. There is
undoubtedly an argument for saying, as did the Law Commission in Sharing
Homes, A Discussion Paper, para 4.23 that the observations, which were G
strictly obiter dicta, of Lord Bridge of Harwich in Lloyds Bank plc v Rosset
[1991] 1 AC 107 have set that hurdle rather too high in certain respects. But
that does not concern us now. It is common ground that a conveyance into
joint names is su–cient, at least in the vast majority of cases, to surmount
the !rst hurdle. The question is whether, that hurdle surmounted, the
approach to quanti!cation should be the same.
H
64 The majority of cases reported since Pettitt v Pettitt [1970] AC 777
and Gissing v Gissing [1971] AC 886 have concerned homes conveyed into
the name of one party only and it is in that context that the more %exible
approach to quanti!cation identi!ed by Chadwick LJ in Oxley v Hiscock
[2005] Fam 211 has emerged: see, in particular, Grant v Edwards [1986]
26
457
A Ch 638, described by Chadwick LJ as $$an important turning point"" and

referred to with $$obvious approval"" in Lloyds Bank plc v Rosset [1991]
1 AC 107; Stokes v Anderson [1991] 1 FLR 391; Midland Bank plc v Cooke
[1995] 4 All ER 562 and Drake v Whipp [1996] 1 FLR 826.
65 Curiously, it is in the context of homes conveyed into joint names but
without an express declaration of trust that the courts have sometimes
B
reverted to the strict application of the principles of the resulting trust: see
Walker v Hall [1984] FLR 126 and two cases decided by the same court on
the same day, Springette v Defoe [1992] 2 FLR 388 and Huntingford v
Hobbs [1993] 1 FLR 736; but cf Crossley v Crossley [2006] 2 FLR 813.
However, Chadwick LJ commented in Oxley v Hiscock [2005] Fam 211,
235:
C $$47. It is, I think, important to an understanding of the reasoning in the
judgments in Springette v Defoe that each member of this court seems to
have thought that when Lord Bridge referred, in Lloyds Bank plc v Rosset
[1991] 1 AC 107, 132f, to the need to base a $!nding of an agreement or
arrangement to share in this sense" on $evidence of express discussions
between the partners" he was addressing the secondary, or consequential,
question#$what was the common intention of the parties as to the extent
D of their respective bene!cial interests"#rather than the primary, or
threshold, question#$was there a common intention that each should
have a bene!cial interest in the property?" . . .
$$48. For the reasons which I have sought to explain, I think that the
better view is that, in the passage in Rosset#s case [1991] 1 AC 107, 132f,
to which both Dillon LJ and Steyn LJ referred in Springette v Defoe [see
E [1992] 2 FLR 388, 393e—f and 395b, agreed with by Sir Christopher
Slade at 397g] Lord Bridge was addressing only the primary question#
$was there a common intention that each should have a bene!cial interest
in the property?" He was not addressing the secondary question#$what
was the common intention of the parties as to the extent of their
respective bene!cial interests?" As this court had pointed out in Grant v
F
Edwards and Stokes v Anderson, the court may well have to supply the
answer to that secondary question by inference from their subsequent
conduct . . .""
In the case before us, he observed, at para 24:
$$. . . I have not altered my view that, properly understood, the
authorities before (and after) Springette v Defoe do not support the
G proposition that, absent discussion between the parties as to the extent of
their respective bene!cial interests at the time of purchase, it must follow
that the presumption of resulting trust is not displaced and the property is
necessarily held in bene!cial shares proportionate to the respective
contributions to the purchase price.""
With these passages I entirely agree. The approach to quanti!cation in cases
H where the home is conveyed into joint names should certainly be no stricter
than the approach to quanti!cation in cases where it has been conveyed into
the name of one only. To the extent that Walker v Hall [1984] FLR 126;
Springette v Defoe [1992] 2 FLR 388 and Huntingford v Hobbs [1993]
1 FLR 736 hold otherwise, they should not be followed.
27
458
66 However, Chadwick LJ went on to say at para 26, that: A
$$there is no reason in principle why the approach to the second

question#$what is the extent of the parties" respective bene!cial interests
in the property?"#should be di›erent, in a case where the property is
registered in the joint names of cohabitees, from what it would be if the
property were registered in the sole name of one of them; although the
fact that it has been registered in joint names is, plainly, to be taken into B
account when having regard $to the whole course of dealing between
them in relation to the property".""
But the questions in a joint names case are not simply $$what is the extent of
the parties" bene!cial interests?"" but $$did the parties intend their bene!cial
interests to be di›erent from their legal interests?"" and $$if they did, in what
way and to what extent?"" There are di›erences between sole and joint C
names cases when trying to divine the common intentions or understanding
between the parties. I know of no case in which a sole legal owner (there
being no declaration of trust) has been held to hold the property on a
bene!cial joint tenancy. But a court may well hold that joint legal owners
(there being no declaration of trust) are also bene!cial joint tenants.
Another di›erence is that it will almost always have been a conscious
D
decision to put the house into joint names. Even if the parties have not
executed the transfer, they will usually, if not invariably, have executed the
contract which precedes it. Committing oneself to spend large sums of
money on a place to live is not normally done by accident or without giving
it a moment"s thought.
67 This is not to say that the parties invariably have a full understanding
of the legal e›ects of their choice: there is recent empirical evidence from E
a small scale qualitative study to con!rm that they do not: see Gillian
Douglas, Julia Pearce and Hilary Woodward, $$Dealing with Property Issues
on Cohabitation Breakdown"" [2007] Fam Law 36. But that is so whether
or not there is an express declaration of trust and no-one thinks that such a
declaration can be overturned, except in cases of fraud or mistake: see
para 49 above. Nor do they always have a completely free choice in the
F
matter. Mortgagees used to insist upon the home being put in the name of
the person whom they assumed would be the main breadwinner.
Nowadays, they tend to think that it is in their best interests that the home be
jointly owned and both parties assume joint and several liability for the
mortgage. (It is, of course, a matter of indi›erence to the mortgagees where
the bene!cial interests lie.) Here again, this factor does not invalidate the
parties" choice if there is an express declaration of trust, nor should it G
automatically count against it where there is none.
68 The burden will therefore be on the person seeking to show that the
parties did intend their bene!cial interests to be di›erent from their legal
interests, and in what way. This is not a task to be lightly embarked upon.
In family disputes, strong feelings are aroused when couples split up. These
often lead the parties, honestly but mistakenly, to reinterpret the past in self-
H
exculpatory or vengeful terms. They also lead people to spend far more on
the legal battle than is warranted by the sums actually at stake. A full
examination of the facts is likely to involve disproportionate costs. In joint
names cases it is also unlikely to lead to a di›erent result unless the facts are
very unusual. Nor may disputes be con!ned to the parties themselves.
28
459
A People with an interest in the deceased"s estate may well wish to assert that
he had a bene!cial tenancy in common. It cannot be the case that all the
hundreds of thousands, if not millions, of transfers into joint names using the
old forms are vulnerable to challenge in the courts simply because it is likely
that the owners contributed unequally to their purchase.
69 In law, $$context is everything"" and the domestic context is very
di›erent from the commercial world. Each case will turn on its own facts.
B
Many more factors than !nancial 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"
C relationship; whether they had children for whom they both had
responsibility to provide a home; how the purchase was !nanced, both
initially and subsequently; how the parties arranged their !nances, 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
D
to be drawn from who pays for what may be very di›erent 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 bene!t or burden equally. The
parties" individual characters and personalities may also be a factor in
E 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 a›ection. 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 bene!cial interests should be di›erent from their legal
F
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 !nanced (or
constructed himself ) an extension or substantial improvement to the
property, so that what they have now is signi!cantly di›erent from what
they had then.
G
The facts of this case
71 It is di–cult to give a full account of the relevant facts in this case
because of the way in which the judge approached it [2005] 2 FCR 739. He
directed himself by citing paras 61 to 67 from Oxley v Hiscock [2005]
Fam 211, dealing with $$Developments since Midland Bank plc v Cooke"",
H but not by citing the crucial $$Summary"" in paras 68 and 69. This means that
he failed to draw a distinction between the !rst and second questions. He
concluded his self directions thus:
$$The real question for the court in [Midland Bank plc v Cooke [1995]
4 All ER 652] was to determine what proportions the parties must have
29
460
assumed to have intended for their bene!cial ownership. I also think it is A

necessary, as I think was pressed on me by one of the parties, that I should
approach the latter more broadly, looking at the parties# entire course of
conduct together."" (Emphasis supplied.)
He then proceeded to do just that, focussing upon their relationship, rather
than upon the factors which were relevant to ascertaining their intentions
with respect to the bene!cial ownership of their home. B
72 The parties" relationship began in 1975, when Mr Stack was aged
19 and Ms Dowden was aged 17. The judge found it more likely than not
that they were living together in rented accommodation since then. In fact,
the evidence did no more than support a conclusion that they became an
$$item"" then, and later spent four months in the United States together, and
that Mr Stack often stayed at Ms Dowden"s home. Mr Stack accepted that C
they did not start cohabiting permanently until 1983. Even after that,
Mr Stack retained his father"s address for some purposes.
73 In 1983, a house in Purves Road, London, NW10 was bought and
conveyed into Ms Dowden"s sole name. It had belonged to someone she
called $$Uncle Sidney"" who had expressed the wish before he died that she be
given the opportunity to buy it. The executors therefore o›ered it to her at
what they considered a favourable price of £30,000. The correspondence D
refers at one point to seeing her and Mr Stack together. The judge
commented that $$this certainly suggests that there was a partnership as man
and mistress between the parties at that time"".
74 The price of the Purves Road property was £30,000. £22,000 was
raised by way of mortgage, of course in Ms Dowden"s name. This was an
interest#only loan backed by an endowment policy. It was common E
ground that Ms Dowden made all the payments due under the mortgage and
that she paid $$all the bills for utilities, council tax and the like"". When the
property was bought she was in regular employment as a trainee electrical
engineer with the London Electricity Board. She has remained in
employment with the Board or its successor throughout, working extremely
hard and eventually rising to become the most highly quali!ed woman
electrical engineer in the London area. In 1983, Mr Stack was $$self- F
employed"" as a builder/decorator, claiming no bene!ts but making no tax
returns and keeping no records. Ms Dowden"s evidence was that he did not
want to take responsibility for the mortgage.
75 The down payment of £8,000 came from a Halifax Building Society
account, also in Ms Dowden"s sole name. The judge, however, found that
this was $$joint savings"" although he could not !nd how much Mr Stack had G
contributed to it. In the Court of Appeal it was said that there was $$no
evidence"" to support this !nding. In fact there was some: Mr Stack"s
evidence was that he had from time to time paid some of his own money into
that account. This was vehemently denied by Ms Dowden. Even if the judge
preferred his evidence to hers, it is something of a leap from this to
characterise the account as $$joint savings"".
H
76 After the house was bought, four children were born to the parties.
The !rst was born in 1986, and although Mr Stack was named as the father,
he gave his father"s address, which was the address to which most of his post
and bank account statements were sent. The judge made little of this fact,
but it might be thought to indicate something about the quality of the
30
461
A parties" relationship, at least until their !rst child was born. Three more
children were born, in 1987, 1989 and 1991. Ms Dowden returned to work
after each maternity leave and the children were looked after by nannies or
child minders. Mr Stack began regular employment with Hammersmith and
Fulham London Borough Council in 1987 and has remained with them ever
since. Ms Dowden"s earnings, however, began to outstrip his and were
eventually £42,000 per annum to his £24,000.
B
77 A great deal of work was done on the Purves Road property, some
of it redecoration and repairs, some of it alterations and improvements.
There is no doubt that the parties worked on this together, although there
was a dispute as to exactly how much work each did and the judge found
that Mr Stack probably did $$more than Ms Dowden gave him credit for""
and eventually concluded that $$he had been responsible for making most
C of these improvements"". But he could not put a !gure on their value to the
sale price.
78 The Purves Road property was sold in May 1993 for £90,000, three
times the !gure for which it had been bought ten years before. After
deduction of the mortgage redemption !gure of £22,674, solicitor"s
disbursements and agent"s fees, Ms Dowden received a cheque for £66,613.
The judge asked himself whether, if the relationship had broken down at
D
that point, she could have said that the Purves Road property was all hers.
He concluded that she could not, given the length and nature of their
relationship, given the work Mr Stack had done on the property, and $$given
that although their !nances were kept separately there had been
contributions to their living between the parties"". This !nding was
overturned in the Court of Appeal, on the basis that the judge had not
E addressed the !rst question#whether Mr Stack had any bene!cial interest at
all. The only matter which could be relied upon as evidence of a common
intention at the time of the purchase would be a contribution to the £8,000
down payment. Because, in the court"s view, there was no evidence of such a
contribution, it was wrong to treat Mr Stack as having any interest in the
proceeds of sale of the Purves Road property.
79 That conclusion is open to the criticism that there was some evidence
F
of such a contribution, albeit rather slim and unsatisfactory, and that would
have been su–cient to answer the !rst question in Mr Stack"s favour. The
second question#what was the extent of that bene!cial interest#would
have been much harder to answer and the judge made no attempt to do so.
But he would certainly have taken into account the improvements made to
the property in trying to quantify the interest.
G 80 In 1993, another property, in Chatsworth Road, London NW2, was
bought as the family home. This time it was conveyed into the joint names
of the parties, using the then current land registry form. This contained no
declaration of trust, but did contain a declaration that the survivor could
give a good receipt for capital moneys arising from a disposition of all or
part of the property.
81 The price of Chatsworth Road was £190,000. £128,813 (the
H
balance of the price after deduction of the mortgage loan plus stamp duty
and legal fees) came from Ms Dowden"s Halifax Building Society account.
This already contained £57,179 in April 1993, to which were added the
proceeds of sale of Purves Road. £65,025 was provided by a loan to both
parties from Barclays Bank, secured by a mortgage and two endowment
31
462
policies, one in their joint names and the other in Ms Dowden"s sole name. A
The mortgage interest and joint endowment policy premiums (eventually
totalling £33,747) were paid by Mr Stack. As contemplated by the parties,
the mortgage loan was repaid by a series of lump sum payments, beginning
in 1994. It was agreed that Mr Stack contributed £27,000 and Ms Dowden
£38,435 towards these capital repayments. The utilities bills were all in
Ms Dowden"s name although Mr Stack claimed to have paid some of these.
B
Improvements were also made, although not on the same scale as those to
Purves Road. Throughout this time, they kept separate bank accounts and
made a series of separate investments and savings. Ms Dowden paid the
premiums on the life policy in her name, which she has retained.
82 The parties separated in October 2002. Mr Stack left the property
and Ms Dowden remained there with the children. There were proceedings
between them in the Inner London Family Proceedings Court under Part C
IV of the Family Law Act 1996. On 11 April 2003, Mr Stack gave various
undertakings to stay away from the property and Ms Dowden undertook to
pay up to £1,000 per month to reimburse him the cost of alternative
accommodation. That undertaking was to continue until 10 January 2004
and was not renewed on that date. The trial judge ordered that £8,100 be
paid to Mr Stack before division of the proceeds of sale of the property in
D
respect of this period and neither party has appealed against that. The trial
judge also ordered that the sum of £900 per month from 6 October 2004 be
paid to Mr Stack out of the net proceeds of sale. The only reason he gave
was that the sale would be in Ms Dowden"s hands.
83 Mr Stack"s claim for an order for sale and equal division of the
proceeds was tried over two days in the Central London County Court. On
6 October 2004, the judge ordered that the property be sold and the net E
proceeds of sale divided equally between the parties, as should the proceeds
of the joint endowment policy. Throughout his judgment, there are
numerous references to the $$partnership"" between the parties. He expressed
his conclusion thus:
$$It seems to me, although the defendant has been the bigger wage-
earner over this very long association between the parties, they have both F
put their all into doing the best for themselves and their family as they
could. In these circumstances after such a very long relationship a 50/50
share is . . . an appropriate division of the net proceeds of sale.""
On the other hand, he held that all their other savings and investments,
including an account in Ms Dowden"s name with the Chelsea Building
Society (opened in 2000 with the redundancy payment she received from G
London Electricity before being immediately re-employed with one of its
successors), represented $$the ways where the parties have allowed their
earnings and their savings to be separately divided"", so that all should lie
where they were.
84 Ms Dowden appealed. (Mr Stack was refused leave to cross-appeal
in respect of the Chelsea Building Society account and so that issue cannot be
H
pursued before us.) On 13 July 2005, the Court of Appeal allowed her
appeal and ordered that the net proceeds of sale be divided 65% to 35% in
her favour. A major issue had been the e›ect of the declaration as to the
receipt for capital moneys in the transfer document. Following Huntingford
v Hobbs [1993] 1 FLR 736, this could not be taken as an express declaration
32
463
A of trust. Nor could it be relied upon for the purpose of drawing an inference
as to their intentions, unless the parties had understood its signi!cance.
If they had done, the inference that they intended a bene!cial joint tenancy
would have been $$irresistible"". With that I entirely agree. But in the court"s
view there was no evidence that they did. Without that, it was impossible to
reach the conclusion that their shares should be equal. Ms Dowden was
B
entitled to at least 65% of the proceeds of sale, and she had made it clear that
she was not then seeking any greater share than that. The court also allowed
her appeal against the order that she pay Mr Stack £900 per month from
6 October 2004. Mr Stack appeals to this House and asks that we restore
the orders of the trial judge.
85 The property was sold in November 2005, with net proceeds of
£754,345. If the £8,100 has to be deducted from that, the balance is
C £746,245. 50% amounts to £373,122.50. The extra 15% claimed by
Mr Stack amounts to £111,936.75. This is a not inconsiderable sum, but
the costs of pursuing the argument to this House will have been quite
disproportionate.
Applying the law to the facts

D 86 The starting point is that it is for Ms Dowden to show that the
common intention, when taking a conveyance of the house into their joint
names or thereafter, was that they should hold the property otherwise than
as bene!cial joint tenants. Unfortunately, we lack precise !ndings on many
of the factors relevant to answering that question, because the judge
addressed himself to $$looking at the parties" entire course of conduct
E
together"". He looked at their relationship rather than the matters which
were particularly relevant to their intentions about this property. He
founded his conclusion on the length and nature of their relationship, which
he repeatedly referred to as a partnership, despite the fact that they had
maintained separate !nances throughout their time together. With the best
will in the world, and acknowledging the problems of making more precise
!ndings on many issues after this length of time, this is not an adequate
F answer to the question. It amounts to little more than saying that these
people were in a relationship for 27 years and had four children together.
During this time Mr Stack made unquanti!able indirect contributions to
the acquisition and improvement of one house and quanti!able direct
contributions to the acquisition of another. Both co-operated in looking
after the home and bringing up their children.
G 87 In some, perhaps many, cases of real domestic partnership, there
would be nothing to indicate that a contrary inference should be drawn.
However, there are many factors to which Ms Dowden can point to indicate
that these parties did have a di›erent common intention. The !rst, of
course, is that on any view she contributed far more to the acquisition of
Chatsworth Road than did Mr Stack. There are many di›erent ways of
calculating this. The Court of Appeal rejected the judge"s view that the
H
Halifax account represented $$joint savings"", either at the time of the Purves
Road purchase or at the time of the Chatsworth Road purchase. Hence they
held that the whole of the purchase price, other than the mortgage loan, had
been contributed by Ms Dowden. She had also contributed more to the
capital repayment of that loan, although Mr Stack had made all the
33
464
payments necessary to keep it going. It is not surprising that the Court of A

Appeal reached the conclusion that Ms Dowden was entitled to at least the
65% she claimed.
88 On the other hand, there was some evidence that Mr Stack had made
payments into the Halifax account before the Purves Road purchase and that
he had made payments thereafter which would have enabled Ms Dowden to
save more of her income than would otherwise have been possible. This, B
together with his contributions towards the substantial improvements made
to Purves Road, might su–ce to give him some interest in the proceeds of
sale, although quantifying that share would be very di–cult. It might also
su–ce to give him some lesser interest in the accumulated Halifax account at
the time when Chatsworth Road was bought. Again, quantifying that
interest would be very di–cult. There was certainly little if anything to
support the conclusion that these were truly $$joint"" savings. But suppose C
that one apportions the Purves Road proceeds between them in shares of 2 to
Ms Dowden and 1 to Mr Stack; the Halifax savings in shares of 3 to her and
1 to him; and shares the mortgage loan equally between them: this would
yield total contributions to Chatsworth Road of roughly 64% to 36%. That
calculation is, in my view, as generous to Mr Stack as it is possible to be.
89 The fact that it is possible to make two such di›erent calculations on D
this sort of evidence indicates the pitfalls in an arithmetical approach to
ascertaining the parties" intentions. The one thing that can clearly be said is
that, when Chatsworth Road was bought, both parties knew that
Ms Dowden had contributed far more to the cash paid towards it than had
Mr Stack. Furthermore, although they planned that Mr Stack would pay the
interest on the loan and premiums on the joint policy, they also planned to
E
reduce the loan as quickly as they could. These are certainly factors which
could, in context, support the inference of an intention to share otherwise
than equally.
90 The context is supplied by the nature of the parties" conduct and
attitudes towards their property and !nances. This is not a case in which it
can be said that the parties pooled their separate resources, even notionally,
for the common good. The only things they ever had in their joint names F
were Chatsworth Road and the associated endowment policy. Everything
else was kept strictly separate. Each made separate savings and investments
most of which it was accepted were their own property. It might have been
asked, $$why then did they make an exception for Chatsworth Road?"" This is
the obvious question. The obvious answer, which Ms Dowden has never
denied, was that this time it was indeed intended that Mr Stack should have G
some interest in the property. In the light of all the other evidence, it cannot
be conclusive as to what that interest was.
91 There are other aspects to their !nancial relationship which tell
against joint ownership. Chatsworth Road was, of course, to be a home for
the parties and their four children. But they undertook separate
responsibility for that part of the expenditure which each had agreed to pay.
The only regular expenditure to which it is clear that Mr Stack committed H
himself was the interest and premiums on Chatsworth Road. All other
regular commitments in both houses were undertaken by Ms Dowden. Had
it been clear that he had undertaken to pay for consumables and child
minding, it might have been possible to deduce some sort of commitment
34
465
A that each would do what they could. But Mr Stack"s evidence did not even
go as far as that.
92 This is, therefore, a very unusual case. There cannot be many
unmarried couples who have lived together for as long as this, who have had
four children together, and whose a›airs have been kept as rigidly separate
as this couple"s a›airs were kept. This is all strongly indicative that they did
not intend their shares, even in the property which was put into both their
B
names, to be equal (still less that they intended a bene!cial joint tenancy with
the right of survivorship should one of them die before it was severed).
Before the Court of Appeal, Ms Dowden contended for a 65% share and in
my view she has made good her case for that.
93 There remains the question of the payment for Mr Stack"s alternative
accommodation. This matter is governed by the Trusts of Land and
C Appointment of Trustees Act 1996. Section 12(1) gives a bene!ciary who is
bene!cially entitled to an interest in land the right to occupy the land if the
purpose of the trust is to make the land available for his occupation. Thus
both these parties have a right of occupation. Section 13(1) gives the trustees
the power to exclude or restrict that entitlement, but under section 13(2) this
power must be exercised reasonably. The trustees also have power under
section 13(3) to impose conditions upon the occupier. These include, under
D
section 13(5), paying any outgoings or expenses in respect of the land and
under section 13(6) paying compensation to a person whose right to occupy
has been excluded or restricted. Under section 14(2)(a), both trustees and
bene!ciaries can apply to the court for an order relating to the exercise of
these functions. Under section 15(1), the matters to which the court must
have regard in making its order include (a) the intentions of the person or
E person who created the trust, (b) the purposes for which the property subject
to the trust is held, (c) the welfare of any minor who occupies or might
reasonably be expected to occupy the property as his home, and (d) the
interests of any secured creditor of any bene!ciary. Under section 15(2), in a
case such as this, the court must also have regard to the circumstances and
wishes of each of the bene!ciaries who would otherwise be entitled to
occupy the property.
F
94 These statutory powers replaced the old doctrines of equitable
accounting under which a bene!ciary who remained in occupation might be
required to pay an occupation rent to a bene!ciary who was excluded from
the property. The criteria laid down in the statute should be applied, rather
than in the cases decided under the old law, although the results may often be
the same. In this case, the judge applied neither. The property had been
G bought as a home for the parties and their children. By October 2004, three
of the children were still minors. Both parties had the responsibility of
providing them with a home. Ms Dowden remained responsible for the
upkeep and outgoings on the home until it was sold. Mr Stack had to
provide himself with alternative accommodation but had nothing to pay in
respect of the upkeep of the family"s home until he was able to realise his
share in it upon sale. While, therefore, a case could be made for
H
compensating him for his exclusion, it has to be borne in mind that he had
agreed to go in the course of proceedings under the Family Law Act 1996.
The reason given by the judge took no account, as he was required to do, of
the statutory criteria. The fact that the house was to be sold as soon as
possible, so that Mr Stack would not be kept out his money for long, was if
35
466
anything a factor telling against the exercise of this discretion. I would A

therefore agree with the Court of Appeal on this point.
95 In the result, therefore, I would dismiss this appeal. But the route by
which I, and as I understand it the majority of your Lordships, have arrived
at that result is di›erent, both in principle and on the facts, from that taken
by the Court of Appeal.
B
LORD NEUBERGER OF ABBOTSBURY
96 My Lords, I have had the great bene!t of reading in draft the
opinions of my noble and learned friends, Lord Hope of Craighead, Lord
Walker of Gestingthorpe and Baroness Hale of Richmond.
97 I gratefully adopt the exposition of the facts of this case in paras
71 to 85 of Baroness Hale"s opinion. I shall !rst consider the extent of
Mr Stack"s ownership of the bene!cial interest in 114 Chatsworth Road C
($$the house""), and then turn to whether Ms Dowden should have been
ordered to pay him in respect of his exclusion from the house.
Bene"cial ownership: some general points

98 Where freehold or leasehold property is acquired in the name of two
parties, the e›ect of sections 1, 34, and 36 of the Law of Property Act 1925 is D
that they must be joint owners of the legal estate: they enjoy equal rights in
respect of an undivided title, and survivorship applies. The rules relating to
the ownership of the bene!cial interest are much less constrained. In
general, the parties are free to agree what they want (and if they are joint
owners, it is open to either to sever it). If there is a valid declaration of trust,
then (subject to any statutory provisions to the contrary) that determines the
E
bene!cial ownership. If not, then, in the absence of agreement, the court has
to decide the issue.
99 In that connection, the present type of case, where the parties were
an unmarried cohabiting couple, whose relationship has ended, and both of
whom claim to have contributed to the acquisition or value of the property,
gives rise to particular di–culties, as can be seen from the analysis in
paras 15 to 26 of Lord Walker"s opinion. This is not surprising. The context F
is lucidly explained in paras 41 to 52 of Baroness Hale"s opinion. Di›erent
judges may have di›erent reactions to a particular case, and to the relative
importance of, and the proper inferences to be drawn from, particular facts.
The task of the judge is normally made no easier by bad feeling between the
parties, con%icts of fact, the need to examine !nances discussions and
actions, the number and incommensurability of relevant factors, and the G
welter of Court of Appeal authority (not all of which is consistent in
approach or result).
100 The room for confusion is reinforced by the fact that the outcome
will normally di›er from that in a similar but crucially di›erent sort of case,
namely where the parties were married. The Matrimonial Causes Act 1973
gives the court wide powers to redistribute assets on divorce. Unlike the
Inheritance (Provision for Family and Dependants) Act 1975, the 1973 Act H
does not extend to unmarried cohabitants, even where (as here) the
relationship has lasted longer and produced more children than the average
marriage. Accordingly, in such cases, judges have to apply the law in
accordance with principles developed by the courts.
36
467
Lord Neuberger of Abbotsbury
A 101 The determination of the ownership of the bene!cial interest in a

property held in joint names primarily engages the law of contract, land and
equity. The relevant principles in those areas of law have been established
and applied over hundreds of years, and have had to be applied in all sorts
of circumstances. While both the nature and the characteristics of the
particular relationship must be taken into account when applying the
principles, the court should be very careful before altering those principles
B
when it comes to a particular type of relationship. After all, these principles
are not static and develop as the needs and values of society change. Thus,
the presumption of advancement, as between man and wife, which was so
important in the 18th and 19th centuries, has now become much weakened,
although not quite to the point of disappearance.
102 However, that does not mean that a change in the principles should
C be easy or frequent. A change in the law, however sensible and just it seems,
always carries a real risk of new and unforeseen uncertainties and
unfairnesses. That is a particular danger when the change is e›ected by the
court rather than the legislature, as the change is in%uenced by, indeed
normally based on, the facts of a particular case, there is little room for
public consultation, and there is no input from the democratically elected
legislature.
D
103 In the present type of case, while the number of unmarried
cohabitants has increased very substantially over the past 50 (and even more
over the past 20) years, the change has been one of degree, and does not, in
my view, justify a departure from established legal principles. I agree with
Gri–ths LJ (see Bernard v Josephs [1982] Ch 391, 402) that the applicable
principles are the same whether the parties are married or not, although the
E nature of the relationship will bear on the inferences to be drawn from their
discussions and actions.
104 The Law Commission has considered this topic in the excellent
Discussion and Consultation Papers described by Baroness Hale in paras 44
to 47 of her opinion. The fact that the Law Commission has characterised
the present state of the law as $$unduly complex, arbitrary and uncertain"",
does not, in my opinion, justify our changing it. The Discussion Paper refers
F
to the impossibility of devising a scheme $$which can operate fairly and
evenly across the diversity of domestic circumstances which are now to be
encountered"". This is a warning shot against the courts (as opposed to the
legislature) refashioning the law. All the more so bearing in mind that, as
Lord Walker says, the Law Commission may soon make speci!c proposals
for change in this area.
G 105 In other words, the Law Commission"s analysis may well justify the
legislature changing the law in this !eld, but it does not support similar
intervention by the courts, other than for the purpose of clari!cation and
simpli!cation. Similarly, the fact that the law of Scotland on this topic may
di›er from that of England and Wales, as explained by Lord Hope, does not
justify the courts changing the law here (or indeed in Scotland), although it
may well be another reason for changing and unifying the law on this topic
H
throughout the United Kingdom.
106 In my judgment, it is therefore inappropriate for the law when
applied to cases of this sort to depart from the well-established principles
laid down over the years. It also seems to me that the law of resulting and
constructive trusts is %exible enough to deal with problems such as those
37
468
thrown up by cases such as this, and it would be a disservice to the important A

causes of certainty and consistency if we were to hold otherwise. I note that
the Court of Appeal"s recent decisions in this case and in Oxley v Hiscock
[2005] Fam 211 (both of which were rightly decided) produced an outcome
which would be dictated by a resulting trust solution.
107 Accordingly, while the domestic context can give rise to very
di›erent factual considerations from the commercial context, I am
B
unconvinced that this justi!es a di›erent approach in principle to the issue of
the ownership of the bene!cial interest in property held in joint names. In
the absence of statutory provisions to the contrary, the same principles
should apply to assess the apportionment of the bene!cial interest as
between legal co-owners, whether in a sexual, platonic, familial, amicable or
commercial relationship. In each type of case, one is concerned with the
issue of the ownership of the bene!cial interest in property held in the names C
of two people, who have contributed to its acquisition, retention or value.
108 It appears to me helpful for present purposes to consider the issue in
a structured way. First, to consider how the bene!cial interest is owned at
the date of acquisition, which involves identifying the nature and e›ect of
the relevant features of what transpired between the parties up to, and at, the
date of acquisition of the property. Then to consider the position at the date D
of the hearing, which involves identifying the relevant features of what
subsequently transpired between the parties, and deciding whether they
justify a change in the way in which the bene!cial ownership is held. As
already explained, I believe that the proper approach to these highly fact-
sensitive inquiries should be in accordance with established legal principles
and, as far as is consistent with those principles, as simple as possible.
E
Bene"cial ownership on acquisition: where there is no evidence
109 In the absence of any relevant evidence other than the fact that the
property, whether a house or a %at, acquired as a home for the legal co-
owners is in joint names, the bene!cial ownership will also be joint, so that it
is held in equal shares. This can be said to result from the maxims that
equity follows the law and equality is equity. On a less technical, and some F
might say more practical, approach, it can also be justi!ed on the basis that
any other solution would be arbitrary or capricious.
Bene"cial ownership on acquisition: di›erential contributions

110 Where the only additional relevant evidence to the fact that the
property has been acquired in joint names is the extent of each party"s G
contribution to the purchase price, the bene!cial ownership at the time of
acquisition will be held, in my view, in the same proportions as the
contributions to the purchase price. That is the resulting trust solution. The
only realistic alternative in such a case would be to adhere to the joint
ownership solution. There is an argument to support the view that equal
shares should still be the rule in cohabitation cases, on the basis that it may
H
be what many parties may expect if they purchase a home in joint names,
even with di›erent contributions. However, I consider that the resulting
trust solution is correct in such circumstances.
111 It is the answer which equity has always favoured (save where the
presumption of advancement, not relevant in the context of cohabitants,
38
469
A applied) both historically and more recently. Eyre CB described it as a

$$general proposition supported by all the cases"" in a passage in Dyer v Dyer
(1788) 2 Cox Eq Cas 92, quoted with approval in Pettitt v Pettitt [1970]
AC 777, 814b—g by Lord Upjohn, whose views on this topic were in turn
cited with approval by Lord Pearson in Gissing v Gissing [1971] AC 886,
902g—h. Lord Brightman in Malayan Credit Ltd v Jack Chia-MPH Ltd
[1986] AC 549, 559g—h approved the view that a joint tenancy in equity is
B
rebutted where the legal owners $$have provided the purchase money in
unequal shares"". Lord Browne-Wilkinson in Westdeutsche Landesbank
Girozentrale v Islington London Borough Council [1996] AC 669, 708 said
that the circumstances in which $$a resulting trust arises"" included:
$$where A . . . pays (wholly or in part) for the purchase of property
which is vested . . . in the joint names of A and B, there is a presumption
C
that A did not intend to make a gift to B: the . . . property is held . . . in
shares proportionate to their contributions.""
112 By contrast, while Lord Reid"s suggestion in Gissing v Gissing
[1971] AC 886, 897b that the notion that equality is equity is no more than a
$$high-sounding brocard"" may be a little extreme, the invocation of such a
notion as between cohabitants, who have contributed unequally to the
D
acquisition of a home, appears to me to be inconsistent with principle. It is
almost a resurrection of the $$family assets"" hypothesis disposed of in Pettitt
v Pettitt [1970] AC 777, 795b, 809h—810h, 816g—817h. It involves
invoking a presumption of advancement between unmarried cohabitants,
where such a presumption has never applied, and at a time when, as I have
mentioned, the court is increasingly unenthusiastic about the presumption,
E even in relationships where it does apply.
113 There are also practical reasons for rejecting equality and
supporting the resulting trust solution. The property may be bought in joint
names for reasons which cast no light on the parties" intentions with regard
to bene!cial ownership. It may be the solicitor"s decision or assumption, the
lender"s preference for the security of two borrowers, or the happenstance of
how the initial contact with the solicitor was made. As the survey mentioned
F
by Baroness Hale in para 45 of her opinion indicates, parties in a loving
relationship are often not anxious to discuss how they should divide the
bene!cial interest in the home they are about to buy. They would have to
debate what should happen if their relationship broke down (the most likely
circumstance, albeit not the only one, in which the question would arise).
While in some cases they may assume equal ownership, in others they may
G not. In many cases the point may not even occur to them, and if it does, they
may be happy to rely on the law to provide the answer if the need arises. If
they are happy with an equal split at the beginning, one might expect them to
say so. The fact that they do not do so may be more consistent with the view
that they (or at any rate the bigger contributor) would not be happy with
that outcome for the very reason that their contributions di›ered.
114 There is also an important point about consistency of approach
H
with a case where the purchase of a home is in the name of one of the parties.
As Baroness Hale observes, where there is no evidence of contributions, joint
legal ownership is re%ected in a presumption of joint bene!cial ownership
just as sole legal ownership is re%ected in a presumption of sole bene!cial
ownership. Where there is evidence of the parties" respective contributions
39
470
to the purchase price (and no other relevant evidence) and one of the parties A
has contributed X%, the fact that the purchase is in the sole name of the
other does not prevent the former owning X% of the bene!cial interest on a
resulting trust basis. Indeed, it is because of the resulting trust presumption
that such ownership arises. It seems to me that consistency suggests that the
party who contributed X% of the purchase price should be entitled to X%
(no more and no less) of the bene!cial interest in the same way if he is a co-
B
purchaser. The resulting trust presumption arises because it is assumed that
neither party intended a gift of any part of his own contribution to the other
party. That would seem to me to apply to contributions irrespective of the
name or names in which the property concerned is acquired and held, as a
matter of both principle and logic.
115 It may be asked why the bigger contributor agreed to the property
being taken in joint names, unless he intended joint bene!cial ownership. C
There are four answers to that. The !rst is that the question sets out to
justify what it assumes, namely that, in the absence of any discussion, the
parties must have assumed an equal split. Secondly, if the other party was a
contributor, he would often want to be a co-owner, and the only way real
property can be held in law by two persons is as joint owners. Thirdly, the
converse point can be made where a property is acquired in the name of one
D
party: if the other party has contributed to the purchase, his absence from
the title is not evidence that he was not intended to have an interest. (In this
connection, it seems to me that, where a home is taken in the name of only
one party, this is almost as likely to have been a conscious decision as where
it is acquired in joint names: where both have contributed to the purchase, it
is unlikely that either will have been unaware of the fact that the home was
being acquired in the name of only one of them). Fourthly, there are the E
practical considerations to which I have already alluded.
116 Having said that, the fact that a property is taken in joint names is
some evidence that both parties were intended to have some bene!cial
interest. In that connection, the facts of the present case are not without
interest. The parties" previous home in Purves Road was acquired in
Ms Dowden"s name alone. On the face of it at least, Purves Road was
F
acquired solely with money from Ms Dowden"s account or borrowed by her
alone (although a small amount may have come indirectly from Mr Stack),
so it is not surprising that it was acquired in her sole name. When the house
at Chatsworth Road was acquired, Mr Stack directly (and through liability
for the mortgage) contributed to its purchase, and it is therefore unsurprising
that his name was included on the title. However, for reasons already
discussed, as he contributed far less to the purchase than Ms Dowden, it G
seems wrong to deduce from those bare facts that the parties intended that
he should have 50% of the bene!cial interest.
117 There are two other aspects of the resulting trust analysis which
I should like to mention. First, there is the e›ect of liability under a
mortgage. This will normally be a relevant, often a very important, factor,
because, as Lord Walker points out, the overwhelming majority of houses
H
and %ats are acquired with the assistance of secured borrowing. There is
attraction in the notion that liability under a mortgage should be equivalent
to a cash contribution. On that basis, if a property is acquired for £300,000,
which is made up of one party"s contribution of £100,000, and both parties
taking on joint liability for a £200,000 mortgage, the bene!cial interest
40
471
A would be two-thirds owned by the party who made the contribution, and
one-third by the other. If one party then repays more of the mortgage
advance, equitable accounting might be invoked to adjust the bene!cial
ownerships at least in a suitable case. Such an adjustment would be
consistent with the resulting trust analysis, as repayments of mortgage
capital may be seen as retrospective contributions towards the cost of
acquisition, or as payments which increase the value of the equity of
B
redemption.
118 However, there is an argument that taking on liability under a
mortgage should not be equivalent to a cash payment. The cash
contribution is e›ectively equity, whereas the mortgage liability arises in
relation to a secured loan. If the value of the property in the example just
given had fallen by 25% when it came to be sold, the party who made the
C cash contribution would lose £75,000 of his £100,000, whereas the other
party would lose nothing (unless he would be liable to pay £25,000 to the
former, which seems intuitively improbable).
119 In Ulrich v Ulrich and Felton [1968] 1 WLR 180, an engaged
couple (who subsequently married) had bought a house, she paying one-
sixth of the acquisition cost in cash, and he raising the balance by a mortgage
in his name. In passages at pp 186 and 189 (approved in Pettitt v Pettitt
D
[1970] AC 777, 816a), Lord Denning MR and Diplock LJ held it was wrong
to treat a mortgage contribution as equivalent to a cash contribution.
120 Desirable though it is to give as much guidance as possible, this is
not an appropriate case in which to express a view as to whether liability
under a mortgage should be treated as the equivalent of a cash contribution
for the purpose of assessing the shares in which the bene!cial interest is held.
E Certainty, simplicity and !rst impression suggest a positive answer, perhaps
particularly where a home is bought almost exclusively by means of a
mortgage. More sophisticated economic and legal analysis may suggest
otherwise, especially where the cash contributions are very di›erent and, at
least in the case of one party, substantial. The point has not been fully
canvassed here, because, however one treats the mortgage, the outcome of
the appeal is the same.
F
121 The !nal aspect I wish to deal with in relation to the resulting trust
analysis is where the evidence is so unsatisfactory that it is impossible to
reach a clear conclusion as to the parties" respective contributions to the
purchase price. In many such cases, the evidence may be so hopeless or may
suggest contributions of the same sort of order, and equality would be
the appropriate outcome (as in Rimmer v Rimmer [1953] 1 QB 63, 72,
G approved in Pettitt v Pettitt [1970] AC 777, 804a—b, 810h, 815h).
However, in other cases (as here, in my opinion), the court may conclude
that, while it is impossible to be precise as to the relative contributions, one
party cannot have contributed more (or less) than Y%. In such cases, where
Y is clearly below (or above) 50, to decide that the party concerned had more
(or less) than Y% of the bene!cial interest would be wrong.
122 So, in the absence of any relevant evidence other than the parties"
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respective contributions, I would favour the resulting trust solution as at the
date of acquisition (in agreement with Chadwick LJ as quoted in para 65 of
Baroness Hale"s opinion). Application of the resulting trust approach in the
present case would justify Mr Stack"s appeal being dismissed. On the !gures
summarised by Baroness Hale, Mr Stack could not possibly establish more
41
472
than a 36% interest in the house as a result of all his contributions. Indeed, A
on the basis of the evidence, I would put his contribution at around 30%,
but, as Ms Dowden is prepared to concede 35%, it is unnecessary to consider
that aspect further. Thus, on a resulting trust basis, Mr Stack had no more
than a 35% share of the bene!cial interest at the date of acquisition.
Bene"cial ownership on acquisition: constructive trust B

123 Accordingly, in my judgment, where there are unequal
contributions, the resulting trust solution is the one to be adopted.
However, it is no more than a presumption, albeit an important one. Lord
Nicholls of Birkenhead said in Royal Bank of Scotland plc v Etridge (No 2)
[2002] 2 AC 773, para 16 that the $$use of the term $presumption" is
descriptive of a shift in the evidential onus on a question of fact"", and that
C
the $$use . . . of the forensic tool of a shift in the evidential burden of proof
should not be permitted to obscure the overall position"". Although said in
the context of undue in%uence, those words apply equally to the resulting
trust presumption, in my opinion.
124 In many cases, there will, in addition to the contributions, be other
relevant evidence as at the time of acquisition. Such evidence would often
enable the court to deduce an agreement or understanding amounting to an D
intention as to the basis on which the bene!cial interests would be held.
Such an intention may be express (although not complying with the requisite
formalities) or inferred, and must normally be supported by some detriment,
to justify intervention by equity. It would be in this way that the resulting
trust would become rebutted and replaced, or (conceivably) supplemented,
by a constructive trust. E
125 While an intention may be inferred as well as express, it may not, at
least in my opinion, be imputed. That appears to me to be consistent both
with normal principles and with the majority view of this House in Pettitt v
Pettitt [1970] AC 777, as accepted by all but Lord Reid in Gissing v Gissing
[1971] AC 886, 897h, 898b—d, 900e—g, 901b—d, 904e—f, and reiterated by
the Court of Appeal in Grant v Edwards [1986] Ch 638, 651f—653a. The
distinction between inference and imputation may appear a !ne one (and in F
Gissing v Gissing [1971] AC 886, 902g—h, Lord Pearson, who, on a fair
reading I think rejected imputation, seems to have equated it with inference),
but it is important.
126 An inferred intention is one which is objectively deduced to be the
subjective actual intention of the parties, in the light of their actions and
statements. An imputed intention is one which is attributed to the parties, G
even though no such actual intention can be deduced from their actions and
statements, and even though they had no such intention. Imputation
involves concluding what the parties would have intended, whereas
inference involves concluding what they did intend.
127 To impute an intention would not only be wrong in principle and a
departure from two decisions of your Lordships" House in this very area, but
H
it also would involve a judge in an exercise which was di–cult, subjective
and uncertain. (Hence the advantage of the resulting trust presumption). It
would be di–cult because the judge would be constructing an intention
where none existed at the time, and where the parties may well not have
been able to agree. It would be subjective for obvious reasons. It would be
42
473
A uncertain because it is unclear whether one considers a hypothetical

negotiation between the actual parties, or what reasonable parties would
have agreed. The former is more logical, but would redound to the
advantage of an unreasonable party. The latter is more attractive, but is
inconsistent with the principle, identi!ed by Baroness Hale at para 61, that
the court"s view of fairness is not the correct yardstick for determining the
parties" shares (and see Pettitt v Pettitt [1970] AC 777, 801c—f, 809c—g,
B
826c).
128 A constructive trust does not only arise from an express or implied
agreement or understanding. It can also arise in a number of circumstances
in which it can be said that the conscience of the legal owner is a›ected. For
instance, it may well be that facts which justi!ed a proprietary estoppel
against one of the parties in favour of the other would give rise to a
C constructive trust. However, in agreement with Lord Walker, I do not
consider it necessary or appropriate to discuss proprietary estoppel further
in this case.
129 It is hard to identify, particularly in the abstract, the factors which
can be taken into account to infer an agreement or understanding, and the
e›ect of such factors. Each case will be highly fact-sensitive, and what is
relevant, and how, may be contentious, whether one is considering actions,
D
discussions or statements, even where there is no dispute as to what was
done or said.
130 In the present case, for instance, there is a disagreement as to the
e›ect of the declaration in the transfer of the house to the parties that the
survivor $$can give a valid receipt for capital money arising on the disposition
of the land"". At any rate in the absence of any evidence that the e›ect of this
E provision was explained to the parties, I would reject the contention that it
has the e›ect of operating as a declaration of joint bene!cial ownership.
That contention is based on inference, and the legal basis of that inference is
open to argument. Indeed, at the time the home was acquired, any well-
informed solicitor would have advised that the law was that such a
declaration probably would not give rise to such an inference, in the light of
the Court of Appeal"s decision in Huntingford v Hobbs [1993] 1 FLR 736.
F
Quite apart from that, it seems to me that, in the absence of any evidence of
contemporaneous advice to the parties as to the e›ect of the declaration, the
alleged inference would simply be too technical, sophisticated, and subtle to
be sustainable, at least in the context of the purchase of a home by two lay
people.
131 Any assessment of the parties" intentions with regard to the
G ownership of the bene!cial interest by reference to what they said and did
must take into account all the circumstances of their relationship, in the
same way as the interpretation of a contract must be e›ected by reference to
all the surrounding circumstances. However, that does not mean that all the
circumstances of the relationship are of primary or equal relevance to the
issue.
132 I am unimpressed, for instance, by the argument that, merely
H
because they have already lived together for a long time sharing all regular
outgoings, including those in respect of the previous property they occupied,
the parties must intend that the bene!cial interest in the home they are
acquiring, with di›erently sized contributions, should be held in equal
shares. Particularly where the parties have chosen not to marry, their close
43
474
and loving relationship does not by any means necessarily imply an intention A
to share all their assets equally. There is a large di›erence between sharing
outgoings and making a gift of a valuable share in property; outgoings are
relatively small regular sums arising out of day-to-day living, but an interest
in the home is a capital asset, with a substantial value. I am similarly
unconvinced that the ownership of the bene!cial interest in a home acquired
in joint names is much a›ected by whether the parties have children at the
B
time of acquisition. While it justi!es the obvious inference that it is to be
used for the children as well as the parties, it says nothing on its own as to the
intended ownership of the bene!cial interest.
133 The fact that the parties operated their day-to-day !nancial a›airs
through a joint bank account, into which both their wages were paid and
from which all family outgoings were paid, could fairly be said to be strong
evidence that they intended the sums in that account to be owned equally. C
Accordingly, it would normally be easy to justify the contention that a home
acquired with money from that account (often together with a mortgage in
joint names) should be treated as acquired with jointly owned money and
therefore as bene!cially owned jointly. However, I am unhappy with the
suggestion that, because parties share or pool their regular income and
outgoings, it can be assumed that they intended that the bene!cial interest in
D
their home, acquired in joint names but with signi!cantly di›erent
contributions, should be shared equally. There is a substantial di›erence, in
law, in commercial terms, in practice, and almost always in terms of value
and importance, between the ownership of a home and the ownership of a
bank account or, indeed, furniture, furnishings and other chattels.
134 The fact that the parties keep assets such as bank accounts and
!nancial investments separate and in separate names could be said to E
indicate that the parties do not intend to pool their resources. But it could
equally be said that the fact that they choose, exceptionally, to acquire the
home in joint names indicates that it is to be treated di›erently from their
other assets, namely that it is to be jointly owned bene!cially. In my view,
however, such evidence is again of little value on its own, as it relates to a
very di›erent category of assets, in terms of nature and value, from the home
F
they are buying.
135 The factors I have been discussing in the previous three paragraphs
will often, however, have some signi!cance. If there is other, possibly
contested, evidence which is said to support the contention that the parties
intended a di›erent result from that indicated by a resulting trust analysis,
those factors may make it easier for the court to accept, or even to interpret,
that evidence as justifying such a di›erent result. G
136 For instance, the fact that the parties are in a close and loving
relationship would render it easier, than in a normal contractual context, to
displace the resulting trust solution with, say, an equal division of the
bene!cial ownership. That is because a departure from the resulting trust
solution normally involves a gratuitous transfer of value from one party to
the other. Thus, in the present case, if the outcome for which Mr Stack
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contends applied at the date of acquisition of the property, it would have
involved an e›ectively gratuitous transfer of value equal to at least 15% of
the purchase price of the house to him from Ms Dowden. Such a transfer is
less unlikely between two parties in a long-term loving relationship than
between two commercial entities or even two friends, but that does not mean
44
475
A that the nature of the relationship of itself justi!es the inference of such a
transfer.
137 In the present case, I consider that there was simply no evidence
to justify departing in Mr Stack"s favour from the apportionment of the
bene!cial interest in the house at the date of acquisition indicated by the
resulting trust presumption. None of the facts recited in the opinion of
B
Baroness Hale justify such a departure. It is fair to record that Mr Stack
did appear to suggest at one point in his evidence that there was some
discussion as to the ownership of the house at the time it was acquired, but
the judge expressly made no !nding in his favour about that, and the Court
of Appeal was not invited to do so or to remit it for the judge to make such
a !nding.
C Bene"cial ownership: events after the acquisition of the house

138 The fact that the ownership of the bene!cial interest in a home is
determined at the date of acquisition does not mean that it cannot alter
thereafter. My noble and learned friend Lord Ho›mann suggested during
argument that the trust which arises at the date of acquisition, whether
resulting or constructive, is of an ambulatory nature. That elegant
D characterisation does not justify a departure from the application of
established legal principles any more than such a departure is justi!ed at the
time of acquisition. It seems to me that $$compelling evidence"", to use Lord
Hope"s expression in para 11, is required before one can infer that,
subsequent to the acquisition of the home, the parties intended a change in
the shares in which the bene!cial ownership is held. Such evidence would
E
normally involve discussions, statements or actions, subsequent to the
acquisition, from which an agreement or common understanding as to such
a change can properly be inferred. I have already discussed some of the
issues arising in this connection, partly because Ms Dowden and Mr Stack
had lived together in Purves Road before they acquired the house at
Chatsworth Road.
139 There are, however, one or two aspects I should like to mention.
F I agree with Lord Walker that, subject of course to other relevant facts
justifying a di›erent conclusion, the fact that one party carries out
signi!cant improvements to the home will justify an adjustment of the
apportionment of the bene!cial interest in his favour. In such a case, the cost
could be seen as capital expenditure which di›ers from regular outgoings
relating to the use of the home, and is not dissimilar in !nancial e›ect, from
G the cost of acquiring the home in the !rst place. To qualify, any work must
be substantial: decoration or repairs (at least unless they were very
signi!cant) would not do.
140 There is also the question of repayments of the mortgage, and
payments of other outgoings. I have already discussed the e›ect of the
parties taking a mortgage in joint names, and suggested that, in some cases,
repayments of capital could have the e›ect of adjusting the shares in the
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bene!cial interest. (It is conceivable that that could apply to payments of
interest as well). In many cases, the repayments of capital, even if e›ected
wholly by one party, should not be interpreted as indicating an intention to
alter the way in which the bene!cial interest is apportioned. Thus, the fact
that one party is the home-maker (and, often, child-carer) and the other
45
476
is the wage-earner would probably not justify the former having his A
share decreased simply because the other party repays the mortgage by
instalments, but it may be di›erent where both parties earn and share the
home-making, but one of them repays the mortgage by a single capital sum.
141 Consistently with what has already been discussed, I am
unconvinced that the original ownership of the bene!cial interest could
normally be altered merely by the way in which the parties conduct their
B
personal and day-to-day !nancial a›airs. I do not see how the facts that they
have lived together for a long time, have been in a loving relationship, have
children, operated a joint bank account, and shared the outgoings of the
household, including in respect of use and occupation of the home, can, of
themselves, indicate an intention to equalise their originally unequal shares
any more than they would indicate an intention to equalise their shares on
acquisition, as discussed earlier. So, too, the facts that they both earn and C
share the home-making, or that one party has a well-paid job and the other is
the home-maker, seem to me to be irrelevant at least on their own. Even the
fact that one party pays all the outgoings and the other does nothing would
not seem to me to justify any adjustment to the original ownership of the
bene!cial interest (subject to the possible exception of mortgage
repayments).
D
142 In many cases, these points may result in an outcome which would
seem unfair at least to some people. However (unless and until the
legislature decides otherwise) fairness is not the guiding principle as
Baroness Hale says, and, at least without legislative directions, it would be a
very subjective and uncertain guide. Further, it is always important to bear
in mind the need for clarity and certainty.
143 It is worth repeating that one is concerned with the ownership of E
what will normally be the most important and valuable asset of the parties,
and the way they conduct their day-to-day living and !nances is, in my view,
at least of itself, not a reliable guide to their intentions in relation to that
ownership. Even payments on decoration, repairs, utilities and council tax,
although related to the home, are concerned with its use and enjoyment, as
opposed to its ownership as a capital asset. It is also worth repeating that
F
these factors are not irrelevant to the issue of whether there has been a
change in the shares in which the bene!cial interest in the home is held. They
provide part of the vital background against which any alleged discussion,
statement or action said to give rise to a change in the bene!cial ownership is
to be assessed, in relation to both whether it occurred and what its e›ect
was.
144 I am unhappy with the formulation of Chadwick LJ in Oxley v G
Hiscock [2005] Fam 211, para 69, quoted by Baroness Hale at para 61 of her
opinion, namely that the bene!cial ownership should be apportioned by
reference to what is $$fair having regard to the whole course of dealing
between [the parties] in relation to the property"". First, fairness is not the
appropriate yardstick. Secondly, the formulation appears to contemplate an
imputed intention. Thirdly, $$the whole course of dealing . . . in relation to
H
the property"" is too imprecise, as it gives insu–cient guidance as to what is
primarily relevant, namely dealings which cast light on the bene!cial
ownership of the property, and too limited, as all aspects of the relationship
could be relevant in providing the context, by reference to which any alleged
discussion, statement and actions must be assessed. As already explained,
46
477
A I also disagree with Chadwick LJ"s implicit suggestion in the same paragraph
that $$the arrangements which [the parties] make with regard to the
outgoings"" (other than mortgage repayments) are likely to be of primary
relevance to the issue of the ownership of the bene!cial interest in the home.
145 I am rather more comfortable with the formulation of the Law
Commission in Sharing Homes, A Discussion Paper (Law Com No 278),
B
para 4.27, also quoted in para 61 of Baroness Hale"s opinion, that the court
should $$undertak[e] a survey of the whole course of dealing between the
parties . . . taking account of all conduct which throws light on the question
what shares were intended"". It is perhaps inevitable that this formulation
begs the di–cult questions of what conduct throws light, and what light it
throws, as those questions are so fact-sensitive. $$Undertaking a survey of the
whole course of dealings between the parties"" should not, I think, at least
C normally, require much detailed or controversial evidence. That is not
merely for reasons of practicality and certainty. As already indicated,
I would expect almost all of $$the whole course of dealing"" to be relevant
only as background: it is with actions, discussions and statements which
relate to the parties" agreement and understanding as to the ownership of the
bene!cial interest in the home with which the court should, at least
D normally, primarily be concerned. Otherwise, the inquiry is likely to be
trespassing into what I regard as the forbidden territories of imputed
intention and fairness.
146 In other words, where the resulting trust presumption (or indeed
any other basis of apportionment) applies at the date of acquisition, I am
unpersuaded that (save perhaps in a most unusual case) anything other than
subsequent discussions, statements or actions, which can fairly be said to
E
imply a positive intention to depart from that apportionment, will do to
justify a change in the way in which the bene!cial interest is owned. To say
that factors such as a long relationship, children, a joint bank account, and
sharing daily outgoings of themselves are enough, or even of potential
central importance, appears to me not merely wrong in principle, but a
recipe for uncertainty, subjectivity, and a long and expensive examination of
F facts. It could also be said to be arbitrary, as, if such factors of themselves
justify a departure from the original apportionment, I !nd it hard to see how
it could be to anything other than equality. If a departure from the original
apportionment was solely based on such factors, it seems to me that the
judge would almost always have to reach an $$all or nothing"" decision. Thus,
in this case, he would have to ask whether, viewed in the round, the personal
G and !nancial characteristics of the relationship between Mr Stack and
Ms Dowden, after they acquired the house, justi!ed a change in ownership
of the bene!cial interest from 35—65 to 50—50, even though nothing they did
or said related to the ownership of that interest (save, perhaps, the
repayments of the mortgage). In my view, that involves approaching the
question in the wrong way. Subject, perhaps, to exceptional cases, whose
possibility it would be unrealistic not to acknowledge, an argument for an
H alteration in the way in which the bene!cial interest is held cannot, in my
opinion, succeed, unless it can be shown that there was a discussion,
statement or action which, viewed in its context, namely the parties"
relationship, implied an actual agreement or understanding to e›ect such an
alteration.
47
478
147 Turning to the present case, I consider that there are no grounds for A
varying the split of the bene!cial ownership, which arose in 1993 on the
acquisition of the house, as a result of any events which occurred
subsequently, at any rate to an extent more favourable to Mr Stack than the
35% accepted by the Court of Appeal. Subject to one exception, there was
nothing said or done by the parties which could justify a change from that
which arose at the date of acquisition. As to the exception, I accept that, as a B
result of his repaying some of the mortgage, Mr Stack has an arguable case
for slightly increasing his share of the bene!cial interest. However, his share
cannot thereby be increased above 36%, assuming all the facts in his favour,
and, in my view, his share would remain less than 35%.
The payment issue

C
148 The parties each had the right to occupy the house and the
concomitant expectation of having to share occupation. After some nine
years of living together, Ms Dowden excluded Mr Stack against his wishes.
On 11 April 2003, the parties agreed a time-limited order in the Family
Proceedings Court, which excluded Mr Stack from the house, and required
Ms Dowden to pay him (or to credit him against her share of the proceeds of
sale of the house) a sum which re%ected the cost of his alternative D
accommodation, later agreed at £900 per month. After that order expired
on 10 January 2004, Mr Stack e›ectively accepted Ms Dowden"s decision to
exclude him. As a result, Ms Dowden continued in exclusive occupation
(with their four children), and Mr Stack had to continue to pay for other
accommodation.
149 At the hearing, an order for the sale of the house was sought and E
granted, and Mr Stack sought a further order that he be paid (or credited) in
the meantime at £900 per month. The judge made that order, after brief
argument, on the sole stated ground that Ms Dowden had control over the
marketing and sale of the house. The Court of Appeal thought this reason
unsatisfactory, and reversed his decision, on the grounds that the house was
soon to be sold, the four children were living there, and there was no basis
for assessing the compensation at £900 per month. F
150 The court"s power to order payment to a bene!ciary, excluded from
property he would otherwise be entitled to occupy, by the bene!ciary who
retains occupation, is now governed by sections 12 to 15 of the Trusts of
Land and Appointment of Trustees Act 1996, having been formerly
equitable in origin. However, I think that it would be a rare case where the
statutory principles would produce a di›erent result from that which would G
have resulted from the equitable principles.
151 The 1996 Act appears to me to apply here in this way. The trustees,
Ms Dowden and Mr Stack, agreed pursuant to section 13(1) of the 1996 Act
(through the consent order of 11 April 2003 and not seeking to disturb the
status quo after it expired) that Mr Stack would be excluded from the house.
Accordingly, they could have agreed pursuant to section 13(3) and
H
(6)(a) that Ms Dowden would pay $$compensation"" to Mr Stack for his
exclusion. They initially agreed that in the order of 11 April 2003, but, once
it expired, they could not agree whether to exercise that power.
Accordingly, the decision whether to require compensation was a matter for
the court under section 14.
48
479
A 152 In my view the proper exercise of the court"s power in the present
case would have been to order compensation. First, both parties had the
right in principle to occupy it, Ms Dowden was living there on her own as
she wanted, she had excluded Mr Stack against his will, and he was
incurring the cost of alternative accommodation: accordingly, such a
payment seems appropriate in the absence of any good reason to the
contrary. Secondly, the parties plainly thought it was right, when agreeing
B
the order of 11 April 2003, that, as a quid pro quo for his exclusion from the
house, Mr Stack should be paid (or credited) at the rate of £900 per month.
The circumstances of the parties do not appear to have changed by (or after)
10 January 2004, when they e›ectively accepted that Mr Stack would
remain excluded from the house.
153 Thirdly, when exercising its power under section 14, the court is
C required to take into account four speci!c matters set out in section 15(1). In
my view, those factors either favour ordering a payment in favour of
Mr Stack, or they are neutral or irrelevant. Thus, paragraphs (a) and (b), the
purpose for which the house was bought and the purpose for which it was
held, favour the conclusion, as the house was bought as a home for Mr Stack
(as well as Ms Dowden and the children), and, at any rate as far as he was
concerned, that remained the position. Paragraph (c), the welfare of minors
D
residing in the house, is neutral as there is no suggestion of prejudice to the
four children whether or not he was paid. Paragraph (d), the interests of any
secured creditor, is irrelevant for present purposes.
154 It is true Ms Dowden had to pay all the outgoings in respect of the
house, but Mr Stack had to pay all the outgoings, as well as the rent, in
respect of his alternative accommodation. Further, if the compensation was
E calculated (as it often is) on the basis of the rental value of the trust property
concerned, the outgoings would be taken into account when assessing its
rental value.
155 I accept that the judge"s reason for ordering payment was weak, no
doubt at least in part because of the brevity of the argument and because he
was not referred to the 1996 Act. (However, it is only fair to the judge to say
that, as the actual occupier of the house, Ms Dowden did have some control
F
over the progress of its marketing and sale.) I also accept that the Court of
Appeal was consequently entitled to reconsider the matter afresh.
Nonetheless, I consider that the Court of Appeal went wrong in reversing the
judge"s decision on the point. The fact that the children needed a home is not
in point. First, it does not meet the main ground for making a payment
order, namely Mr Stack"s exclusion from the house and having to !nd and
G pay for alternative accommodation. Secondly, Mr Stack was paying
towards the children"s maintenance, and, through his share of the bene!cial
ownership of the house, helping to house them. Thirdly, there was no
evidence to suggest that ordering a payment to Mr Stack would have in any
way harmed the children"s interests. That Ms Dowden had agreed to pay
£900 per month under the order of 11 April 2003 suggests that it would not
have had that e›ect.
H
156 The fact that the house might have been expected to be sold fairly
soon after the hearing is a point which, in my view, is either irrelevant or cuts
both ways. It did not alter the position: it merely rendered it more likely to
come to an end sooner rather than later. Nor is it as if any wrongful act by
Mr Stack caused his exclusion: it was simply due to the relationship breaking
49
480
down. The fact that, after the order of 11 April 2003 expired, Mr Stack A
accepted his exclusion should not count against him. To hold that a
reasonable acceptance of exclusion would make it more di–cult to claim
compensation would put a premium on unreasonableness and encourage
litigation.
157 I also disagree with the Court of Appeal on quantum. I can see no
reason to depart from the !gure which the parties originally agreed, and was
B
not challenged before the judge, namely £900 per month. It is a !gure
which had a rational basis (namely the cost of Mr Stack"s alternative
accommodation). There is, in my view, a strong argument for saying that,
on the basis of an analogy with trespass damages, that the court should be
able to award compensation based either on the notional rental value of the
house or the cost of the alternative accommodation.
C
Conclusion
158 Accordingly, I agree that Mr Stack"s appeal against the Court of
Appeal"s determination as to the extent of his ownership of the bene!cial
interest in Chatsworth Road should be dismissed, but I would have allowed
his appeal against the Court of Appeal"s refusal to order Ms Dowden to pay
him £900 per month in respect of his exclusion. D
Appeal dismissed.
Solicitors: Attiyah Lone, Hammersmith; Walter Jennings & Son, Kentish

Town.
BLS
E
F
END OF VOLUME AND OF APPEAL CASES SERIES FOR 2007
50
107
1 A.C.
A [HOUSE OF LORDS]
LLOYDS BANK PLC APPELLANTS

AND
R O S S E T AND A N O T H E R RESPONDENTS
B
1990 Feb. 12, 13, 14, 15; Lord Bridge of Harwich, Lord Griffiths,
March 29 Lord Ackner, Lord Oliver of Aylmerton
and Lord Jauncey of Tullichettle
Land Registration—Overriding interest—"Actual occupation"—Semi-

derelict property purchased by husband as matrimonial home
C with trust moneys—Trustee's requirement that husband be
registered as sole proprietor—Bank loan to husband charged on
house without wife's knowledge—Wife undertaking renovation
work prior to completion—Transfer to husband and charge to
bank completed on same date—Registration at later date—Wife's
claim to overriding interest having priority over bank's charge—
Common intention that wife have beneficial interest in property
r-v alleged—No express agreement—Whether wife's activities in
relation to renovation of property sufficient to justify inference of
common intention—Relevant date for ascertaining whether interest
in registered land protected by actual occupation—Whether date
of transfer or creation of legal estate or of registration—Land
Registration Act 1925 (15 Geo. 5, c. 21), ss. 20(1), 70(1 )(g)
Trusts—Constructive trust—Joint enterprise—Property acquired in
husband's name as matrimonial home—Intention that wife have
E beneficial interest—No express agreement—Wife undertaking
renovation work—Whether joint venture or intention to occupy as
family home sufficient to indicate intentions relating to beneficial
ownership
A h u s b a n d a n d wife, t h e first a n d second defendants, wished

t o p u r c h a s e a p r o p e r t y , which w a s registered land a n d in a
semi-derelict condition , as a h o m e for themselves and their t w o
F children. T h e purchase was t o be effected with moneys from the
h u s b a n d ' s family trust in Switzerland, and t h e Swiss trustee, to
t h e knowledge of both defendants , insisted on t h e acquisition
being in t h e h u s b a n d ' s sole n a m e . T h e vendors gave the
defendants permission to ente r t h e property with builders to
u n d e r t a k e renovation work before exchange of contracts. T h e
builders began work on 7 N o v e m b e r 1982, a n d t h e wife herself
P carried o u t decorating work almost daily, obtained necessary
materials a n d generally urged o n t h e builders. Contracts were
e x c h a n g e d with t h e vendor s o n 23 N o v e m b e r for a purchase
price of £57,500. O n 14 D e c e m b e r , the h u s b a n d , without t h e
wife's k n o w l e d g e , sought a n d obtained permission from t h e
plaintiff b a n k t o o v e r d r a w up to £15,000 on his current account
with t h e m t o m e e t t h e cost of t h e renovation a n d signed t h e
b a n k ' s form of legal charge. Completion of t h e transfer in t h e
H h u s b a n d ' s sole n a m e a n d execution of t h e b a n k 's charge t o o k
place o n 17 D e c e m b e r , £2,267 being provided towards the
purchase price from t h e h u s b a n d ' s overdraft facility. T h e wife
m a d e n o financial contribution either t o the purchase of t h e
p r o p e r t y o r t o t h e cost of renovation. T h e transfer and the
51
108
Lloyds Bank Pic. v. Rosset (H.L.(E.)) [1991]
charge were registered on 7 February 1983, the family moving *
into the property in the same month. The husband left in May
1984 following matrimonial difficulties, the wife and children
remaining in the property. After a formal demand for repayment
of the loan had not been met, the bank claimed possession and
an order for sale. The husband did not resist the claim, but the
wife alleged by way of defence that she had a beneficial interest
in the property under a constructive trust that qualified as an
overriding interest under section 70(1)(#) of the Land Registration °
Act 1925' because she had been in actual occupation of the
property on the relevant date. The judge rejected the wife's
claim that it had been expressly agreed between the husband
and herself that the property was to be jointly owned. He
found, however, that there had been a common intention
between the parties formed prior to 17 December 1982 that the
wife should have a beneficial interest in the property under a C
constructive trust and that, by virtue of the work that she had
done towards the renovation of the property before that date,
she had acted to her detriment on the faith of that common
intention. He concluded, however, that she had not been in
actual occupation of the property on that date and that,
accordingly, her equitable interest as against the husband was
not protected as an overriding interest by section 70(l)(g) of the n
Act of 1925 so as to prevail against the bank's legal charge. The
Court of Appeal, by a majority, allowed an appeal by the wife.
On appeal by the bank:—
Held, allowing the appeal, (1) that the relevant date for
ascertaining whether an interest in registered land was protected
by actual occupation so as to prevail against the holder of a
legal estate as an overriding interest under section 70(l)(g) of
the Land Registration Act 1925 was that of the transfer or E
creation of the estate, not of its registration (post, pp. 126C-D,
134C-E).
Abbey National Building Society v. Cann [1991] 1 A.C. 56,
H.L.(E.) followed.
(2) That the wife's activities in relation to the renovation of
the property between the beginning of November 1982 and the
date of completion, on which the judge had, essentially, based p
his inference of a common intention that she should have a
beneficial interest in it, had been insufficient to justify that
inference, and, accordingly, the judge's finding that the husband
1
Land Registration Act 1925, s. 20(1): "In the case of a freehold estate registered
with an absolute title, a disposition of the registered land or of a legal estate therein . . .
for valuable consideration shall, when registered, confer on the transferee or grantee an
estate in fee simple or other legal estate expressed . . . to be created in the land dealt Q
with, together with all rights, privileges, and appurtenances belonging or appurtenant
thereto, including (subject to any entry to the contrary in the register) the appropriate
rights and interest which would, under the Law of Property Act, 1925, have been
transferred if the land had not been registered, subject—(a) to the incumbrances and
other entries, if any, appearing on the register; and (b) unless the contrary is expressed on
the register, to the overriding interests, if any, affecting the estate transferred or created,
but free from all other estates and interests whatsoever . . ."
S. 70(1): "All registered land shall, unless under the provisions of this Act the contrary
is expressed on the register, be deemed to be subject to such of the following overriding JJ
interests as may be for the time being subsisting in reference thereto, and such interests
shall not be treated as incumbrances within the meaning of this Act, (that is to say): . . .
(g) The rights of every person in actual occupation of the land or in receipt of the rents
and profits thereof, save where inquiry is made of such person and the rights are not
disclosed; . . . "
52
109
1 A.C. Lloyds Bank Pic. v. Rosset (H.L.(E.))
^ held the property as constructive trustee for himself and the
wife could not be supported (post, pp. 131C-D, 132B, 134B-D).
Per curiam. A critical distinction that any judge required to
resolve a dispute between former partners as to the beneficial
interest in the home that they formerly shared should always
have in the forefront of his mind is between the effect of
evidence on the one hand of express discussions capable of
establishing an express agreement or an express representation
B that the partner who was not the legal owner was to have an
interest in the property and evidence on the other hand of
conduct alone as a basis for an inference of a common intention
to share the property beneficially and giving rise to a constructive
trust. In the latter case, it is at least extremely doubtful whether
anything less than direct contributions to the purchase price by
the non-owning partner will be sufficient. Neither a common
^ intention 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 the
partners' intentions with respect to the beneficial ownership of
the property (post, pp. 130C-D, 132D—133A, H—134A).
Decision of the Court of Appeal [1989] Ch. 350; [1988] 3
W.L.R. 1301; [1988] 3 All E.R. 915 reversed.
u
The following cases are referred to in the opinion of Lord Bridge of
Harwich:
Abbey National Building Society v. Cann; [1991] 1 A.C. 56; [1990] 2
W.L.R. 832; [1990] 1 All E.R. 1085, H.L.(E.)
Eves v. Eves [1975] 1 W.L.R. 1338; [1975] 3 All E.R. 768, C.A.
Gissing v. Gissing [1971] A.C. 886; [1970] 3 W.L.R. 255; [1970] 2 All E.R.
F 780, H.L.(E.)
Grant v. Edwards [1986] Ch. 638; [1986] 3 W.L.R. 114; [1986] 2 All E.R.
426, C.A.
McFarlane v. McFarlane [1972] N.I. 59, C.A.
Pettitt v. Pettitt [1970] A.C. 777; [1969] 2 W.L.R. 966; [1969] 2 All E.R.
385, H.L.(E.)
p The following additional cases were cited in argument:

Amalgamated Investment & Property Co. Ltd. v. Texas Commerce
International Bank Ltd. [1982] Q.B. 84; [1981] 2 W.L.R. 554; [1981]
1 All E.R. 923, C.A.
Bernard v. Josephs [1982] Ch. 391; [1982] 2 W.L.R. 1052; [1982] 3 All E.R.
162, C.A.
Burns v. Burns [1984] Ch. 317; [1984] 2 W.L.R. 582; [1984] 1 All E.R. 244,
G C.A.
Church of England Building Society v. Piskor [1954] Ch. 553; [1954] 2
W.L.R. 952; [1954] 2 All E.R. 85, C.A.
City of London Building Society v. Flegg [1988] A.C. 54; [1987] 2 W.L.R.
1266; [1987] 3 All E.R. 435, H.L.(E.)
Connolly Brothers Ltd., In re (No. 2), [1912] 2 Ch. 25, C.A.
Crabb v. Arun District Council [1976] Ch. 179; [1975] 3 W.L.R. 847; [1975]
H 3 All E.R. 865, C.A.
Dillwyn v. Llewelyn (1862) 4 De G.F. & J. 517
Grace Rymer Investments Ltd. v. Waite [1958] Ch. 314; [1958] 2 W.L.R.
200; [1958] 1 All E.R. 138; [1958] Ch. 831; [1958] 3 W.L.R. 337; [1958]
2 All E.R. 777, C.A.
53
110
Greasley v. Cooke [1980] 1 W.L.R. 1306; [1980] 3 All E.R. 710, C.A. A
Ives (E. R.) Investment Ltd. v. High [1967] 2 Q.B. 379; [1967] 2 W.L.R.
789; [1967] 1 All E.R. 504, C.A.
Jones (A.E.) v. Jones (F.W.) [1977] 1 W.L.R. 438; [1977] 2 All E.R. 231,
C.A.
Lysaght v. Edwards (1876) 2 Ch.D. 499
Midland Bank Pic. v. Dobson [1986] 1 F.L.R. 171, C.A.
National Provincial Bank Ltd. v. Hastings Car Mart Ltd. [1964] Ch. 665; R
[1964] 3 W.L.R. 463; [1964] 3 All E.R. 93, C.A.; [1965] A.C. 1175; °
[1965] 3 W.L.R. 1; [1965] 2 All E.R. 472, H.L.(E.)
Paddington Building Society v. Mendelsohn (1985) 50 P. & C.R. 244, C.A.
Pascoe v. Turner [1979] 1 W.L.R. 431; [1979] 2 All E.R. 945, C.A.
Rayner v. Preston (1881) 18 Ch.D. 1, C.A.
Ridout v. Fowler [1904] 1 Ch. 658
Security Trust Co. v. Royal Bank of Canada [1976] A.C. 503; [1976] 2
C
W.L.R. 437; [1976] 1 All E.R. 381, P.C.
Strand Securities Ltd. v. Caswell [1965] Ch. 958; [1965] 2 W.L.R. 958;
[1965] 1 All E.R. 820, C.A.
Taylors Fashions Ltd. v. Liverpool Victoria Trustees Co. Ltd. (Note) [1982]
Q.B. 133; [1981] 2 W.L.R. 576; [1981] 1 All E.R. 897
Williams & Glyn's Bank Ltd. v. Boland [1979] Ch. 312; [1979] 2 W.L.R.
550; [1979] 2 All E.R. 697, C.A.; [1981] A.C. 487; [1980] 3 W.L.R.
138; [1980] 2 All E.R. 408, H.L.(E.) D
APPEAL from the Court of Appeal.

This was an appeal by the plaintiffs, Lloyds Bank P i c , by leave of
the House of Lords from the decision of the Court of Appeal (Purchas
and Nicholls L.JJ., Mustill L.J. dissenting) [1989] Ch. 350 dated 13 May
1989 allowing an appeal by the second defendant, Diana Irene Rosset, g
from the judgment of Judge Scarlett given at Thanet County Court on
22 May 1987. The judge had ordered that the bank be given possession
of Vincent Farmhouse, Manston Road, Manston, Kent.
The Court of Appeal refused the bank leave to appeal from their
decision, but on 19 October 1989 the Appeal Committee of the House
of Lords (Lord Bridge of Harwich, Lord Oliver of Aylmerton and Lord
Jauncey of Tullichettle) allowed a petition by the bank for leave to F
appeal.
The facts are set out in the opinion of Lord Bridge of Harwich.
Michael Crystal Q.C., Alastair Walton and Simon Browne-Wilkinson

for the bank. First, how does the court determine whether a claimant
has acquired a beneficial interest in real property where there has been G
no financial contribution by the claimant?
1. The court looks to see whether it can find an arrangement or
understanding between the parties whereby in return for some conduct
on the part of the claimant it is agreed or understood that the claimant
will acquire an interest in the property owned by the other (the legal
owner).
2. This involves the court in the following analysis: (1) was such an
arrangement or understanding expressed by the parties at the time?
(2) If not, the arrangement or understanding may be inferred from
conduct on the part of the claimant that is only consistent with the tacit
54
Ill
A or unexpressed existence of such an arrangement or understanding at
the time. (3) If it cannot be inferred from such conduct then the
existence of such an arrangement or understanding cannot be imputed to
the parties. (4) If the conduct relied on is consistent with a number of
different explanations, i.e. it is equivocal, then no arrangement or
understanding can be inferred from such conduct.
On 1, see Pettitt v. Pettitt [1970] A.C. 777, 804B-E, 809F-G, 818E-F;
B
Gissing v. Gissing [1971] A.C. 886, 904F-905G, 909F-910A; McFarlane v.
McFarlane [1972] N.I. 59, 67-72, 75-76, 78; Eves v. Eves [1975] 1
W.L.R. 1338, 1345A-D; Midland Bank Pic. v. Dobson [1986] 1 F.L.R.
171, 173-177; Burns v. Burns [1984] Ch. 317, 327A-H, especially 327G-H,
330H-331D; and Grant v. Edwards [1986] Ch. 638, 651F-653A.
On 2(1), see Gissing, at p. 905D-G, H; on 2(2), see Pettitt, at
Q pp. 804B-E, especially 804E, and 813G; Eves, at p. 1345D-F (as to
differences regarding inferences, see Burns); and Bernard v. Josephs
[1982] Ch. 391, 401H-402G, 404C-H. On 2(3), see Pettitt, at p. 804F-G;
Gissing, at pp. 897H, 898B-D, 900E-G, 904E-F, 905H-906B, 907B-908D;
McFarlane, at pp. 70-71, 76-77; and Grant v. Edwards, at p. 652G-H.
On 2(4), see Gissing, at p. 906E-F, Eves, at p. 1345B-F, Midland Bank
Pic. v. Dobson, at pp. 176, 177 and Burns, at pp. 330-331, 344D-345C.
D The role of Parliament has been dominant since 1970. There has
been a great body of legislation concerning the breakdown of marriage.
The consequence of that legislation is that the issues debated in Pettitt
and Gissing have not continued to be debated in the House of Lords.
The subsequent cases really deal with persons who are not married.
There is no new social evil that needs to be dealt with by judicial
g declaration in the House of Lords.
Midland Bank Pic. v. Dobson (following Pettitt, Gissing, McFarlane
and Eves) was a clear expression of the "bargain theory." In Grant v.
Edwards, a distinction was made between beneficial interest and equity:
equity will only be given effect to by the court, maybe years later. The
obiter dictum in Sir Nicolas Browne-Wilkinson V.-C.'s judgment in
Grant v. Edwards, at pp. 656-657, is the whole basis of Nicholls L.J.'s
F judgment in the present case. [Reference was made to Jones (A.E.) v.
Jones (F.W.) [1977] 1 W.L.R. 438; Pascoe v. Turner [1979] 1 W.L.R.
431, 435; and Greasley v. Cooke [1980] 1 W.L.R. 1306, 1311.] Reading
Grant v. Edwards as a whole, the judgments provide some support for
the "detriment theory" (i.e. the obtaining of a beneficial interest without
any quid pro quo), but only in cases where there has been some indirect
Q financial contribution. It is not right to apply the detriment theory to
cases where there has been no financial contribution, which the Court of
Appeal here had to do to bring the case within Grant v. Edwards and
give the second defendant an interest.
There is a distinction between a financial contribution and a
contribution in kind of a substantial nature. The latter has to be a
significant contribution to the value of the house; certainly duties of an
" ephemeral character do not suffice: as to the emphemeral nature of
decoration, see Pettitt, at p. 796E.
According to the principles to be deduced from Pettitt and Gissing, in
order to establish that she had a beneficial interest in the property the
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second defendant had to show three things: (a) a common intention of A
her and the first defendant that she should have such an interest; (b) an
agreement between her and the first defendant that she was to do
something to her detriment (i.e., reciprocal obligations); (c) that she did
do that something to her detriment.
As to common intention, the judge found that it was the parties'
common intention "that the renovation of the house should be a joint
venture, after which the house was to become a family home to be
shared by [them] and their children." His later statement that "there was
a common intention between [them] that the second defendant should
have a beneficial interest in the property under a constructive trust" was
a conclusion of law based on his previous finding, not itself a finding of
fact. His finding of fact did not support that conclusion of law. Marriage
is itself a joint venture. Further, any matrimonial home is "our home" C
to the married couple. Nicholls L.J. quoted certain parts of the judge's
notes of evidence to support the judge's conclusion of law. The judge
did not find those matters as facts. Further, a distinction appears from
the parts quoted between what the second defendant "understood" and
what was actually discussed. It is a common intention that the wife
should have a beneficial interest that is necessary: Gissing, per Lord J-J
Diplock, at p. 906. On the facts here, there was no common intention.
As to reciprocal obligations, if, contrary to the bank's submissions
above, there was a common intention, nonetheless something more is
necessary, namely circumstances that bring into operation the saving
provision of section 53(2) of the Law of Property Act 1925 and create a
resulting implied or constructive trust. That would only be so if the
agreement between the parties was that the second defendant would do E
something to her detriment. Equity will not assist a volunteer: Gissing,
per Lord Diplock, at pp. 904G-905H, and Midland Bank Pic. v. Dobson,
per Fox L.J., pp. 175-176. Nicholls L.J. correctly held that there was no
evidence, and the judge did not find that it had been agreed, that if the
second defendant acted in a particular way she would have an interest in
the property. However, Nicholls L.J. said that he saw no reason in p
principle why, if the parties' common intention were that the wife
should have a beneficial interest in the property and if thereafter to the
knowledge of the husband she acted to her detriment in reliance on that
common intention, she should not be able to assert an equitable interest
against the husband. This is to introduce into the principles governing
the acquisition of a beneficial interest in property considerations that „
apply to proprietary estoppel. In the former case, where there is an
agreement that is performed, the wife thereby acquires a beneficial
interest. In the latter case, an equity (not an equitable interest) arises
that the court may satisfy as it thinks fit, for example, by the payment of
a sum of money: see Snell's Principles of Equity, 28th ed. (1982),
pp. 561-563. The wife acquires no interest save (if at all) under the
order of the court. The importance of the distinction for present H
purposes is: (i) a mere equity would confer no "rights" on the second
defendant within the meaning of section 70(l)(g) of the Act of 1925;
(ii) even if it did, the competing priorities would be between a mere
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A equity and an equitable interest, not between two equitable interests.
The equitable interest would prevail.
As to acts of detriment, if, contrary to the bank's submissions, there
was a common intention and all that the second defendant had to show
was that she had acted to her detriment in reliance on that common
intention, then: (i) the acts relied on by her and set out in the judge's
judgment did not amount to acts of detriment; (ii) there was no evidence
" that she did any such acts in reliance on any common intention, nor is it
legitimate or possible to infer that from the circumstances; (iii) the acts
carried out by her were acts that she might well have carried out
regardless of any intention as to common ownership and were equally
referable to moving into a new house that required renovation prior to
use as the family home.
Q The essentials of proprietary estoppel are that in some form or other
it comprises (1) an assurance or representation of entitlement, (2) a
reliance and (3) a detriment. As to the assurance: (a) an assurance
(whether by words or other conduct) is present only if the person who
gives it intends it to be relied on; (b) the assurance required to raise an
"equity" in the party to whom it is given must confirm in the latter an
expectation that he will be the recipient of some interest in the land that
D he would not otherwise have; (c) the rights promised must be rights in
or over land and must be such as fall within the capacity of the owner to
grant; (d) within the limits of certainty the potential subject matter of
the rights promised may take a variety of forms: the precise nature of
the promised entitlement need not be spelt out in terms of recognisable
property rights; (e) the assurance that generates the "equity" may be
g express or implied, active or passive. Relevant assurances may fall
anywhere within the broad spectrum that ranges from a direct and
positive request to incur expenditure through encouragement and
incitement to mere silent abstention from the assertion of one's rights;
(f) the assurance need not be made, and commonly is not made, in any
manner that gives rise to contractual liability; and (g) the party giving
the relevant assurance, whether actively or passively, must intend that it
F should be relied on to another's detriment.
As to the reliance: (a) reliance occurs only if the person to whom the
assurance is given then takes action detrimental to his own interests;
(b) the assurance must be an effective cause of detriment; (c) it must be
proved that the assurance encouraged or induced an expectation in the
claimant to whom it was given that at least influenced his conduct
Q (Amalgamated Investment & Property Co. Ltd. v. Texas Commerce
International Bank Ltd. [1982] Q.B. 84, 103A-107F-G, esp. 105A); i.e.,
there has to be evidence that the assurance was one of the operative
causal factors bringing about the change of position in respect of which
the "equity" is claimed (Taylors Fashions Ltd. v. Liverpool Victoria
Trustees Co. Ltd. (Note) [1982] Q.B. 133, 143H-155C, 156C-D, esp.
156c); (d) the improvement of land is the classic way in which the
" claimant of an "equity" can establish that he has undergone a factual
detriment or change of position in reliance on an assurance; (e) reliance
is most clearly and tangibly expressed in the form of expenditure on
improvements to realty, provided the improvements are relatively
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permanent or substantial; (f) there is no strict requirement, however, A
that the change of position should comprise any form of expenditure
related to land at all, or, indeed involve the payment of money;
(g) however, (i) the claimant has to show that the parties have dealt
with each other on the basis of a shared assumption as to their future
rights; (ii) this involves the claimant showing at least that the owner of
the land has induced in the claimant a belief that the claimant would
receive a sufficient interest in the land to justify the expenditure or other ^
disadvantage undertaken by the claimant; (iii) the claimant must be able
to formulate this expectation of entitlement, though a formulation in
fairly vague and non-legal terms can suffice.
As to the detriment: (a) "detriment" results only if the assurance,
once relied on, is withdrawn; (b) in this sense detriment means such
prejudice that it would be inequitable to allow the party who made the Q
relevant assurance to go back on it; (c) the claimant must establish as a
fact that the owner of the land, by setting up his right, is taking
advantage of him in a way that is unconscionable, inequitable or unjust;
(d) each case is a matter of fact or degree; and (e) where no net
disadvantage would be suffered by the claimant if the assurance originally
given were allowed to be withdrawn or not enforced by the court, the
claimant will fail to establish detriment. D
As to remedy: (a) when an equity has been raised the court looks at
all the circumstances in the case to decide in what way the equity should
be satisfied; (b) the court has an extremely wide discretion and
formulates the remedy in terms of the minimum equity required to do
justice to the claimant {Crabb v. Arun District Council [1976] Ch. 179,
198G-199C); (C) the remedy awarded may involve the grant of a c
recognised proprietary interest in land, but may sometimes take the
form of an occupation licence or a money remedy or a lien for
expenditure (d) in general terms, the court seeks to frame the remedy in
accordance with the representation or assurance on which the claimant
relied, so that the outcome of the litigation is that the claimant is given
no more and no less than was promised by the original representation or
assurance; and (e) it is particularly appropriate for the court to satisfy F
the equity through an award of monetary compensation where the
equity is founded on expenditure for improvements which are not
substantial.
As to the nature of the "equity": (a) there is a close relationship
between the operation of proprietary estoppel and the device of the
constructive trust: the same general principle is involved in that the Q
courts applying equitable principles will prevent a person from insisting
on his strict legal rights when it would be equitable for him to do so
having regard to the dealings that have taken place between the parties;
(b) the distinction between the doctrine of proprietary estoppel and the
constructive trust as substantive institutions is that estoppel puts weight
on inducement, constructive trust on undertakings; (c) put another way,
the constructive trust is ultimately based on some concept of frustrated H
"bargain", whereas the equity of estoppel is more clearly founded on a
concept of frustrated "expectation" in circumstances where some "holding
out" to the claimant that he has an interest in the land has comprised
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A part (or the whole) of the inducement to him to do the acts relied on;
and (d) there are limits on the kinds of contributory activity that are
recognised as relevant forms of detriment within even the most liberal
formulation of the substantive doctrine of constructive trust: the estoppel
doctrine rests on wider equitable principles and can attach significance to
a broader range of contributions inclusive of the more intangible
elements of domestic commitment and endeavour.
B As to when the equity arises: (a) it arises as soon as the conscience
of the landowner is affected by the transactions of the parties, i.e. when
he unconscionably sets up his undoubted rights adversely to the
legitimate demands of the claimant; (b) from this point onwards the
claimant has some kind of inchoate right, or "equity," to bend the ear of
the court of conscience to listen sympathetically to his tale; (c) the mere
Q fact that a claimant has acquired an inchoate "equity" does not mean
that he already has a right to be awarded any particular interest by way
of remedy; and (d) the "equity" crystallises only when concretised in the
form of a specific property or other interest allocated by the court.
As to whether the "equity" is a right or interest in land: (a) the
estoppel claimant receives no right or interest in land unless and until a
court finally awards him one in satisfaction of his "equity"; (b) until such
D stage the equity is difficult to place within the existing canon of rights
and interests recognised in the 1925 property legislation (cf. National
Provincial Bank Ltd. v. Hastings Car Mart Ltd. [1965] A.C. 1175,
1238B-G et passim) [1964] Ch. 665, per Lord Denning M.R. and Russell
L.J.; (c) in jurisprudential terms the equity is a right that can give the
claimant access to or provide him with a channel to some proprietary or
g personal advantage (d) the right will not in all cases lead to some
proprietary gain: the right therefore in analytical terms is no more than
a right that provides for access to an interest in land through the courts
or for the conferment of a right to the enjoyment of property (e.g., by
occupation) or to the payment of money, without bestowing any
beneficial ownership of land on the claimant; (e) until the equity
crystallises by means of an order of the court that confers a right or
F interest in land on the claimant in the exercise of the court's discretion
the equity cannot itself be regarded as: (i) a right in reference to land
that has the quality of being capable of enduring through different
ownerships of the land, according to normal conceptions of title to real
property (National Provincial Bank Ltd. v. Hastings Car Mart Ltd., at
pp. 1226-1227; City of London Building Society v. Flegg [1988] A.C. 54,
Q 87H-88E, 90D-E); (ii) an interest or right whose transmissible character is
known or ascertainable aliunde, i.e., under other statutes or under the
common law (National Provincial Bank Ltd. v. Hastings Car Mart Ltd.,
at p. 1261); (iii) a right subsisting in reference to land under section
70(l)(g) of the Act of 1925 that can be protected by the right of
occupation of the claimant.
If the House of Lords were to accede to the second defendant's
" claim through proprietary estoppel to a beneficial interest, the problem
would arise of there being an overriding interest without knowing what
it was. It comes back to the same problem on the facts: one cannot spell
out any clear promise by the first defendant. The second defendant
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relies solely on a rinding of fact by the judge: there was no assurance or A
representation of entitlement by the first defendant. That is the end of
proprietary estoppel based on reliance or detriment.
To decide whether to adopt the "bargain theory" or the "detriment
theory" it is important to look at the policy aspect. In the case of
husband and wife, there is no need for the detriment theory because of
legislation since 1970. There has been no perceptible change in social
conditions from 1970 onwards to justify repudiating the bargain theory: "
see Pettitt, at pp. 794H, 805, 810E, 811E. The detriment theory does not
produce certainty; on the contrary, it produces the possibility of further
fine distinctions. The principles of proprietary estoppel do not fall within
section 53 of the Act of 1925 at all.
The exponents of the detriment theory in Grant v. Edwards did not
focus on its difficulties. If that theory is adopted one will be upsetting Q
the rights of occupiers and purchasers finely balanced in the Act of 1925
and introducing an inherent element of uncertainty. In the present case
nine years on one still does not know what the court will declare the
wife's beneficial interest to be.
Secondly, was the second defendant in "actual occupation" of the
property on completion? As to this, see the bank's argument in the
Court of Appeal [1989] Ch. 350, 360G-362E, and what Nicholls L.J. said, D
at pp. 375H-379F. (In the event that the bank is right on the first issue,
this issue does not arise.) (1) The judge's finding that the second
defendant was not "in actual occupation" of the property on 17
December 1982 was right. (2) The question whether a person is in actual
occupation is one of fact: see Williams & Glyn's Bank Ltd. v. Boland
[1979] Ch. 312, 332D-F. The words "actual occupation" are not defined g
in the Land Registration Act 1925 and should be given their plain and
ordinary meaning: see Boland [1981] A.C. 487, 504F-G. Mustill L.J. was
correct in holding [1989] Ch. 350, 399 that "the wife was preparing the
home for occupation, but was not in occupation. . . ." (3) The judge
directed himself correctly in law, and there was evidence on which he
could reach his conclusion. (4) There can be no constructive or vicarious
"actual occupation." This is plain from the words of section 70(l)(g) of F
the Law of Property Act 1925 that prevent a claimant from asserting his
rights if they are not disclosed on inquiry. The inquiry must be of
persons present on the land. It cannot have been Parliament's intention,
and it would not be just, if a claimant were able to assert his rights even
though inquiry were made of the only person present on the land and
that person did not reveal the claimant's rights. (5) If there can be Q
"actual occupation" by an agent, as was said in Strand Securities Ltd. v.
Caswell [1965] Ch. 958, 981B, 984 (which dicta the bank invites the
House of Lords to disapprove), this can only be where the agent is
specifically employed to occupy the land (e.g., a resident caretaker). In
the present case, the builders were not employed to occupy the land.
Thirdly, on the true construction of section 70(l)(g) of the Land
Registration Act 1925, is the relevant date for "actual occupation" that "
of completion or that of registration? It is that of completion: (a) this
construction leads to a just and practical result rather than to an unjust
and impractical one; (b) such indications as are to be found in other
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A sections of the Act of 1925 support the contention that this is the right
answer; (c) it accords with the purpose of section 70(l)(g); (d) the
natural and ordinary meaning of the words in section 20(1) compels this
construction. Further or alternatively, the bank adopts the reasoning of
the Court of Appeal as set out in the judgment of Nicholls L.J. [1989]
Ch. 350, 370A-375G; see also the bank's argument, at p. 359B-C, referring
to section 25(2)(b).
B Fourthly, as to priorities, will equity assist the second defendant?
(1) If, contrary to the bank's submissions, the second defendant was in
actual occupation on the relevant date and had a beneficial interest in
the property, in equity the bank's voice ought to prevail because without
its moneys advanced for the acquisition and refurbishment of the
property the second defendant would never have obtained any beneficial
Q interest in the property. (2) Further: (i) on the transfer of the property
to the first defendant the bank immediately acquired an equitable
mortgage under its specifically enforceable contract with him for the
grant by him of a legal charge on it; (ii) there is competition between
that equitable interest and the second defendant's equitable interest as
tenant in common that arose simultaneously; (iii) in a case of competing
equitable interests the transfer to the first defendant and the grant of the
D legal charge are regarded as one in substance and he is regarded as
having acquired only the equity of redemption, in which alone the
second defendant's interest subsists: see In re Connolly Brothers Ltd.
(No. 2) [1912] 2 Ch. 25, Church of England Building Society v. Piskor
[1954] Ch. 553 and Security Trust Co. v. Royal Bank of Canada [1976]
A.C. 503. (3) Nicholls L.J. wrongly distinguished In re Connolly on the
£ ground that there effect was being given to the intention of the
debenture-holder: see [1989] Ch. 350, 385B-C. That decision turned
solely on the nature of the interest acquired by the company (i.e. the
equity of redemption). (4) Nicholls L.J. wrongly held that the second
defendant's interest preceded the bank's in time and hence prevailed:
see at p. 386c. The second defendant had no right to possession prior to
completion, and any interest that she or the first defendant had in the
F property depended on payment of the purchase price to the vendor,
which payment the bank enabled to be satisfied.
The first defendant, Gerald Marcel Rosset, did not appear and was
not represented.
Leolin Price Q.C. and Timothy Bowles for the second defendant.
(i) The relevant date. The relevant date is that of registration of the
Q legal charge, not that of its execution, (a) Under section 20(l)(b) of the
Land Registration Act 1925 the effect of registering a disposition of
registered freehold land or any legal estate therein is to confer on the
grantee a legal estate in the land dealt with subject to the overriding
interests, if any, affecting the estate created. The reference to the
"estate . . . created" is a reference to the legal estate created, and by
reason of sections 19(1) and (2), 20(1) and 26 of the Act such legal
" estate is created only when the disposition in question is registered.
Accordingly, the overriding interests referred to in section 20(1 )(b) as
affecting the (legal) estate created must be those overriding interests
obtaining as at the date of registration, (b) The Act of 1925 does not
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afford any exception to the foregoing in respect of dispositions by way A
of legal charge. The second defendant adopts the analysis of section
27(3) of the Act contained in the judgment of Lord Evershed M.R. in
Grace Rymer Investments Ltd. v. Waite [1958] Ch. 831, 849-851 and that
of Danckwerts J. [1958] Ch. 314, 322, 323. (c) The construction
contended for its consistent with the overall scheme of the Act of 1925
whereby notice of a relevant interest and its priority are primarily to be
determined by the fact and date of registration, (d) The construction
contended for, if it be the true one, should not be affected by any
consideration of its allegedly adverse consequences. In any event, such
consequences can be overstated and can be mitigated by diligent
conveyancing.
The second defendant does not say that actual occupation by itself
creates any addition to the strength of her interest. Her argument above C
is correct but depends entirely on analysis on the Act of 1925. Its
simplicity represents the correct conclusion with regard to interpretation.
(ii) Actual occupation, (a) The words "actual occupation" are not
defined in the Act of 1925. They should be given their plain and
ordinary meaning, namely physical presence on the land of such quality
as, having regard to the particular facts of any given case, constitutes p
physical presence in the capacity of occupier: see Williams & Glyn's
Bank Ltd. v. Boland [1981] A.C. 487, 504F-505C. (b) There is nothing
in section 70(l)(g) of the Act of 1925 to preclude "actual occupation" of
land through the person of the agent or employee of the party claiming
an overriding interest, providing that that agent or employee is himself
in "actual occupation." The dicta of Lord Denning M.R. and Russell
E
L.J. in Strand Securities Ltd. v. Caswell [1965] Ch. 958, 981, 984 and of
Ormerod L.J. in Boland in the Court of Appeal [1979] Ch. 312, 338
should be approved. There is nothing unjust in this construction. In the
vast majority of cases, the agent in "actual occupation" will inform any
person making inquiries of the identity of his principal to whom further
inquiries can be directed. Furthermore, the Act of 1925 is an Act of
general application and unless section 70(l)(g) is construed in the way p
contended for certain corporate occupiers who can only occupy land
through their agents would be debarred from its benefit. In any event,
the purpose of section 70(1 ){g) is to protect the rights of persons in
"actual occupation" of land as opposed to persons in "apparent"
occupation: see Boland [1981] A.C. 487, 504c-F, 505G-506D, 511D-F.
Accordingly, as between an actual occupier of land, whether personally „
or by an agent, and a person making inquiry Parliament must have
intended that the rights of the occupier, whether or not "apparent" or
discoverable by inquiry, should prevail, (c) In the context of a semi-
derelict property in process of renovation such as Vincent Farmhouse,
the degree and quality of the second defendant's physical presence prior
to completion both personally and by her agents, the builders employed
by herself and the first defendant to renovate the property, was sufficient H
to constitute "actual occupation." The second defendant adopts the
reasoning of Nicholls L.J. in the Court of Appeal [1989] Ch. 350, 375G-
379G. Her argument succeeded in the Court of Appeal on apt grounds.
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A Her submissions above, with what Nicholls L.J. said, are sufficient for
success.
(iii) Constructive trust, (a) A constructive trust arises in respect of
the acquisition of land whenever it is shown (i) that the apparent
common intention of the person in whom the legal estate is vested (the
legal owner) and the person claiming a beneficial interest in the land
(the claimant) was that the claimant should have a beneficial interest in
° the land and (ii) that the claimant has carried out acts in reliance on that
apparent common intention of such a substantial nature and so referable
to the acquisition, renovation or improvement of the property as to
render it inequitable to deny the claimant his or her intended interest.
(b) It is not necessary to the creation of a constructive trust in respect of
the acquisition of land for the claimant to show that the common
Q intention of the claimant and the legal owner was that the claimant
would acquire an interest only if he or she acted in a certain way and
that the claimant had acted in the agreed way in order to acquire that
interest. That analysis would state the law too narrowly and is
inconsistent with the majority of the speeches in Gissing v. Gissing
[1971] A.C. 886. In particular, it puts the law in terms of
agreement/contract whereas it is clear from the speeches in Gissing
D (specifically that of Lord Diplock) that a constructive trust can be
created in circumstances where there has been no agreement between
the claimant and the legal owner but simply a common intention (or
apparent common intention) can be inferred and the claimant has acted
in reliance on that intention (see also the dicta of Nourse L.J. and Sir
Nicolas Browne-Wilkinson V.-C. in Grant v. Edwards [1986] Ch. 638,
g 646H-647B, 654D-F, which the House of Lords should approve). This
approach is further well illustrated by a consideration of the examples of
direct and indirect financial contribution discussed by Lord Diplock in
Gissing, at pp. 906-908. In those examples, the contributions made by
the claimant giving rise to an inference of common intention (and also
constituting the acts of the claimant in reliance on the common intention)
are made by the claimant not pursuant to any agreement that in making
F the contributions he or she will thereby acquire an interest but because
he or she believes by reason of the common intention that he or she has
an interest. Further, the second defendant adopts the reasoning of
Nicholls L.J. in the Court of Appeal, at p. 381. (c) It is necessary to the
creation of a constructive trust in land that the common intention be
acted on by the claimant in some substantial way referable to the
Q acquisition or renovation or enhancement of the property in question
because: (i) is is the fact that the common intention is acted on by the
claimant that renders the transaction something more than an
unenforceable oral declaration of trust; (ii) it is the fact that the common
intention has been acted on in a substantial way that renders it
inequitable that the legal owner should deny the existence of a beneficial
interest in the claimant; (iii) it is the fact that the claimant's act is
" referable to the acquisition, renovation or enhancement of the property
in question that renders it inequitable that he should be satisfied other
than by way of the construction of a beneficial interest under a trust in
his favour, (d) The foregoing principles apply as much in a case where
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the claimant has made no financial contribution as where some financial A
contribution has been made. They are to be differentiated from the
principles applicable to a case of "proprietary" estoppel, so called,
because a proprietary estoppel can arise in cases: (i) where no common
intention that the claimant was to have an interest in the land in
question is shown; (ii) where the interest, estate or right of occupation
that the claimant believed he had been granted or expect to obtain is
something other than a beneficial interest in the land; (iii) where the "
acts carried out by the claimant to his detriment are not directly
referable to the acquisition or improvement of any right or interest that
the claimant had been led to believe that he had obtained or would
obtain, (e) In this case, the judge found as a fact that there was a
common intention between the first and second defendants that the
second defendant should have a beneficial interest in the property. That Q
finding is one that was supported by evidence, alternatively was the
proper inference to be drawn from the primary facts. In reliance on that
common intention, the second defendant carried out the acts set out in
the judge's judgment. They were of a substantial nature and directly
referable to the renovation and improvement of the property and were
accordingly sufficient to create a constructive trust interest in her favour.
(f) Even if her case properly falls to be considered on principles of D
proprietary estoppel, on the finding of fact made by the judge the first
defendant's beneficial interest in Vincent Farmhouse prior to completion
(see her submission on issue (iv) below) was subject to an "equity" in
her favour arising as a result of the application of those principles. In
consequence, as at the date of completion: (i) her "equity" was a right
subsisting in reference to the registered land within the meaning of g
section 70(l)(g) of the Act of 1925 and hence protected as an overriding
interest by her "actual occupation" at that date; (ii) the bank's equitable
charge arising at or shortly before completion took effect, having regard
to the nature of the second defendant's prior "equity" (namely an
"equity" founded in estoppel), subject to that prior "equity;" (iii) the
bank's legal charge, when registered, was subject to the second
defendant's "equity" and hence subject to such right or interest as the F
court might vest in her in satisfaction of it. In the circumstances of this it
is or would be properly satisfied by vesting in her a beneficial interest in
Vincent Farmhouse.
The whole of the bank's argument about the "bargain theory" versus
the "detriment theory" is not one that the second defendant recognises
as valid or the proper approach after Gissing. Gissing plainly recognised Q
that by a common intention together with an alteration in the position of
the person intended to have a beneficial interest, and having therefore a
beneficial interest, a beneficial interest is created. "Bargain" is not
something that can here be regarded as a contractual bargain: none of
the members of the Appellate Committee in Gissing regarded it as a
position that arose ex contractu (an agreement actually entered into or
discernible by the ordinary process of implication). "
The "quid pro quo" in the bank's bargain theory is presumably a
promise in exchange for a promise. That amounts to a contractual
agreement. The position in Gissing (and also in Pettitt v. Pettitt [1970]
64
121
A A.C. 777) was that the House of Lords recognised the paramount
importance of establishing a common intention, which did not need to
be contractual. That common intention, not being contractual, may be
ascertained expressly or from what the parties said or did. What has to
be added to contractual intention to express the trust (Gissing: the
creation of a trust) is to be found not in a promise to do anything but in
the conduct of (here) the second defendant referable to the common
intention and of sufficient substantiality to justify inferring that intention.
The second defendant accepts that the conduct has to be referable to the
common intention, also that intention is not to be something merely
arising out of what she did pursuant to the intention: something arising
not merely out of the marriage bond but out of the intention. She also
recognises that Sir Nicolas Browne-Wilkinson V.-C. in Grant v. Edwards
C was going a little beyond the bounds of the doctrine as she understands
it.
The question is not of bargain or detriment theory but of whether
there is a common intention, which is not always clearly expressed and
so may have to be implied, and of the conduct that is referable to that
intention and that creates the circumstances in which equity will say that
£) a beneficial interest has been acquired. The question is one of
substantiality and of the "but for" point, which introduces a superfluity
of work by the second defendant. To show that the "bargain theory"
does not include what the bank suggests, one goes to Gissing. Basically,
Gissing says that one finds the common intention plus substantiality:
there is enormous emphasis on common intention, as opposed to
agreement or bargain. There are difficulties, but these have to be faced
E in applying this decision of the House of Lords. It is a common
intention, as distinct from an agreement or bargain. If it is to be
converted into a beneficial interest, the person has to do something in
reliance on, or furtherance of, or referable to, the common intention
that he shall have some beneficial interest.
The bank has said that until 1986 the bargain theory prevailed.
F "Bargain" and "arrangement" in Eves v. Eves [1975] 1 W.L.R. 1338
does not carry the matter any further than Gissing. Lord Denning M.R.
went a little further than was necessary for the decision of the case.
[Reference was made to McFarlane v. McFarlane [1972] N.I. 59, 72, 75;
Midland Bank Pic. v. Dobson [1986] 1 F.L.R. 171, 175, 177; Grant v.
Edwards [1986] Ch. 638, 646 et seq.; Burns v. Burns [1984] Ch. 317,
„ 326F et seq. and Bernard v. Josephs [1982] Ch. 391.]
A continuing common intention can properly be inferred here,
together with the work that the second defendant did. One does not
necessarily have to be able to quantify the interest at the moment of
breakdown. Once the second defendant had embarked on the work with
the quality of substantiality that points to the common intention that she
should have a beneficial interest, then, if that is related to the acquisition
" and renovation of the property, the quantification may bind the bank in
respect of the completion of the work after the completion date. The
choice is not of asking what is the size of the interest at completion date
but of what is the interest.
65
122
The second defendant does not give up her claim in her defence that A
the property was owned jointly by herself and the first defendant. She
has given up the proposition that there was a bargain. She does not rely
on an actual agreement or understanding but relies on a constructive
trust. In quantifying the interest under a constructive trust, one may
have to get back to the maxim "equality is equity." In this exercise, it
may be that the more probable outcome is that the court will find some
quantification that makes better sense of the inferred intention of the B
parties than "equality is equity." The second stage, however, common
intention, may have to be resolved by reference to that maxim.
The judge found a common intention, and the facts that he found
were sufficient to justify his conclusion. Gissing has been applied for the
last 20 years. The House of Lords should be indulgent about lapses in
the judge's judgment, which should be fairly interpreted. The Court of Q
Appeal (per Nicholls L.J.) dealt fairly with the facts and the judge's
judgment and should not be disturbed.
As to proprietary estoppel, the second defendant does not claim that
what Sir Nicolas Browne-Wilkinson V.-C. said in Grant v. Edwards, at
p. 657, was right, or that it was within Gissing. Dillwyn v. Llewelyn
(1862) 4 De G.F. & J. 517 shows that the equity is binding on the
successors in title of the person originally bound. National Provincial D
Bank Ltd. v. Hastings Car Mart Ltd. [1965] A.C. 1175 is a very different
case, of an absolutely personal right in the wife. That is very different
from the type of proprietary estoppel, and right under a constructive
trust, with which one is concerned in the present case. [Reference was
made to E. R. Ives Investment Ltd. v. High [1967] 2 Q.B. 379.]
(iv) Priority of equitable interests, (a) There is no reason based on g
authority or principle why the beneficial interest in land obtained by a
purchaser of land at exchange of contracts should not be held by that
purchaser on constructive trust for himself and another. The second
defendant adopts the analysis and reasoning of Nicholls L.J. in the
Court of Appeal [1989] Ch. 350, 385F et seq. (b) The effect of the
creation of a constructive trust in favour of the second defendant prior
to completion of the purchase of Vincent Farmhouse was that the F
defeasible equitable interest therein arising in favour of the purchaser at
exchange of contracts was held jointly by the first and second defendants
in undivided shares, (c) Pursuant to that defeasible equitable interest,
the second defendant had a vested right prior to completion to an
indefeasible equitable interest in Vincent Farmhouse on payment of the
balance of the purchase price, (d) Her equitable interest preceded in Q
time the bank's equitable charge, which arose no earlier than 15
December 1982 (at which date the agreement to create a legal charge
became specifically enforceable by dint of part-performance), and
accordingly the bank's equitable charge took effect subject to the second
defendant's prior equitable interest and subject, therefore, to her prior
vested right to an indefeasible equitable interest on payment of the
price. The second defendant again adopts the reasoning of Nicholls L.J. "
in the Court of Appeal, pp. 386B-F. (e) Because the equitable interest in
Vincent Farmhouse prior to 15 December 1982 was held by the first and
second defendants in undivided shares, and because under the Act of
66
123
A 1925 (section 19(2)) the first defendant acquired no legal estate until
registration of the transfer, the first defendant could not at or before
completion charge anything more than his own equitable interest. He
could not charge the second defendant's equitable interest. Accordingly,
her equitable interest was not subject to the bank's equitable charge.
(f) The foregoing is not affected by the decisions in In re Connolly
Brothers Ltd. (No. 2) [1912] 2 Ch. 25 or Security Trust Co. v. Royal
Bank of Canada [1976] A.C. 503. In those cases, the entirety of the
purchaser's interest was from the outset fettered by an agreement to
grant a charge on mortgage so that in each case the purchaser under his
contract of purchase was only to obtain an equity of redemption. In this
case, the first defendant's beneficial interest under the contract of
purchase was initially unfettered by any agreement for a charge and only
C became so fettered on 15 December 1982, by which date an unfettered
undivided share had been created in favour of the second defendant. It
would only have been if the contract to charge the land had preceded
the creation of the second defendant's equitable interest that that
interest would have been subject thereto (see Security Trust, at p. 519F-
H). (g) Further, and alternatively, the second defendant adopts the
jj analysis of In re Connolly and Security Trust by Nicholls L.J. in the
Court of Appeal, at pp. 382A-385E. (h) The priority of the second
defendant's and the bank's equitable interests is not affected by the fact
that money secured by the bank's charge were used in part for the
acquisition and renovation of Vincent Farmhouse, and no injustice is
caused thereby. If the second defendant had been aware prior to the
creation of her interest that the bank's funds were to be utilised for the
E acquisition and renovation of the property and were to be secured by
mortgage, then that interest would have been subject to the bank's
charge (see Paddington Building Society v. Mendelsohn, 50 P. & C.R.
244). In the absence of such knowledge, the bank and the second
defendant were each ignorant of the other's interest. However, the
second defendant was in actual occupation, and inquiry by the bank at
F Vincent Farmhouse would have disclosed that fact and would have
enabled them to protect their position. They failed to make the inquiry,
and in those circumstances it is equitable that the second defendant
should retain her priority.
What is the nature of the interest that the purchaser acquires at
contract? What he acquires is the equitable estate in the land, not
„ something postponed until the completion of the purchase: see Underhill
and Hayton, Law of Trusts and Trustees, 14th ed. (1987), pp. 368-369
(art. 36), 371; Williams on Vendor and Purchaser, 4th ed. (1936), vol. I,
pp. 545-547, 563; Megarry and Wade, The Law of Real Property, 5th
ed. (1984), pp. 364, 602, 604, 804-805, 806.
So here, in November 1982, the equitable estate in the property
passed; a trust attached to it. Thus, the consequence of the competing
H equites (before completion, before the bank had advanced any money at
all) was that the first defendant was trustee for himself and the second
defendant of an estate in the land. He could not without her approbation
create a new charge having priority over her interest.
67
124
The above submissions are additional to those made for the second A
and third defendants in Abbey National Building Society v. Cann [1991]
1 A.C. 56, which the second defendant adopts.
Crystal Q.C. in reply. The bank's submissions in opening were
intended to be the means of identifying the role that the court has to
perform in determining whether the claimant has acquired an interest in
real property where he or she has made no financial contribution and
how it goes about it. There are two approaches, the bargain theory and "
the detriment theory. The bank did not intend to submit that one
needed something of a contractual type before the court could conclude
that an interest in property had been acquired.
The bank accepts that there is a distinction between the position
where the court can find an actual declaration of trust and where work
has been done, etc. The bank is not talking about the bargain theory in Q
terms of finding something contractual. However, it is not correct to say
that one can infer the detriment from the undertaking. One should not
try to cram the whole analysis into one category. It is helpful to look at
the earlier part of the speech of Lord Diplock in Gissing, at pp. 904F-
905B. He is starting from the bottom-line premise that one has to have
an agreement or arrangement. It is not right to jump forward and say
that this is a case dealing with common intention; see also at p. 910E-F. D
(It may be said that Lord Diplock's statement at p. 908E does not seem
to require two categories, but the purpose of dividing the cases into two
categories is to show the House that there are difficulties with the
detriment theory.) Further as to the "bargain theory," see Grant v.
Edwards [1986] Ch. 638, 652G-653A, regarding the risk of circularity in
deducing common intention from the conduct of the parties. £
The judge himself did not think that the evidence manifested a
common intention: see [1989] Ch. 350, 380E.
As to proprietary estoppel, this issue has become somewhat academic,
but one gets the impression from the second defendant's argument that
there is a body of authority to the effect that proprietary estoppel gives
rise to an interest in land. That is not accepted, nor is the idea
acceptable that one can bind third parties from the date of the estoppel. F
Equitable interests may or may not have become academic. The
bank does not accept the second defendant's analysis to the effect that
from the date of exchange of contracts she had a beneficial interest in
the property. A declaration of trust would create not the right of a
beneficiary under a trust for sale but an interest in the proceeds of sale
only. In any event, this type of trust for sale cannot come into play, or Q
existence, until completion. Reference may be made to the bank's
submissions in the Court of Appeal [1989] Ch. 350, 364E, and see
Barnsley's Conveyancing Law and Practice, 3rd ed. (1988), pp. 226-227.
Until one gets to completion, one does not know what is going to
happen: Rayner v. Preston (1881) 18 Ch.D. 1, 6, 9, 16; and Ridout v.
Fowler [1904] 1 Ch. 658.
Common intention could only relate to the house as and when "
purchased and therefore could not relate to any stage before that. The
purchaser prior to completion cannot confer any right on a third party
that will be an interest in the land before completion has taken place.
68
125
A As to actual occupation, see the bank's argument in the Court of
Appeal [1989] Ch. 350, 361E-362C. The Court of Appeal did not give
sufficient weight to the judge's findings that the second defendant was
not in actual occupation. Nicholls L.J.'s analysis introduces unnecessary
refinements in relation to the test to be applied.
Price Q.C. As to actual occupation, the vendor would have said: "I
have let the purchaser and his wife into occupation."
° As to the new cases cited with regard to the position between
contract and completion, whatever was said in Rayner v. Preston (see at
p. 366E) was very much less relevant than any case dealing with the
position between contract and completion, e.g. Lysaght v. Edwards
(1876) 2 Ch.D. 499. Nothing in a case about an insurance policy (Rayner
v. Preston) can detract from what was said there. The same comment
Q can be made about the extract cited from Williams on Vendor and
Purchaser, 4th ed., vol I, p. 563. As against that, one has just Rayner v.
Preston on insurance.
Crystal Q.C. The answer to Lysaght v. Edwards is to be found in
what Barnsley's Conveyancing Law and Practice, 3rd ed., says regarding
conversion of titles, at pp. 34-35.
Their Lordships took time for consideration.
29 March. LORD BRIDGE OF HARWICH. My Lords, the subject

matter of this dispute is Vincent Farmhouse, Manston Road, Thanet
("the property"). The property is registered land which the first
respondent, Mr. Rosset, contracted to purchase on 23 November 1982
E and which was conveyed to him on 17 December 1982. On the same
date Mr. Rosset executed a legal charge on the property in favour of the
appellant, Lloyds Bank Pic. ("the bank"), to secure an overdraft on his
current account with the bank. The bank's charge was registered on 7
February 1983. The bank initially agreed to allow Mr. Rosset to borrow
up to £15,000, but later raised this limit to £18,000. The limit was after
p a time exceeded, the bank's demand for repayment was not met and the
bank instituted proceedings in the Thanet County Court for possession
of the property in July 1984 against both respondents. Mr. and Mrs.
Rosset, who had initially occupied the property as their matrimonial
home, had by this time parted. Mr. Rosset, who was no longer residing
in the property, did not resist the bank's claim. Mrs. Rosset, however,
alleged by way of defence to the bank's claim and by way of counterclaim
G against her husband that she had been entitled, since the date when her
husband contracted to purchase the property, to a beneficial interest in
the property under a constructive trust which qualified as an overriding
interest under section 70(l)(g) of the Land Registration Act 1925
because she was in actual occupation of the property both on 17
December 1982 and 7 February 1983, whichever was the relevant date
to be considered in determining the existence of the overriding interest
to which she alleged the bank's charge was subject.
At the trial Judge Scarlett found that Mrs. Rosset was entitled as
against her husband to a beneficial interest in the property in an amount
to be determined at a future hearing. He held that, on the true
69
126
tfHaJîcf Lloyds Bank Pic. v. Rosset (H.L.(E.)) [1991]
construction of the Land Registration Act 1925, the proprietor of a legal A
charge takes subject to overriding interests which are subsisting on the
date of creation, as opposed to the date of registration, of the charge.
He accordingly asked himself whether Mrs. Rosset was in actual
occupation of the property on 17 December 1982 and, finding that she
was not, concluded that her equitable interest was not protected as an
overriding interest by section 70(l)(g) so as to prevail against the bank's
legal charge. He gave judgment for possession in favour of the bank. ^
Mrs. Rosset appealed, but Mr. Rosset has taken no further part in the
proceedings.
The Court of Appeal unanimously affirmed the judge's decision that
the relevant date on which Mrs. Rosset had to show that she was in
actual occupation in order to establish an overriding interest which
would prevail against the bank was 17 December 1982, the date of Q
creation of the bank's charge. But they differed on the facts as to
whether she was in actual occupation on that date. Purchas and
Nicholls L.JJ. held that she was; Mustill L.J. held that she was not.
The bank now appeals by leave of your Lordships' House against the
majority decision of the Court of Appeal in Mrs. Rosset's favour.
The important question arising under the Land Registration Act 1925
as to the relevant date on which to ascertain whether an interest in D
registered land is protected by actual occupation so as to prevail under
section 70(l)(g) against the holder of a legal estate has now been
resolved by your Lordships' decision in Abbey National Building Society
v. Cann [1991] 1 A.C. 56 in favour of the view that it is the date when
the estate is transferred or created, not the date when it is registered.
The primary ground of the bank's appeal challenges the judge's g
finding, which was also unanimously affirmed by the Court of Appeal,
that Mrs. Rosset had by the date of completion acquired a beneficial
interest in the property.
The Rossets were married in 1972. There are two children of the
marriage, a daughter born in 1972 and a son born in 1981. From 1976
until the events giving rise to the present dispute, the parties were living
in premises which had been built as an extension to a bungalow in F
Broadstairs which was the home of Mrs. Rosset's parents, Mr. and Mrs.
Gardner. Mr. Rosset had borne the cost of building the extension, but
it was occupied on the terms of an agreement between the Rossets and
the Gardners which provided that, on the Rossets vacating the extension,
each should be paid a fixed sum by Mr. and Mrs. Gardner. Mrs.
Rosset's father had insisted on his daughter being joined in the Q
agreement in this way.
Mr. Rosset is a Swiss national. He was working in 1982 as a courier
conducting coach parties of tourists on the continent of Europe and was
away from home a great deal. Some time before 1982 he became
entitled to a substantial sum of money under a trust fund established by
his grandmother in Switzerland. In 1982 the Rossets were looking for a
new home to be bought with Mr. Rosset's inheritance. It was Mrs. "
Rosset who first found the property. It had been unoccupied for seven
or eight years and required substantial work to render it suitable for
occupation. Mrs. Rosset took her husband to see it. He liked it and
70
127
1 A.C. Lloyds Bank Pic. v. Rosset (H.L.(E.)) ■^l™??
* of Harwich
\ made an offer to purchase it for the asking price of £57,500. This was
accepted on 3 August 1982 subject to contract.
On 25 October 1982 Mr. Rosset opened an account at the Broadstairs
branch of the bank. He saw the manager and told him that he was
intending to buy the property with money he had inherited in
Switzerland. On 2 November Mr. Rosset received a payment of £70,200
from Switzerland of which £59,200 was paid into his account with the
° bank. On 23 November contracts for the purchase of the property were
exchanged. On 14 December Mr. Rosset saw the bank manager and
asked to be allowed to overdraw on his current account up to £15,000 to
meet the cost of the works of renovation which were needed to be
undertaken to the property. The manager asked whether the property
was to be acquired in joint names. Mr. Rosset replied that the property
Q was to be acquired in his sole name because his wife and children were
living with her parents. The manager agreed the overdraft and Mr.
Rosset signed the bank's form of charge which was then sent to Mr.
Rosset's solicitor to be dated on completion and registered on behalf of
the bank. Completion took place on 17 December with funds drawn
from the account which required an initial overdraft of £2,267. Mrs.
Rosset knew nothing of the charge to the bank or the overdraft.
D Meanwhile Mr. and Mrs. Rosset had been let into possession of the
property by the vendors even before the exchange of contracts. The
builder employed by them, a Mr. Griffin, commenced work on 7
November 1982. It was originally hoped that the house would be ready
for the Rossets to move in before Christmas, but this proved in the
event to be impossible. Eventually the Rossets moved in about the
£ middle of February 1983 when the work was substantially complete. By
this time Mr. Rosset's overdraft had risen to over £18,000 and the bank
refused to extend further credit. Most of the additional funds drawn
from the account had been expended in paying for the renovation
works. Both the purchase price of the property and the cost of the
works of renovation were paid by Mr. Rosset alone and Mrs. Rosset
made no financial contribution to the acquisition of the property.
F The case pleaded and carefully particularised by Mrs. Rosset in
support of her claim to an equitable interest in the property was that it
had been expressly agreed between her and her husband in conversations
before November 1982 that the property was to be jointly owned and
that in reliance on this agreement she had made a significant contribution
in kind to the acquisition of the property by the work she had personally
Q undertaken in the course of the renovation of the property which was
sufficient to give rise to a constructive trust in her favour.
There was a conflict of evidence between Mr. and Mrs. Rosset on
the vital issue raised by this pleading. The question the judge had to
determine was whether he could find that before the contract to acquire
the property was concluded they had entered into an agreement, made
an arrangement, reached an understanding or formed a common
" intention that the beneficial interest in the property would be jointly
owned. I do not think it is of importance which of these alternative
expressions one uses. Spouses living in amity will not normally think it
necessary to formulate or define their respective interests in property in
71
128
I*Ha^lche L
'°yd s Bank
P |c - v - Rosset
(H.L.(E.)) [1991]
any precise way. The expectation of parties to every happy marriage is A
that they will share the practical benefits of occupying the matrimonial
home whoever owns it. But this is something quite distinct from sharing
the beneficial interest in the property asset which the matrimonial home
represents. These considerations give rise to special difficulties for
judges who are called on to resolve a dispute between spouses who have
parted and are at arm's length as to what their common intention or
understanding with respect to interests in property was at a time when "
they were still living as a united family and acquiring a matrimonial
home in the expectation of living in it together indefinitely.
Since Mr. Rosset was providing the whole purchase price of the
property and the whole cost of its renovation, Mrs. Rosset would, I
think, in any event have encountered formidable difficulty in establishing
her claim to joint beneficial ownership. The claim as pleaded and as Q
presented in evidence was, by necessary implication, to an equal share
in the equity. But to sustain this it was necessary to show that it was
Mr. Rosset's intention to make an immediate gift to his wife of half the
value of a property acquired for £57,500 and improved at a further cost
of some £15,000. What made it doubly difficult for Mrs. Rosset to
establish her case was the circumstance, which was never in dispute,
that Mr. Rosset's uncle, who was trustee of his Swiss inheritance, would D
not release the funds for the purchase of the property except on terms
that it was to be acquired in Mr. Rosset's sole name. If Mr. and Mrs.
Rosset had ever thought about it, they must have realised that the
creation of a trust giving Mrs. Rosset a half share, or indeed any other
substantial share, in the beneficial ownership of the property would have
been nothing less than a subterfuge to circumvent the stipulation which £
the Swiss trustee insisted on as a condition of releasing the funds to
enable the property to be acquired.
In these circumstances, it would have required very cogent evidence
to establish that it was the Rossets' common intention to defeat the
evident purpose of the Swiss trustee's restriction by acquiring the
property in Mr. Rosset's name alone but to treat it nevertheless as
beneficially owned jointly by both spouses. I doubt whether the F
evidence would have sustained a finding to that effect. But the judge
made no such finding. On the contrary, his judgment on this point
amounts to a clear rejection of Mrs. Rosset's pleaded case. He said:
"The decision to transfer the property into the name of the first
defendant alone was a disappointment to the second defendant, but
I am satisfied that she genuinely believed that the first defendant G
would hold the property in his name as something which was a joint
venture, to be shared between them as the family home and that
the reason for it being held by the first defendant alone was to
ensure that the first defendant's uncle would sanction the export of
trust funds from Switzerland to England for the purchase. As so
often happens the defendants did not pursue their discussion to the
extent of defining precisely what their respective interests in the "
property should be. It was settled that the property should be
transferred into the name of the first defendant alone to achieve the
provision of funds from Switzerland, but in the period from August
72
129
1 A.C. Lloyds Bank Pic. v. Rosset (H.L.(E.)) Lord Bridge
of Harwich
A 1982 to 23 November 1982 when the contracts were exchanged, the
defendants did not decide whether the second defendant should have
any interest in the property. On one occasion the second defendant
heard the first defendant say to her parents that he had put the
house in their joint names, but she knew that he could not do that
and treated what he said as an expression of what he would like to
do. In these circumstances I am satisfied that the outcome of the
° discussions between the parties as to the name into which the
property should be transferred did not exclude the possibility that
the second defendant should have a beneficial interest in the
property."
I have emphasised the critical finding in this passage from the judgment.
Q Even if there had been the clearest oral agreement between Mr. and
Mrs. Rosset that Mr. Rosset was to hold the property in trust for them
both as tenants in common, this would, of course, have been ineffective
since a valid declaration of trust by way of gift of a beneficial interest in
land is required by section 53(1) of the Law of Property Act 1925 to be
in writing. But if Mrs. Rosset had, as pleaded, altered her position in
reliance on the agreement this could have given rise to an enforceable
D interest in her favour by way either of a constructive trust or of a
proprietary estoppel.
Having rejected the contention that there had been any concluded
agreement or arrangement or any common intention formed before
contracts for the purchase of the property were exchanged on 23
November 1982 that Mrs. Rosset should have any beneficial interest, the
_ judge concentrated his attention on Mrs. Rosset's activities in connection
with the renovation works as a possible basis from which to infer such a
common intention. He described what she did up to the date of
completion as follows:
"Up to 17 December 1982 the second defendant's contribution to
the venture was: (1) to urge on the builders and to attempt to co-
ordinate their work, until her husband insisted that he alone should
^ give instructions; (2) to go to builders' merchants and obtain
material required by the builders . . . and to deliver the materials to
the site. This was of some importance because Mr. Griffin and his
employees did not know the Thanet area; (3) to assist her husband
in planning the renovation and decoration of the house. In this, she
had some skill over and above that acquired by most housewives.
G She was a skilled painter and decorator who enjoyed wallpapering
and decorating, and, as her husband acknowledged, she had good
ideas about this work. In connection with this, she advised on the
position of electric plugs and radiators and planned the design of
the large breakfast room and the small kitchen of the house; (4) to
carry out the wallpapering of Natasha's bedroom and her own
bedroom, after preparing the surfaces of the walls and clearing up
" the rooms concerned before the papering began; (5) to begin the
preparation of the surfaces of the walls of her son's bedroom, the
Den, the upstairs lavatory and the downstairs washroom for
papering. All this wallpapering was completed after 17 December
1 A.C. 1991-5
73
130
L|
rfHaîch' oyds Bank pl<:- v - R «sset (H.L.(E.)) [1991]
1982 but by 31 December 1982; (6) to assist in arranging the A
insurance of the house by the Minster Insurance Co. Ltd. home
cover policy, in force from 3 November 1982; (7) to assist in
arranging a crime prevention survey on 23 November 1982; (8) to
assist in arranging the installation of burglar alarms described in a
specification dated 3 December 1982."
Later the judge said: B
"I am satisfied that in 1982 the common intention expressed by the
defendants in conversation between themselves was that Vincent
Farmhouse should be purchased in the name of the first defendant
alone, because funds would not be made available from the first
defendant's family trust in Switzerland unless the purchase was
made only in his name. In addition, however, it was their common C
intention that the renovation of the house should be a joint venture,
after which the house was to become a family home to be shared by
the defendants and their children."
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 D
home throws any light on their intentions with respect to the beneficial
ownership of the property.
Reverting to Mrs. Rosset's activity in connection with the renovation
of the property the judge said:
"It is plain that she made every effort to make the house fit for
occupation before Christmas 1982 and spent all the time she could E
at Vincent Farmhouse in between taking Natasha to school and
fetching her from school. . . . Obviously the extent of the work
which the defendant did in preparation, clearing up before painting
and decorating, and the painting and decorating itself, was
valuable. . . . In the result, having considered: (1) the semi-derelict
condition of Vincent Farmhouse in November 1982, (2) the absence „
of the first defendant abroad for 10 days in November and early
December 1982, (3) the second defendant's special skills in painting
and decorating over and above those of the average housewife and
her indirect contribution to reducing the cost of renovation of the
farmhouse by carrying out certain painting and decorating herself,
(4) the time she spent at the farmhouse from 4 November 1982
attempting to co-ordinate the work of the builders and her work in G
ordering and delivering materials to the site for the builders, and
(5) the conversations between the parties concerning into whose
name the property was to be transferred and the nature of the joint
venture and the purpose of purchasing Vincent Farmhouse, I am
satisfied that prior to 17 December 1982 there was a common
intention between the defendants that the second defendant should
have a beneficial interest in the property under a constructive trust
and that she did act to her detriment on the faith of such a common
intention. Some, but not all, of her work at the farmhouse prior to
17 December 1982 falls into the category of work upon which she
74
131
' of Harwich
A could not reasonably have been expected to embark unless she was
to have an interest in the house, namely the work to which she
brought the special skills of painting and decorating and her work in
ordering and delivering materials to the site for the builders in
attempting to co-ordinate her work. These actions by the second
defendant must have reduced the cost of renovating the farmhouse
and thus indirectly contributed to the acquisition of the property,
B albeit to a small extent."
At the very end of his judgment the judge pointed out that he had
made no finding as to the extent of Mrs. Rosset's beneficial interest in
the property. He indicated that he would hear counsel as to what
directions should be given for the determination of this issue at a later
date. He concluded his judgment with the sentence:
"An area which the court would wish to explore is the extent to
which the qualifying conduct of the second defendant reduced the
cost of the renovation of the farmhouse and its buildings."
It is clear from these passages in the judgment that the judge based
his inference of a common intention that Mrs. Rosset should have a
T-V beneficial interest in the property under a constructive trust essentially
on what Mrs. Rosset did in and about assisting in the renovation of the
property between the beginning of November 1982 and the date of
completion on 17 December 1982. Yet by itself this activity, it seems to
me, could not possibly justify any such inference. It was common
ground that Mrs. Rosset was extremely anxious that the new matrimonial
home should be ready for occupation before Christmas if possible. In
E these circumstances it would seem the most natural thing in the world
for any wife, in the absence of her husband abroad, to spend all the
time she could spare and to employ any skills she might have, such as
the ability to decorate a room, in doing all she could to accelerate
progress of the work quite irrespective of any expectation she might
have of enjoying a beneficial interest in the property. The judge's view
_ that some of this work was work "upon which she could not reasonably
have been expected to embark unless she was to have an interest in the
house" seems to me, with respect, quite untenable. The impression
that the judge may have thought that the share of the equity to which he
held Mrs. Rosset to be entitled had been "earned" by her work in
connection with the renovation is emphasised by his reference in the
concluding sentence of his judgment to the extent to which her
G "qualifying contribution" reduced the cost of the renovation.
On any view the monetary value of Mrs. Rosset's work expressed as
a contribution to a property acquired at a cost exceeding £70,000 must
have been so trifling as to be almost de minimis. I should myself have
had considerable doubt whether Mrs. Rosset's contribution to the work
of renovation was sufficient to support a claim to a constructive trust in
the absence of writing to satisfy the requirements of section 51 of the
Law of Property Act 1925 even if her husband's intention to make a gift
to her of half or any other share in the equity of the property had been
clearly established or if he had clearly represented to her that that was
what he intended. But here the conversations with her husband on
75
132
tfHaîcf Lloyds Bank Pic. v. Rosset (H.L.(E.)) [1991]
which Mrs. Rosset relied, all of which took place before November A
1982, were incapable of lending support to the conclusion of a
constructive trust in the light of the judge's finding that by that date
there had been no decision that she was to have any interest in the
property. The finding that the discussions "did not exclude the
possibility" that she should have an interest does not seem to me to add
anything of significance.
These considerations lead me to the conclusion that the judge's ^
finding that Mr. Rosset held the property as constructive trustee for
himself and his wife cannot be supported and it is on this short ground
that I would allow the appeal. In the course of the argument your
Lordships had the benefit of elaborate submissions as to the test to be
applied to determine the circumstances in which the sole legal proprietor
of a dwelling house can properly be held to have become a constructive Q
trustee of a share in the beneficial interest in the house for the benefit of
the partner with whom he or she has cohabited in the house as their
shared home. Having in this case reached a conclusion on the facts
which, although at variance with the views of the courts below, does not
seem to depend on any nice legal distinction and with which, I
understand, all your Lordships agree, I cannot help doubting whether it
would contribute anything to the illumination of the law if I were to D
attempt an elaborate and exhaustive analysis of the relevant law to add
to the many already to be found in the authorities to which our
attention was directed in the course of the argument. I do, however,
draw attention to one critical distinction which any judge required to
resolve a dispute between former partners as to the beneficial interest in
the home they formerly shared should always have in the forefront of g
his mind.
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 F
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 Q
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
76
133
or Harwich
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.
The leading cases in your Lordships' House are Pettitt v. Pettitt [1970]
B
A.C. 777 and Gissing v. Gissing [1971] A.C. 886. Both demonstrate
situations in the second category to which I have referred and their
Lordships discuss at great length the difficulties to which these situations
give rise. The effect of these two decisions is very helpfully analysed in
the judgment of Lord MacDermott L.C.J, in McFarlane v. McFarlane
[1972] N.I. 59.
Q Outstanding examples on the other hand of cases giving rise to
situations in the first category are Eves v. Eves [1975] 1 W.L.R. 1338
and Grant v. Edwards [1986] Ch. 638. In both these cases, where the
parties who had cohabited were unmarried, the female partner had been
clearly led by the male partner to believe, when they set up home
together, that the property would belong to them jointly. In Eves v.
Eves the male partner had told the female partner that the only reason
D why the property was to be acquired in his name alone was because she
was under 21 and that, but for her age, he would have had the house
put into their joint names. He admitted in evidence that this was simply
an "excuse." Similarly in Grant v. Edwards the female partner was told
by the male partner that the only reason for not acquiring the property
in joint names was because she was involved in divorce proceedings and
£ that, if the property were acquired jointly, this might operate to her
prejudice in those proceedings. As Nourse L.J. put it, at p. 649:
"Just as in Eves v. Eves [1975] 1 W.L.R. 1338, 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
P house; otherwise no excuse for not putting her name on to the title
would have been needed."
The subsequent conduct of the female partner in each of these cases,
which the court rightly held sufficient to give rise to a constructive trust
or proprietary estoppel supporting her claim to an interest in the
property, fell far short of such conduct as would by itself have supported
G the claim in the absence of an express representation by the male
partner that she was to have such an interest. It is significant to note
that the share to which the female partners in Eves v. Eves and Grant v.
Edwards were held entitled were one quarter and one half respectively.
In no sense could these shares have been regarded as proportionate to
what the judge in the instant case described as a "qualifying contribution"
in terms of the indirect contributions to the acquisition or enhancement
" of the value of the houses made by the female partners.
I cannot help thinking that the judge in the instant case would not
have fallen into error if he had kept clearly in mind the distinction
between the effect of evidence on the one hand which was capable of
77
134
rfH,S«f Lloyds Bank Pic. v. Rosset (H.L.(E.)) [1991]
establishing an express agreement or an express representation that Mrs. A
Rosset was to have an interest in the property and evidence on the other
hand of conduct alone as a basis for an inference of the necessary
common intention.
If Mrs. Rosset had become entitled to a beneficial interest in the
property prior to completion it might have been necessary to examine a
variant of the question regarding priorities which your Lordships have
just considered in Abbey National Building Society v. Cann [1991] 1 g
A.C. 56 and, subject to that question, to decide whether, as a matter of
fact, she was in "actual occupation" of the property on 17 December
1982. Since these questions have now become academic, I do not think
any useful purpose would be served by going into them.
For the reasons I have indicated I would allow the appeal, set aside
the order of the Court of Appeal and, as between Mrs. Rosset and the
bank, restore the order of the trial judge. Q
LORD GRIFFITHS. My Lords, I have had the advantage of reading in
draft the speech of my noble and learned friend, Lord Bridge of
Harwich. I agree with it and, for the reasons he gives, I would allow
the appeal.
LORD ACKNER. My Lords, I have had the advantage of reading in
draft the speech delivered by my noble and learned friend Lord Bridge _.
of Harwich. I agree with it and would allow the appeal for the reasons
which he has given.
LORD OLIVER OF AYLMERTON. My Lords, I have had the advantage
of reading in draft the speech delivered by my noble and learned friend
Lord Bridge of Harwich. I agree with it and would allow the appeal for
the reasons which he has given.
LORD JAUNCEY OF TULLICHETTLE. My Lords, I have had the E
advantage of reading in draft the speech prepared by my noble and
learned friend Lord Bridge of Harwich. I agree with it, and for the
reasons which he has given I too would allow the appeal.
Appeal allowed.
Order of Court of Appeal of 13 May
1988, as amended on 15 June
1988, set aside save as to costs. F
Order of Judge Scarlett of 22 May
1987 as between bank and second
defendant restored.
Bank to pay second defendant's
costs in House of Lords without
prejudice to its rights against first
defendant. G
Cause remitted to Queen's Bench
Division to do therein as just and
consistent with judgment.
Solicitors: Collyer-Bristow for Walmsley & Barnes, Cliftonville;
Gregory Rowcliffe & Milners for Daniel & Edwards, Ramsgate.
M.G. H
78
[2014] 3 HKLRD 224
Mo Ying
and
Brillex Development Ltd
————
(Court of First Instance)
(High Court Action No 111 of 2011)
————
Deputy Judge Eugene Fung SC

1, 2, 3 and 8 April, 5 May 2014
Land law — beneficial ownership — family home — property purchased

in husband’s sole name — whether wife had beneficial interest under common
intention constructive trust
Trusts — constructive trusts — common intention constructive trust —
whether established
⼟土地法 — 實益擁有權 — 家庭居所 — 以丈夫的個⼈人名義購買之物業 —
妻⼦子是否在共同意圖的法律律構定信託下擁有實益權益
信託 — 法律律構定信託 — 共同意圖的法律律構定信託 — 是否確立
H purchased a flat (the Property) before his wife, W, came to reside
in Hong Kong from mainland China. The Property was registered
in H’s sole name and was the matrimonial home. Shortly after W’s
arrival, she and H discussed adding her name as a co-owner, which
was their only conversation on that matter, but H refused and said,
“it’s troublesome, have to pay” (the Conversation). More than two
years before W commenced divorce proceedings against H, he sold
the Property to X, who in turn leased it back to H. When H
defaulted on the rent payments, X brought proceedings for vacant
possession of the Property. W then brought this action against H
and X, alleging that H had sold the Property to X without her
knowledge or consent and claiming a beneficial interest in it on the
basis of a common intention construction trust. W claimed, inter
alia, that: (a) W’s sister loaned part of the purchase price for the
Property (the Loan); (b) W and H pooled their income and resources
to build up their own family, to acquire the Property and repay the
mortgage and the Loan, and subsequently for the benefit of their
household; (c) W and H rented out part of the Property to generate
rental income for the benefit of the household, including the
mortgage payments, the Loan and household expenses; and (d) W
resigned from her job and it was agreed that H would then be
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224 2014/7/17—8:58
[2014] 3 HKLRD 224 Mo Ying v Brillex Development Ltd 225
responsible for the family’s financial support, while W would be

responsible for the housework and care of their children. H’s case
was that there was no common intention.
Held, dismissing W’s action, that:

(1) There was no express common intention between W and H
concerning the sharing of the Property at any time. H’s words
during the Conversation were equivocal. In addition, on her
own evidence, W was not thereby led into believing that she
would have an interest in the Property. In any event, the fact
that a man made an excuse for not having conveyed a property
into joint names did not necessarily mean that he accepted
that the woman would have a share in the property. Each case
turned on its own facts and here, W could not have reasonably
believed that her name would be added to the title of the
Property (Stack v Dowden [2007] 2 AC 432, Jones v Kernott
[2012] 1 AC 776 considered; Eves v Eves [1975] 1 WLR
1338, Grant v Edwards [1986] Ch 638 distinguished). (See
paras.57–59, 61, 63.)
(2) Where a property was in the sole name of one party, it was
important to distinguish between a pre-acquisition common
intention and, as here, a post-acquisition common intention.
In the absence of an express post-acquisition agreement, the
court would be slow to infer from conduct alone that parties
intended to vary existing beneficial interests established at the
time of the acquisition (Ip Man Shan Henry v Ching Hing
Construction Co Ltd (No 2) [2003] 1 HKC 256, James v
Thomas [2007] 3 FCR 696, Morris v Morris [2008] Fam Law
521, Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343
applied). (See para.60.)
(3) An inference could not be drawn from the existence of the
parties’ marriage that each of them intended to have a
beneficial interest in their matrimonial home. Nor had W
established that the Loan was applied to the purchase of the
Property, and W had not in any way contributed to the
payment of the purchase price when it was purchased by H.
Further, W had not in any way contributed to the payment
of mortgage instalments. There was no evidence of the alleged
pooled resources and it was more probable than not that the
money for such instalments came entirely from H’s own
resources. In addition, without an agreement between the
parties that the payment by one of them of the household
expenses to permit the other to pay the mortgage instalments,
W’s payment of household expenses, namely those not related
to the Property, was not a sufficient basis on which to infer
a common intention (Gissing v Gissing [1971] AC 886, Burns
80
224 2014/7/17—8:58
226 HONG KONG LAW REPORTS & DIGEST [2014] 3 HKLRD 224
v Burns [1984] Ch 317, Grant v Edwards [1986] Ch 638,

Lloyds Bank Plc v Rosset [1991] 1 AC 107 applied). (See
paras.66–85.)
(4) Even if W had established a common intention to share the
Property beneficially, there was no detrimental reliance. 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 or she was to have
an interest in the property. W’s payment for some of the
household expenses was unrelated to the Property and the
fact she resigned from her job to look after her children could
not be described as conduct to her detriment (Grant v Edwards
[1986] Ch 638 applied). (See paras.91–92.)
Action
This was an action by the plaintiff-wife against the second
defendant-husband and the first defendant in respect of the former
matrimonial home, registered in the husband’s name, claiming a
beneficial interest in the property on the basis of a common intention
constructive trust. The facts are set out in the judgment.
Mr William Wong SC and Mr Justin Lam, instructed by Fairbairn
Catley Low & Kong, assigned by the Director of Legal Aid, for
the plaintiff.
Ms Audrey Eu SC and Mr Alan Kwong, instructed by Poon, Yeung
& Li, for the 1st defendant.
The 2nd defendant appeared in person.
Legislation mentioned in the judgment

Limitation Ordinance (Cap.347) s.20, 20(1)(b), 20(2)
Cases cited in the judgment

Abbott v Abbott [2007] UKPC 53, [2008] 1 FLR 1451
Burns v Burns [1984] Ch 317, [1984] 2 WLR 582, [1984] 1 All ER
244, [1984] Fam Law 244
Chan Chui Mee v Mak Chi Choi [2009] 1 HKLRD 343
Chan Gordon v Lee Wai Hing [2011] 2 HKLRD 506
Cheng Kwok Fai v Mok Yiu Wah Peter [1990] 2 HKLR 440,
[1989–91] CPR 434
De Bussche v Alt (1878) 8 Ch D 286
El-Ajou v Dollar Land Holdings Plc (No 1) [1994] 2 All ER 685,
[1994] BCC 143
Eves v Eves [1975] 1 WLR 1338, [1975] 3 All ER 768, (1975) 119
SJ 394
Fung Kai Sun v Chan Fui Hing [1951] AC 489, [1951] 2 TLR 47
81
224 2014/7/17—8:58
[2014] 3 HKLRD 224 Mo Ying v Brillex Development Ltd 227
Gissing v Gissing [1971] AC 886, [1970] 3 WLR 255, [1970] 2 All

ER 780, (1970) 21 P & CR 702
Grant v Edwards [1986] Ch 638, [1986] 3 WLR 114, [1986] 2 All
ER 426, [1987] 1 FLR 87
Greenwood v Martins Bank Ltd [1933] AC 51, [1932] All ER Rep
318, (1932) 101 LJKB 623
Hammond v Mitchell [1991] 1 WLR 1127, [1992] 2 All ER 109
Hui Cheung Fai v Daiwa Development Ltd (unrep., HCA
1734/2009, [2014] HKEC 619)
ING Baring Securities (HK) Ltd v Commissioner of Inland Revenue
(2007) 10 HKCFAR 417, [2008] 1 HKLRD 412, [2008] 1 HKC
1
Ip Man Shan Henry v Ching Hing Construction Co Ltd (No 2)
[2003] 1 HKC 256, [2002–03] CPR 562
James v Thomas [2007] EWCA Civ 1212, [2008] 1 FLR 1598,
[2007] 3 FCR 696
Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776, [2011] 3 WLR
1121, [2012] 1 All ER 1265, [2012] 1 FLR 45
Large Land Investments v Cheung Siu Kwai [2003] 1 HKLRD 313,
[2002] 4 HKC 652, [2002–03] CPR 459
Lindsay Petroleum Co v Hurd (1873–74) LR 5 PC 221
Lloyds Bank Plc v Rosset [1991] 1 AC 107, [1990] 2 WLR 867,
[1990] 1 All ER 1111, [1990] 2 FLR 155
Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1
Midland Bank Ltd v Farmpride Hatcheries Ltd (1981) 260 EG 493
Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890, [1976]
3 WLR 66, [1976] 2 All ER 641, [1976] RTR 437
Morris v Morris [2008] EWCA Civ 257, [2008] Fam Law 521
Oxley v Hiscock [2004] EWCA Civ 546, [2005] Fam 211, [2004]
3 WLR 715, [2004] 3 All ER 703, [2004] 2 FLR 669
Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432, [2007] 2 WLR
831, [2007] 2 All ER 929, [2007] 1 FLR 1858
Tai Sang Kung Ltd v Paraking Ltd [2001] 4 HKC 61, [2001] CPR
218
Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd [1982]
QB 133, [1981] 2 WLR 576, [1981] 1 All ER 897, [1981] Com
LR 34
Thorner v Major [2009] UKHL 18, [2009] 1 WLR 776, [2009] 3
All ER 945, [2009] 2 FLR 405
Wong Chim Ying v Cheng Kam Wing [1991] 2 HKLR 253,
[1989–91] CPR 476
Yili Concepts (HKG) Ltd v Lee Wai Chuen (unrep., HCA
12911/1997, [2000] HKEC 1043)
Other materials mentioned in the judgment

Lewin on Trusts (18th ed., 2006) para.44-19
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224 2014/7/17—8:58
Megarry & Wade: The Law of Real Property (7th ed., 2008)
para.8-018
Snell's Equity (32nd ed., 2010) paras.4-027, 4-036, 5-019
Spencer Bower on The Law Relating to Estoppel by Representation
(4th ed., 2004) p.48
Wilken & Ghaly, The Law of Waiver, Variation, and Estoppel (3rd
ed., 2012) para.4.28.
Deputy Judge Eugene Fung SC
A. Introduction
1. These proceedings arise out of a dispute concerning the
ownership of a residential flat at Flat G, 6th Floor, State Theatre
Building, Nos 277–291 King’s Road, Nos 4, 4A–D, 6, 6A–D Java
Road, Nos 2–16 Tin Chong Street, Hong Kong (the Property). The
Property was the former matrimonial home of the plaintiff, Madam
Mo Ying (the Wife) and the 2nd defendant, Mr Chan Wai Tim
(the Husband), and was at all material times registered in the
Husband’s name.
2. More than two years before the Wife commenced divorce
proceedings against the Husband, the Husband sold the Property
to the 1st defendant, Brillex Development Ltd (the Purchaser). In
this action, she claims against both the Husband and the Purchaser
that she has some beneficial interest in the Property on the basis of
a common intention constructive trust.
B. The relevant factual background

3. The facts set out in this section were largely not disputed
by the parties.
B1. Husband and Wife’s marriage in 1987

4. The Husband and Wife were married in Hangzhou in
Mainland China on 29 October 1987. At the time of their marriage,
the Husband was residing in Hong Kong and the Wife was residing
in the Mainland.
B2. Husband’s purchase of the Property in 1988

5. By a sale and purchase agreement dated 31 May 1988, the
Husband agreed to purchase the Property for HK$500,000.
6. On 20 June 1988, the Property was assigned to the Husband.
7. The Husband purchased the Property with the assistance of
a loan from Hang Seng Finance Ltd (Hang Seng). On 20 June 1988,
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224 2014/7/17—8:58
Mo Ying v Brillex Development Ltd
[2014] 3 HKLRD 224 Deputy Judge Eugene Fung SC 229
a mortgage over the Property was executed by the Husband in

favour of Hang Seng to secure the loan (the Hang Seng Mortgage).
8. The Hang Seng Mortgage was discharged on 28 December
1993.
B3. Wife’s arrival in Hong Kong in 1988

9. In December 1988, the Wife came to reside in Hong Kong
from the Mainland.
B4. Birth of children in 1990 and 1995

10. The Wife and Husband have two children. On 8 January
1990, the Wife gave birth to a daughter. On 12 November 1995,
the Wife gave birth to a son.
B5. Husband’s sale of Property to the Purchaser in 2008 and renting of

Property from 2008 to 2010
11. By a provisional sale and purchase agreement dated 18 July
2008 (the Provisional SPA), the Husband agreed to sell the Property
to the Purchaser for HK$1,750,000. The completion date was stated
on the Provisional SPA to be 29 October 2008.
12. On 31 July 2008, the Husband and the Purchaser executed
the formal sale and purchase agreement in respect of the Property
(the Formal SPA).
13. By a tenancy agreement dated 9 October 2008 (the Tenancy
Agreement), the Purchaser leased the Property to the Husband for
one year from 29 October 2008 to 28 October 2009 for HK$9,500
per month.
14. On 29 October 2008, the Husband and the Purchaser
executed an assignment to assign the Property to the latter (the
Assignment).
15. After the expiry of the Tenancy Agreement on 28 October
2009, the Purchaser continued to lease the Property to the Husband
on a monthly tenancy basis on the same terms as those in the
Tenancy Agreement.
16. The Husband continued to pay rent of HK$9,500 to the
Purchaser until July 2010.
B6. Purchaser’s commencement of possession proceedings in 2010

17. From late July 2010, the Husband defaulted in the payment
of rent for the Property to the Purchaser.
18. On 13 September 2010, the Purchaser commenced
proceedings in the Lands Tribunal (LDPD 2264/2010) against the
Husband to recover vacant possession of the Property (the Possession
Proceedings).
84
224 2014/7/17—8:58
19. On 5 October 2010, Deputy HH Judge Kot ordered,

amongst other things, that vacant possession of the Property be
delivered to the Purchaser (the Possession Order).
20. On 11 October 2010, the Wife applied to join in the
Possession Proceedings as a co-respondent.
B7. Wife’s commencement of proceedings in 2011

21. On 20 January 2011, the Wife commenced the present
proceedings against the Purchaser and the Husband.
22. On 30 January 2011, the Wife commenced divorce
proceedings (FCMC 1264/2011) against the Husband (the Divorce
Proceedings).
B8. Status of Possession Proceedings and Divorce Proceedings

23. On 25 January 2011, Deputy HH Judge Kot allowed the
Wife to be joined as a co-respondent and ordered that the Possession
Order be stayed upon the condition that the Wife should pay
HK$9,500 per month from 1 February 2011 as interim payment to
be stake-held by the Purchaser’s solicitors.
24. On 30 August 2011, the Purchaser successfully applied to
be joined as an intervener in the Divorce Proceedings.
25. On 25 November 2011, Deputy HH Judge Kot ordered
that the interim payment order against the Wife be stayed.
26. I was told by Ms Audrey Eu SC (leading Mr Alan Kwong),
counsel for the Purchaser, that both the Possession Proceedings and
the Divorce Proceedings are effectively stayed pending the
determination of these proceedings.
C. The plaintiff ’s case

27. The Wife’s pleaded case can be summarised as follows:
(1) It was the common intention of the Wife and Husband that
the Wife would have a beneficial interest in the Property. The
Husband therefore held the Property on a common intention
constructive trust for himself and the Wife.
(2) In July 2008, the Husband sold the Property to the Purchaser
without the knowledge or consent of the Wife.
(3) The sale price was below the market price of the Property.
(4) The Purchaser did not inspect the Property before the
purchase.
(5) The Purchaser’s estate agent, Mr Chu Pui of Yue Kee Estate
Agent (Mr Chu), knew that the Wife was in occupation of
the Property at the time of purchase. Mr Chu’s knowledge
should be attributed to the Purchaser.
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(6) The Purchaser had notice of the Wife’s beneficial interest in

the Property.
(7) The Wife has not abandoned her right to enforce against the
Property.
(8) The Wife seeks, amongst other things, (a) a declaration that
she is a beneficial owner of the Property, (b) a declaration
that the Husband holds the Property on trust for her, (c) a
declaration that the Provisional SPA, the Formal SPA and the
Assignment be null and void, (d) an order that the Purchaser
do transfer the Property, or such share as the court thinks fair,
to her, and (e) an account of profits made from the Property.
D. The defendants’ case
D1. The Purchaser’s case

28. The Purchaser’s case against the Wife can be summarised
as follows:
(1) The Wife has no beneficial interest in the Property.

(2) The purchase price of the Property was not below market
value.
(3) Because the Husband leased the Property back immediately
after the purchase, the Purchaser did not inspect the Property.
(4) An estate agent’s knowledge cannot be imputed or attributed
to his principal.
(5) The Purchaser was a bona fide purchaser for value without
notice.
(6) The Wife has waived her right to enforce, or is estopped from
enforcing, against the Property. Further, the Wife has
acquiesced in the Purchaser’s purchase of the Property.
29. The Purchaser has issued a Contribution Notice against the

Husband. In the event that the Purchaser is found to be liable to
the Wife, the Purchaser would claim against the Husband to be
indemnified against the Wife’s claim and the costs of this action
and, a number of other relief including (1) damages for breach of
the covenants in the Assignment or the Formal SPA, (2) rescission
of the Assignment, the Formal SPA and the Provisional SPA, and
(3) restitution or refund of HK$1,750,000.
D2. The Husband’s case

30. Throughout these proceedings, the Husband was not legally
represented. He conducted the trial as a litigant in person. His case
is primarily that the Property belonged to him absolutely and there
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was no common intention between the Wife and him to share the
Property beneficially.
E. The issues for determination

31. There are the following three principal issues in this trial
for my determination:
(1) whether the Wife has any, and if so how much, beneficial
interest in the Property under a common intention constructive
trust (the Common Intention Constructive Trust Issue);
(2) whether the Purchaser was a bona fide purchaser for value
without notice (the Bona Fide Purchaser Issue); and
(3) whether the Wife is barred from enforcing her rights by reason
of estoppel, waiver, acquiescence, and laches (the Estoppel,
Waiver, Acquiescence and Laches Issue).
F. The common intention constructive trust issue
F1. The Wife’s case on Common Intention Constructive Trust

32. In her Statement of Claim, the Wife claimed that it was
the common intention of her and the Husband that she would have
a beneficial interest in the Property. The following matters were
pleaded as support of the alleged common intention:
(1) The Wife’s third sister, Madam Mo Ha Ting (the Third Sister)
made a loan of HK$96,000 (the Loan) and the loan was used
as part of the purchase price for the Property.
(2) The Husband and Wife pooled their income and resources
together to build up their own family, to acquire the Property
and to repay the Hang Seng Mortgage as well as the Loan.
The pooled income and resources were then used for the
benefit of the household of both the Husband and Wife (the
Household).
(3) The Husband and Wife rented out two bedrooms of the
Property in order to generate rental income for the benefit of
the Household, including the payment of the Hang Seng
Mortgage as well as the Loan.
(4) With the consent of the Husband and Wife, the rental income
of about HK$5,000 was appropriated to settle the mortgage
instalments as well as some of the household expenses
including the management fee, government rates, water and
electricity charges and other outgoings for the benefit of the
Household.
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(5) In September 1997, the Wife resigned from work and became
a full-time housewife. The Husband said to the Wife that he
would from then on be responsible for the financial support
of the family while the Wife would be responsible for the
household work and taking care of the children.
F2. The relevant legal principles

33. Where a property is vested only in one person’s name (A),
the other party (B), in order to establish a beneficial interest, may
be able to establish a constructive trust by showing that it would
be inequitable or unconscionable for A to claim the entirety of the
beneficial ownership. This requires two matters to be proved:
(1) that there was a common intention that both should have a
beneficial interest; and
(2) that B has acted to his/her detriment on the basis of that
common intention.
See Grant v Edwards [1986] Ch 638 at 654D–E (Sir Nicolas

Browne-Wilkinson V-C); Luo Xing Juan v Estate of Hui Shui See
(2009) 12 HKCFAR 1 at [38] (Ribeiro PJ). This type of constructive
trust is generally known as a “common intention constructive trust”.
34. The onus is upon the person seeking to show that the
beneficial ownership is different from the legal ownership. Therefore,
in sole ownership cases, it is upon the non-owner to show that
he/she has any interest at all. See Stack v Dowden [2007] 2 AC
432 at [56] and [68] (Baroness Hale); Jones v Kernott [2012] 1 AC
776 at [17] (Lord Walker & Baroness Hale).
F2a. Common intention to share the property beneficially

35. The party alleging the common intention constructive trust
must first prove that there was, at any time prior to acquisition or
exceptionally at some later date, an agreement, arrangement or
understanding reached between the parties that the property is to
be shared beneficially: see Lloyds Bank Plc v Rosset [1991] 1 AC
107 at 132E–F (Lord Bridge).
36. The question of whether there was a common intention
that each party should have a beneficial interest in the property has
been described as the primary or threshold question: see Oxley v
Hiscock [2005] Fam 211 at [47] and [68] (Chadwick LJ); Chan Chui
Mee v Mak Chi Choi [2009] 1 HKLRD 343 at [24] (Johnson Lam
J).
37. The common intention, or the agreement, arrangement or
understanding, between the parties may be based on express
discussions between them or inferred from their conduct: see Lloyds
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Bank Plc v Rosset at 132E–133B (Lord Bridge) and Oxley v Hiscock

at [36] and [40] (Chadwick LJ).
38. Express common intention:
(1) To found any express agreement, arrangement or

understanding between the parties, there must have been some
actual discussions between them, however imperfectly
remembered and however imprecise their terms may have
been: see Lloyds Bank Plc v Rosset at 132F–G (Lord Bridge).
(2) Express discussions should be pleaded in the greatest detail,
both as to language and as to circumstance: Hammond v
Mitchell [1991] 1 WLR 1127 at 1139E–F (Waite J).
39. Inferred common intention:
(1) Where the parties have not used words to communicate their
intention, the court may infer from their conduct an intention
that both are to have a beneficial interest in the property: see
Lloyds Bank Plc v Rosset at 132H.
(2) The search is to ascertain the parties’ actual shared intentions
to be deducted objectively from their words and their actions:
see Jones v Kernott at [31], [46], [51] (Lord Walker &
Baroness Hale), [64] (Lord Collins).
(3) The parties’ whole course of conduct in relation to the
property must be taken into account in determining their
shared intentions as to its ownership: see Stack v Dowden at
[60] (Baroness Hale), Abbott v Abbott [2008] 1 FLR 1451 at
[19] (Baroness Hale).
(4) Examples of the sort of evidence which might be relevant to
drawing inferences from the parties’ conduct were given by
Baroness Hale in Stack v Dowden at [69]:
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 …
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(5) Direct contributions to the purchase price by one party who

is not the legal owner, whether initially or by payment of
mortgage instalments, will readily justify the inference: see
Lloyds Bank Plc v Rosset at 133A–B (Lord Bridge).
40. In Lloyds Bank Plc v Rosset, Lord Bridge at 132D-E

referred to the distinction between:
(1) cases in which there is evidence of express discussions to

support an agreement, arrangement or understanding reached
between the parties that each is to have a beneficial interest
in the property (ie cases of express common intention); and
(2) cases in which there is no evidence to support such a finding
the court must rely entirely on the conduct of the parties (ie
cases of inferred common intention).
Lord Bridge said that “any judge required to resolve a dispute

between former partners as to the beneficial interest in the home
they formerly shared should always have [such a distinction] in the
forefront of his mind”.
F2b. Detriment
41. Once a finding of express discussions is made, the party
asserting a claim to a beneficial interest must show that he or she
has acted to his or her detriment or significantly altered his or her
position in reliance on the agreement, arrangement or understanding
in order to give to a constructive trust: see Lloyds Bank Plc v Rosset
at 133G (Lord Bridge).
42. There must be some connection between the plaintiff ’s
conduct and his/her belief that he/she has an interest in the property.
To constitute conduct amounting to an acting upon the common
intention, it 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).
F2c. Quantifying the shares

43. The last question is to find out the extent of the parties’
respective beneficial interests in the property: see Oxley v Hiscock
at [69] (Chadwick LJ); Chan Chui Mee at [25] (Johnson Lam J).
44. Where the defined shares have been agreed by the parties,
the court will give effect to that agreement.
45. The court cannot impute an intention that is contrary to
the evidence: Stack v Dowden at [61] (Baroness Hale).
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46. When the evidence does not support an inference as to the

shares they intended to take, the court can impute an intention to
them. The parties are taken to have intended whatever share was
fair having regard to the whole course of dealing between them.
See Jones v Kernott at [31] and [51] (Lord Walker & Baroness Hale)
and [64] (Lord Collins).
F3. Express Common Intention

47. As I read the Wife’s Statement of Claim, there is no
contention that the Husband and Wife had any actual discussions
about the sharing of the Property at any time.
48. Moreover, in her cross-examination by Ms Eu, the Wife
accepted that she and the Husband never talked about how much
interest she would have in the Property.
49. Nonetheless, in the Wife’s written closing submissions, Mr
William Wong SC (leading Mr Justin Lam) contended the Wife’s
primary case on common intention constructive trust was based on
an express common intention. His contentions are summarised as
follows:
(1) There was a discussion between the Husband and Wife

regarding the addition of the Wife’s name as a co-owner of
the Property but the Husband refused and gave some excuse.
(2) This conversation involved an express verbal communication
between the Husband and Wife and was made on the basis
that the Wife was entitled to a share in the Property.
50. The discussion between the Husband and Wife was

described in the Wife’s written closing submissions as the “most
important piece of evidence”. Mr Wong submitted that the Wife
was led by the Husband to believe that she had an interest in the
Property. He relied heavily on Grant v Edwards and Eves v Eves
[1975] 1 WLR 1338 and submitted that the existence of the Wife’s
interest in the Property was established by these two authorities.
51. The Wife’s evidence was that soon after she arrived in
Hong Kong, she and the Husband discussed about adding her name
as a co-owner of the Property. However, the Husband refused to
do so and said to the Wife “it’s troublesome, have to pay” (好⿇麻
煩，要加錢). In the course of writing this judgment, I listened to
the court’s recording of this part of the proceedings and am satisfied
that these were the actual words used by the Wife when she told
Ms Eu what the Husband said in that discussion. The Wife also told
the court in her oral testimony that she did not have anything else
to say to the Husband after he uttered those words. The Wife
confirmed that that was the only conversation she had with the
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Husband about the addition of her name to the title of the Property.
The Husband accepted the Wife’s account in his cross-examination.
52. Although the Husband agreed that there was such a
conversation between him and the Wife, the Husband said in his
oral testimony that the conversation was very brief and only
comprised a few exchanges between them.
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.
54. Mr Wong submitted that Eves v Eves and Grant v Edwards
are authorities for the legal proposition that where there was a
discussion about the beneficial interest of the property and the legal
owner gave an impression to the partner that the latter would have
some interest in the property, this would give rise to an express
common intention for the purpose of a common intention
constructive trust.
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,
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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 Pennycuick
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
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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 Edwards at
656G–H as being “closely akin to those laid down in Gissing
v Gissing [1971] AC 886”. 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 Eves and Grant v

Edwards is 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.
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(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.
60. Further, it is important to bear in mind the distinction

between a pre-acquisition common intention and a post-acquisition
common intention:
(1) This distinction was highlighted by Deputy High Court Judge

Johnson Lam (as he then was) in Ip Man Shan Henry v Ching
Hing Construction Co Ltd (No 2) [2003] 1 HKC 256 at [74]:
If the common understanding was arrived at prior to the acquisition
of the property, the beneficial ownership had not yet been
crystallized and one may infer a common intention more readily.
On the other hand, if the common understanding were only formed
after the acquisition of the property, this would imply a change in
the beneficial ownership of the property. The evidence must
support an inference that there was a fresh agreement as to
beneficial ownership before the court can give effect to the
common understanding. In other words, in that situation, there
must be some evidence to infer that the original beneficial owner
has agreed to give up some of his interest in the property in favour
of the other party.
(2) This passage was repeated by Johnson Lam J (as he then was)
in Chan Chui Mee at [34]. In particular, his Lordship did not
think that the subsequent UK authorities like Stack v Dowden
brought about any changes regarding that distinction.
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(3) In James v Thomas [2007] 3 FCR 696, Sir John Chadwick at

[24] said:
… 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 acquisition) was,
beyond dispute, the sole beneficial owner: Gissing v Gissing …,
Bernard v Josephs … 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 the acquisition.
This passage cited with approval by Johnson Lam J (as he then
was) in Chan Chiu Mee in [35].
(4) The proposition that a court in the absence of an express
post-acquisition agreement will be slow to infer from conduct
alone that parties intended to vary existing beneficial interests
established at the time of the acquisition was followed by
subsequent English cases: see Morris v Morris [2008] EWCA
Civ 257 in [19] (Sir Peter Gibson), [36] (May LJ), [45] (Pill
LJ).
(5) In all of the above cases, the property was in the sole name
of one party and it was in that context that the courts made
a distinction between a pre-acquisition common intention and
a post-acquisition common intention.
(6) Mr Wong submitted that the proposition of Sir John Chadwick
in [24] of James v Thomas has been “superseded” by Jones v
Kernott [2012] 1 AC 776. He relied on what Lord Walker
and Baroness Hale said in [47]–[48] to support his submissions.
However, Jones v Kernott was not a single-name case; it was
a joint names case “where the parties already share[d] the
beneficial interest” ([47]). As pointed out by Lord Walker
and Baroness Hale in [52], the starting point for single name
case is different from that of a joint names case. I do not read
what the Supreme Court said in Jones v Kernott as casting
doubt on the correctness of the proposition in [24] of James
v Thomas.
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
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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.
62. Other than this short conversation between the Husband
and Wife shortly after December 1988, I find that there was no
actual discussion at any time between the Wife and Husband about
whether the Wife would have any beneficial interest in the Property.
63. For the above reasons, there was no express common
intention between the Husband and Wife concerning the sharing
of the Property at any time.
F4. Inferred Common Intention

64. Apart from express common intention, the Wife also alleged
that the Court should infer from the conduct of the Husband and
Wife a common intention that both were to have a beneficial interest
in the Property. Mr Wong submitted that he relied on five matters
to give rise to such inference that both the Husband and Wife would
have a beneficial interest in the Property:
(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 Third Sister was allowed to stay at the Property after its
purchase.
65. As far as the second matter is concerned, the Wife alleged

that through the existence of “pooled family resources”, she
contributed to (1) the purchase price of the Property, (2) the
payment of mortgage instalments in relation to the Property, and
(3) the household expenses.
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F4a. Marriage between the Husband and Wife

66. Mr Wong submitted that the Court should infer from the
existence of the marriage between the Husband and Wife that each
of them intended to have a beneficial interest in their matrimonial
home. I am unable to accept this submission.
67. The fact that two persons get married and live in a family
home (either by themselves or with other family members) does
not throw light on their intention in relation to the beneficial
ownership of the home. As Lord Bridge said in Lloyds Bank Plc v
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.
68. Therefore, I cannot infer from the marriage between the
Husband and Wife and the fact that they used to live together with
the children at the Property that the two of them intended to each
have a beneficial interest in the Property.
F4b. The Wife’s alleged contribution to purchase price of the Property

69. The Wife contended that the Property was purchased with
the assistance of the Loan (from the Third Sister):
(1) There is no dispute that the Third Sister made a loan of

HK$96,000 in December 1987. The Wife produced a copy
of a receipt dated 17 December 1987 and signed by the
Husband acknowledging the making of the Loan.
(2) There is a dispute as to whether any part of the Loan was
used towards the purchase of the Property. The Wife said the
entirety of it was used in the purchase of the Property. The
Husband disputed this and said that none of it was used
towards the purchase.
(3) It is right to point out that the Wife’s case about the purpose
of the Loan and the application of the money under the Loan
was not altogether consistent:
(a) In the Wife’s Statement of Claim, she alleged that the

Loan (of HK$96,000) was used to pay the purchase price
of the Property. In the pleading, there was no mention
of the identity of the borrower or the exact amount of
money which went into the purchase of the Property.
(b) This led to the Purchaser making a request for further
and better particulars. In her Answers, the Wife said
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that (i) the Loan was made between the Third Sister as
the lender and the Husband for and on behalf of himself
and the Wife as the borrowers, and (ii) she did not know
the exact amount of the Loan which was applied for the
payment of the purchase price. The Answers were signed
by the Wife after the relevant interpretation was made
to her.
(c) In her cross-examination by Ms Eu, the Wife said that
the Loan was made to the Husband as the borrower and
that all the money from the Loan was applied towards
the purchase of the Property. There were discrepancies
between the Wife’s oral testimony and her written
answers previously filed, and Ms Eu asked the Wife
about such discrepancies. As to the identity of the
borrower, the Wife said that she was the cause for the
Loan to be made. As to the application of the money
from the Loan, the Wife said that her solicitors possibly
did not listen to her carefully when her written answers
were prepared.
(d) In her re-examination, the Wife said that she did not
know how the Husband made use of the Loan of
HK$96,000.
(4) In her cross-examination, the Wife further told the Court for
the first time that the Loan was repaid by treating the Third
Sister as paying rent of HK$2,000 a month for the occupation
of herself and her family in the Property. Ms Eu pointed out
to the Wife that the HK$2,000 per month notional rent was
never mentioned in her written answers to the requests for
further and better particulars, or in her witness statement. The
Wife was not able to give any satisfactory explanation for her
failure to mention this piece of evidence.
(5) In his oral testimony, the Husband said that the Loan from
the Third Sister was not made for him to purchase the
Property. He disagreed with the suggestion that he needed
the Loan to purchase the Property. It 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.
(6) On balance, I am unable to accept the Wife’s evidence that
the money from the Third Sister went into the purchase of
the Property. First, the timing of the Loan did not quite match
the Husband’s purchase of the Property. The Loan was made
on 17 December 1987 but the Husband only agreed to
purchase the Property on 31 May 1988. I am unable to infer
that the Loan of HK$96,000 was retained by the Husband for
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over five months to pay for the HK$10,000 deposit on 31

May 1988, or the HK$40,000 further deposit on or before 5
June 1988, or as partial payment for the HK$450,000 as the
balance of purchase price on 20 June 1988. Second, there
were unsatisfactory aspects about the Wife’s evidence
concerning the Loan and I am not satisfied that she knew how
the money from the Loan was used by the Husband. Indeed,
she frankly admitted in her re-examination that she did not
know how the Husband applied the Loan. For these two
reasons, I do not find that the HK$96,000 from the Third
Sister (or any part thereof) was applied towards the purchase
of the Property by the Husband in 1988.
(7) In any event, it is conceptually difficult to see how a loan
from a third party can be used to constitute a contribution by
the Wife towards the purchase of the Property. As pointed
out in the Purchaser’s written closing submissions, the nature
of loan is that it has to be repaid and is not a contribution for
acquiring beneficial interest in the property.
70. Following from my conclusion that the Wife has not

established that any part of the Loan was subsequently applied
towards the payment of purchase price of the Property in 1988, I
find that the initial deposit of HK$10,000 and the further deposit
of HK$40,000 for the purchase of the Property were paid by the
Husband using his own money. I also find that the Wife did not in
any way contribute to the payment of purchase price when the
Property was purchased by the Husband in 1988.
F4c. The Wife’s alleged contribution to payment of mortgage instalments

71. It was submitted on behalf of the Wife that “Mortgage
payments were … made by the pooled family resources, including
rent from the [Property]”. It appears to be the Wife’s contention
that the Husband and Wife consciously pooled the family resources
together and the mortgage instalments were settled by the Husband
using the pooled family resources. If this were true, it might provide
a basis for the Wife to contend that she indirectly contributed to
the payment of mortgage instalments in relation to the Property.
72. The Wife’s evidence was that the Husband and Wife pooled
their income and resources to acquire the Property, to repay the
mortgage in respect of the Property, to repay the Loan and for the
benefit of the Household.
73. In her evidence, the Wife accepted that all the mortgage
instalment payments were made by the Husband. The Wife also
gave evidence to say that the rental income of about HK$5,000 per
month was used, with the consent of both herself and the Husband,
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to settle the mortgage instalments as well as some of the household

expenses.
74. In her cross-examination, the Wife accepted:
(1) she never had any joint bank account with the Husband;
(2) all of her salary income was paid into her personal bank
account; and
(3) all expenses relating to the Property were paid by the Husband
(despite the fact that she said in her witness statement that
some of the household expenses including the management
fees, Government rates, water and electricity charges were
paid from the alleged pooled income and resources).
75. There was no dispute that it was the Husband who arranged
for all the mortgage instalments to be paid. The Husband gave
evidence to this effect at the trial.
76. However, the Husband denied that the mortgage instalments
were paid from the rental income. He said he had sufficient money
to settle them from his salary. Moreover, he said that all the expenses
relating to the Property including management fees, all utility
expenses, rates, as well as renovation expenses. The Husband
disagreed with the Wife’s contention that there was any pooling of
income between him and the Wife, and that there was any discussion
between them relating to the application of the rental income.
77. In seeking to resolve the factual differences between the
Husband and Wife in this case, I bear in mind the general principles
which judges apply as to fact finding and the assessment of
credibility. Some of these principles were recently summarised in
Hui Cheung Fai v Daiwa Development Ltd (unrep., HCA
1734/2009, [2014] HKEC 619) (8 April 2014), [77]–[80]:
[77] Generally speaking, contemporaneous written documents

and documents which came into existence before the
problems in question emerged are of the greatest
importance in assessing credibility: Onassis v Vergottis
[1968] 2 Lloyd’s Rep 403 at 431 (Lord Pearce)…
[78] In deciding whether to accept a witness’ account,
importance should also be attached to the inherent
likelihood or unlikelihood of an event having happened,
or the apparent logic of events: eg Lam Rogerio Sou Fung
v Tan Soon Gin George (unreported, HCA 2576/2005, 5
May 2011) [39] (Chu J).
[79] In determining a witness’ credibility, I have also attached
importance to the consistency of the witness’ evidence
with undisputed or indisputable evidence, and the internal
consistency of the witness’ evidence. The latter type of
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consistency is often tested by a comparison between the

witness’ oral testimony and his or her witness statement.
[80] I have cautioned myself against the dangers of too readily
drawing conclusions about truthfulness and reliability
solely or mainly from the appearance of witnesses (Ting
Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336
at [36]–[37] (Bokhary PJ)), or from the assessment of the
witnesses’ character (Esquire (Electronics) Ltd v HSBC
[2007] 3 HKLRD 439 at [135] (Stock JA)).
78. In the context of the present case, I also bear in mind what
Baroness Hale said at [69] of Stack v Dowden where she said the
“parties’ individual characters and personalities may also be a factor
in deciding where their true intentions lay”. On this point, I have
seen how the Wife and Husband gave their evidence from the
witness box. Although one’s true character and personality may
never be accurately assessed from the witness box, it is fair to say
that one aspect of the Husband’s character and personality surfaced
fairly clearly during his oral testimony. When the Husband was
asked in cross-examination why he did not consult the Wife before
signing the Provisional SPA, the Husband said that he just decided
to sell the Property and that was his way of doing things. Having
seen the Husband giving evidence in the witness box, it appears to
me that the Husband is a man of strong character and is not the
sort of person who would discuss family matters with the Wife.
Indeed, Ms Eu in her closing submissions described the Husband as
someone with “a big ego” and “in every respect a male chauvinist”.
Bearing in mind that one should not too readily draw conclusions
about a witness’ reliability from the assessment of his character, I
should emphasise that my assessment of the Husband’s character
and personality in this respect is only relevant to my assessment of
the inherently likelihood of the Wife’s case concerning the existence
of the alleged pooled family resources.
79. Neither the Husband nor the Wife produced any
contemporaneous documents to support their respective evidence.
80. On the existing evidence, I find it was inherently unlikely
for the Husband and Wife at the material times to have any
arrangement or understanding between them that they should pool
their resources together to settle the mortgage instalments. First,
there was no joint bank account between the Husband and Wife
and they kept their income separate at the material times. I am not
satisfied that the Wife has proved on a balance of probabilities that
the money used by the Husband to pay the mortgage instalments
was not his alone but came from some “pooled resources”. Second,
in view of the Husband’s strong personality, I find it difficult to
imagine that this couple would have had any discussion about how
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to pool their resources together to settle any payment. 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 for by the Wife. I find that it is more probable than
not that the money for the payment of mortgage instalments came
entirely from the Husband’s own resources and not from the alleged
pooled resources of the family. I am unable to find that there were
any pooled resources in this family. I also find that the Wife did
not in any way contribute to the payment of mortgage instalments
in respect of the Property.
F4d. The Wife’s alleged contribution to household expenses

81. As mentioned above, the Wife alleged that she and the
Husband pooled their income together and spent it on the household
expenses. By household expenses, I refer to the everyday expenses
of the family (eg expenses for grocery), but excluding those relating
to the Property (eg utility expenses).
82. A common intention may be inferred where there is an
agreement between the parties that the payment by one of them of
the household expenses permits the other to pay the mortgage
instalments: see Gissing v Gissing [1971] AC 886 at 903B–C (Lord
Pearson).
83. However, following from my finding that the Husband and
Wife did not have any arrangement or understanding between them
that they should pool their resources together to settle the mortgage
instalments, I also find that there was no arrangement or
understanding between them to pool their resources to pay for the
household expenses.
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
Edwards at 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.
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F4e. The Husband’s alleged abandonment of the Property in 2005

86. The Wife’s evidence was that the Husband no longer lived
at the Property from 2005 onwards and had from that date
abandoned the family. The Husband disagreed with the Wife’s
evidence.
87. I do not consider this to be a relevant issue. Even if (which
I do not find) the Husband did move out of the Property in 2005,
that cannot have any bearing as to whether there was or was not
any common intention between the Husband and Wife that each
of them should have a beneficial interest in the Property.
F4f. The Husband’s removal of hi-fi equipment from the Property in

2008
88. In the Husband’s cross-examination, he said that he went
back to the Property in 2008 to take away his hi-fi equipment. Mr
Wong submitted that this was consistent with the Wife having some
interest in the Property. I disagree with this submission. I cannot
see how the removal of certain chattels from the Property by the
Husband can give rise to an inference that there was a common
intention that the Wife would have some beneficial interest in the
Property.
F4g. The Third Sister’s occupation at the Property

89. The Wife’s evidence was that the Third Sister occupied a
room at the Property with her family from around August 1988 to
around February 1990. The Husband did not seriously dispute this.
Mr Wong submitted that the fact that the Third Sister was allowed
to live at the Property suggested that the Wife had an interest in
the Property. I also cannot accept this submission. On the Wife’s
own case, the Third Sister was staying at the Property as a tenant
(even though the rent she would have had to pay was set off against
the Loan). I fail to see how the Third Sister’s occupation at the
Property can give rise to an inference of common intention that the
Wife should have some beneficial interest in the Property.
F5. Detriment
90. As mentioned in the above section on the legal principles,
in order to establish a common intention constructive trust, a plaintiff
must prove that he or she has acted to his/her detriment in reliance
on the informal agreement, arrangement or understanding that
he/she would acquire a beneficial interest in the property. In case
I am wrong in my conclusion on the existence of common intention,
I proceed to briefly discuss the element of detriment and make the
necessary findings.
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91. In the light of my findings 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.
F6. Quantification of Interests

94. In the light of my conclusion that there was never any
common intention between the Husband and Wife that each of
them should have a beneficial interest in the Property, the question
(“what is the extent of the parties’ respective beneficial interests in
the property?”) does not arise.
F7. Conclusion
95. It is perhaps worth repeating one part of the Wife’s
evidence to illustrate her frame of mind in bringing this claim. As
mentioned above, the Wife said that the reason why she believed
that she has an interest in the Property was because she was the
lawful wife of the Husband. In other words, her belief was not
grounded on the existence of some informal agreement, arrangement
or understanding between herself and the Husband that she would
have an interest in the Property. In these proceedings, this Court is
determining the property rights of the parties. Whether or not the
Wife should obtain any assets upon her divorce is not a question
before this Court.
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96. Accordingly, I conclude that: (1) there was no common

intention at any time, whether express or inferred, between the
Husband and Wife that each should have a beneficial share in the
Property; and (2) the Wife did not act to her detriment in the belief
that by so acting she was acquiring a beneficial interest in the
Property. In these circumstances, it would neither be inequitable
nor unconscionable for the Husband (who was the sole registered
owner) to claim the entirety of the beneficial ownership of the
Property.
97. The Wife’s claim that the Property was held on a common
intention constructive trust therefore fails.
G. The bona fide purchaser issue
G1. The Purchaser’s case

98. The Purchaser contended that it was a bona fide purchaser
for value without notice and should take free of the Wife’s interest
even if she has any beneficial interest in the Property.
99. In the light of my conclusion on the Common Intention
Constructive Trust Issue, I do not strictly need to go into the Bona
Fide Purchaser Issue. However, in case I am wrong on my views
expressed above, I will proceed to discuss this issue and make the
necessary findings of fact. Everything I say on the Bona Fide
Purchaser Issue in this judgment is therefore on the assumption that
the Wife has a beneficial interest in the Property under a common
intention constructive trust.
G2. The Wife’s case

100. The Wife alleged that the Purchaser was not a bona fide
purchaser for value without notice. Mr Wong submitted that the
Purchaser had (1) actual, (2) imputed and (3) constructive, notice
of the Wife’s beneficial interest in the Property.
101. The Wife also took a point in her pleadings and evidence
that the Property was sold by the Husband to the Purchaser at an
undervalue. This point was featured in Mr Wong’s opening
submissions and was explored by Mr Wong in his cross-examination
of the Purchaser’s witness. At the end of his oral closing submissions,
Mr Wong confirmed that the Court would not need to be troubled
by the Wife’s undervalue point. Accordingly, in this judgment, I
have treated the Wife’s undervalue complaint as no longer being
an issue between the parties.
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G3. Different kinds of notice

102. The Wife relied on three classes of notice against the
Purchaser and it is important to bear in mind what each class of
notice means.
103. I adopt the definition of the three classes of notice used
in Snell's Equity (32nd ed., 2010) para.4-027:
(1) Actual notice: where the equity was within the purchaser’s
own knowledge.
(2) Constructive notice: where the equity would have come to
the purchaser’s own knowledge if proper inquiries had been
made.
(3) Imputed notice: where the purchaser’s agent as such in the
course of the transaction had actual or constructive notice of
the equity.
G4. The Wife’s case on Actual Notice

104. The Wife alleged that the Purchaser had actual notice of
the Purchaser’s interest in the Property.
105. In her closing submissions, Mr Eu objected to the Wife’s
allegation of actual notice on the basis that it was not pleaded by
the Wife. Ms Eu took me to the relevant parts of the Wife’s
pleadings to demonstrate that there was never any pleaded case that
the Purchaser had actual notice of the Wife’s interest in the Property.
In response, Mr Wong submitted that the case of actual notice was
pleaded and took me to a paragraph in the Wife’s Reply to the
Purchaser’s Defence where the Wife pleaded “[the Purchaser] had
notice of the [Wife’s] occupation of the [Property] and her refusal
to sell the [Property] through its agent Mr Chu and/or Yue Kee
Estate Agent”. In my view, reading this paragraph as a whole, it is
clear that it was not a plea of actual notice, but a plea of imputed
notice. The Wife in that paragraph relied on the notice of the
Purchaser’s agent to support her case of notice; there was no plea
that the Purchaser’s agent actually told the Purchaser what the agent
knew. I consider Ms Eu’s objection on pleading to be well-founded.
106. Be that as it may, I do not think the point would have
assisted the Wife even if the case of actual notice had been pleaded.
This is because I do not consider that the Wife has proved that the
Purchaser actually knew about the Wife’s interest in the Property.
Ms Sy Lai Li (Ms Sy) gave evidence for the Purchaser and her
evidence was that the Purchaser never knew, or was told by anyone,
whether the Wife had any interest in the Property. I accept her
evidence in this regard.
107. If (contrary to my conclusion on the Constructive Trust
Issue) the Wife has a beneficial interest in the Property, I would
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have concluded that the Purchaser did not at the material times
have actual notice of the Wife’s interest in the Property.
G5. The Wife’s case on Imputed Notice

108. The Wife’s case on imputed notice was that the Purchaser’s
estate agent, Mr Chu, had notice of the Wife’s interest in the
Property and such notice ought to be imputed to the Purchaser.
G5a. The relevant principles on imputed notice

109. The general principles on imputed notice are summarised
in Snell's Equity (32nd ed., 2010) para.4-036:
It has long been settled that any actual or constructive notice which
an agent has (eg a purchaser’s solicitor or counsel) is normally
imputed to his principal. The notice must have been obtained by
the agent in the same transaction, and it must have come to the
agent as such. Notice acquired in a previous transaction, however
closely connected with the transaction in which the question of
notice to the principal arises, is not sufficient to affect the principal.
And even if the notice is acquired by the agent in the same
transaction, it affects the principal only if it is so material to the
transaction as to make it the duty of the agent to communicate it
to the principal … The question of whether an agent has actual or
constructive notice of a matter which can be imputed to the
principal is an objective one and does not depend on the particular
instructions given by the principal to the agent.
110. Ms Eu submitted that an estate agent in Hong Kong in
law is not a true agent of the principal, but only a middle man. She
relied on what Godfrey J said in Cheng Kwok Fai v Mok Yiu Wah
Peter [1990] 2 HKLR 440 at 445F:
An agent in the property market in Hong Kong is not, as it seems
to me, in quite the same position as an estate agent in England and
Wales … An agent in Hong Kong acts as a broker, usually, though
not always, taking ‘commission’ from both vendor and purchaser.
111. This passage was relied upon by Chung J in Tai Sang
Kung Ltd v Paraking Ltd [2001] 4 HKC 61 at 77D–E to conclude
that the estate agent on the facts of the case only acted as an
“introducer” of the relevant property.
112. In Yili Concepts (HKG) Ltd v Lee Wai Chuen (unrep.,
HCA 12911/97, [2000] HKEC 1043) (29 September 2000), Deputy
High Court Judge Susan Kwan (as she then was) at pp.21 and 22
referred to Cheng Kwok Fai and said:
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It is a question of fact in each case whether an estate agent is

authorised by and therefore acting for a particular party in providing
information relating to a property to another party. Although an
estate agent in Hong Kong usually acts as a broker taking
commission from both sides, he may assume different roles at
different stages of the negotiation leading to the transaction …
… I do not think Godfrey J [in Cheng Kwok Fai] was laying
down any proposition of law that is generally applicable in that
part of his judgment. As I have stated, it is a question of fact
whether an estate agent was acting for a particular party at a
particular stage of the negotiating process.
113. In my view, I consider what Godfrey J was saying in the
above-quoted passage in Cheng Kwok Fai was to explain that an
estate agent in Hong Kong is not an agent in the strict legal sense.
An agent in the strict legal sense is a person who acts on behalf of
the principal so as to affect the principal’s legal relations with a third
party. In a case of true agency, where the agent is effectively the
alter ego of the principal, so that the agent’s acts are treated as the
principal’s acts, it is not surprising that the agent’s knowledge is
similarly attributed to the principal. However, an estate agent in
Hong Kong cannot affect his principal’s legal relations with a third
party, and is therefore not an agent in the strict legal sense. This
was explained by Lord Millett NPJ in ING Baring Securities (HK)
Ltd v Commissioner of Inland Revenue (2007) 10 HKCFAR 417
at [137]–[138]:
[137] In Kennedy v De Trafford [1897] AC 180 Lord Herschell

observed (at p.188) that “No word is more commonly
and constantly abused than the word ‘agent’”. An agent
properly so called is a person who acts on behalf of
another, called the principal, so as to affect the principal’s
legal relations with a third party: see the definition in
Bowstead and Reynolds on Agency (op. cit.) p.1. Where a
contract is entered into by an agent acting on behalf a
principal, it is the principal who obtains rights and incurs
liability under the contract, not the agent. In such a case
it is not inaccurate to describe the contract as the contract
of the principal and not the agent.
[138] But many professional persons who act for clients and
who are popularly described as agents are not agents in
this sense at all. Estate agents are an obvious example.
Stockbrokers are another. They transact business on the
stock exchange as principals, not as agents for their clients.
Stockbrokers are liable as principals on the contracts
which they make with each other; their clients have no
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liability under those contracts. The only contractual

liability which the client undertakes is to his own
stockbroker under the contract between them in which
each acts as principal.
I believe this was why Godfrey J in Cheng Kwok Fai described a

Hong Kong estate agent as a “broker”.
114. Accordingly, given that the Wife relied on the notice of
an estate agent in the present case, it seems to me that she cannot
simply rely on the general principle that “any actual or constructive
notice which an agent has … is normally imputed to his principal”.
The Wife must rely on something more to impute the notice of Mr
Chu or Yue Kee to the Purchaser. Mr Wong appeared to recognise
this and submitted that the question to ask was whether Yue Kee
had actual or ostensible authority to receive information on behalf
of the Purchaser in relation to the transaction.
115. The question posed by Mr Wong appeared to be taken
from what Hoffmann LJ said in El-Ajou v Dollar Land Holdings
Plc (No 1) [1994] 2 All ER 685 at 703c–e:
Agent authorised to receive communications
Thirdly, there are cases in which the agent has actual or
ostensible authority to receive communications, whether
informative (such as the state of health of an insured … or
performative (such as a notice to quit …) on behalf of the principal.
In such cases, communication to the agent is communication to
the principal.
116. Mr Wong then submitted that the question he posed must
be answered in relation to the specific facts of the case.
117. In cases where an agent’s function is to receive
communications on behalf of his principal, one can readily
understand why the knowledge of the agent would be imputed to
the principal. However, I have some doubt as to whether such a
principle applies to an estate agent in Hong Kong. In a typical case,
an estate agent’s function is to perform a service by introducing a
counter-party to his principal so as to enable his principal to conclude
a particular transaction with that counter-party; his function is not
to receive communications on behalf of his principal. No cases have
been cited to suggest that an estate agent in Hong Kong has the
general authority to receive communications for his principal.
Accordingly, I am unable to accept Mr Wong’s submission that
notice of an estate agent in Hong Kong is imputed to his principal.
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G5b. Findings of fact

118. In any event, I proceed to make the relevant findings of
fact in the event that I am wrong in my conclusion above that notice
of an estate agent is not imputed to his principal.
119. The Wife’s evidence was that after she learned of the
Husband’s sale of the Property, she went to Yue Kee and told Mr
Chu that she did not approve of the sale and would not move out
of the Property. The Wife said that she expressly told Mr Chu to
pass on the message to the Purchaser. The Wife also said that during
that visit, Mr Chu’s daughter, Ms Chu Lai Sheung (Ms Chu), told
the Wife that this had nothing to do with them and asked the Wife
to discuss with the Husband.
120. Before the trial, Mr Chu prepared a witness statement for
the Purchaser (on 3 April 2012). In the Purchaser’s written opening
submissions, Ms Eu informed the Court and the Wife that Mr Chu
was unfit to attend the trial to give evidence. A letter from Mr
Chu’s doctor (dated 28 February 2014) was produced to certify that
Mr Chu was suffering from senile dementia and that he was not
able to present himself in court. On the first day of the trial, Ms Eu
asked the Court for leave to allow Ms Chu to file a witness
statement for the Purchaser. Mr Wong did not object to the
application. I accordingly gave leave to the Purchaser to file Ms
Chu’s witness statement. Ms Chu attended the trial and gave
evidence on behalf of the Purchaser.
121. Ms Chu’s evidence was that: (1) the Wife did pay a visit
to Yue Kee on one occasion and asked Mr Chu whether the
Property had been sold; (2) Mr Chu told the Wife that the Husband
had already sold the Property for HK$1,750,000 and that the
Provisional SPA had already been signed; and (3) the Wife left Yue
Kee without protest or making any objection to the sale. In her
cross-examination, Ms Chu said that she told the Wife on that
occasion to ask the Husband about the sale.
122. Mr Wong submitted that Ms Chu’s evidence should not
be believed because it was inherently improbable for the Wife to
visit Yue Kee and not object to the sale of the Property. I do not
find it inherently improbable for the Wife not to have made any
objections during her visit to Yue Kee. I do not see why a person
would necessarily make objections to an estate agent about the sale
of a property when the person knew that the provisional sale and
purchase agreement has already been signed.
123. Mr Wong further attacked Ms Chu’s credibility by
suggesting that there was no reason for her to tell the Wife to ask
the Husband about the sale unless Ms Chu knew that there was
already a dispute between the Husband and Wife over the sale of
the Property. I do not think this is necessarily correct. As submitted
by Ms Eu, as Ms Chu did not understand why the Wife would
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approach an estate agent to ask whether the Husband had sold the
Property, it was only natural for Ms Chu to tell the Wife to talk to
the Husband about the sale.
124. Moreover, I bear in mind that Ms Chu is a completely
independent witness and I can see no good reason for her to lie in
her evidence.
125. On the other hand, there are unsatisfactory aspects of the
Wife’s evidence regarding her visit to Yue Kee:
(1) First, when the Wife was cross-examined, I noticed that she
was able to give some information which did not appear in
her witness statement. For example, the Wife in
cross-examination said that she told Mr Chu to tell the
Purchaser to return the Property and Mr Chu told her that
they had money and should go and buy an apartment in City
Garden. Such information was not mentioned in her witness
statement.
(2) Further, the Wife in cross-examination said that Ms Chu
“rushed out” to scold her when she (the Wife) was talking
to Mr Chu at Yue Kee. However, the premises of Yue Kee
were less than 100 sq ft with two desks and no partition. I do
not understand how Ms Chu could have rushed out from
anywhere on that occasion.
126. For these reasons, as far as the Wife’s visit to Yue Kee is
concerned, I prefer Ms Chu’s evidence to that of the Wife. I find
that on a day between 18 July 2008 (the date when the Provisional
SPA was signed) and 29 October 2008 (date of completion of the
sale and purchase of the Property), the Wife visited Yue Kee and
spoke to Mr Chu. On that occasion, the Wife asked Mr Chu
whether the Property had been sold. Mr Chu told the Wife that
the Husband had already sold the Property for HK$1,750,000 and
that the Provisional SPA had already been signed. Having heard Mr
Chu’s response, the Wife left Yue Kee without protest or making
any objection to the sale.
127. It follows that I am unable to find that Mr Chu was told
by the Wife that she would not move out of the Property or that
she objected to the sale of the Property by the Husband.
G5c. Conclusion on imputed notice

128. If (contrary to my conclusion on the Constructive Trust
Issue) the Wife has a beneficial interest in the Property, I would
have concluded that the Purchaser did not at the material times
have imputed notice of the Wife’s interest in the Property.
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G6. The Wife’s Case on Constructive Notice
G6a. The relevant principles

129. According to Megarry & Wade: The Law of Real Property
(7th ed., 2008) para.8-018, a purchaser has constructive notice of
a fact if he:
(1) had actual notice that there was some incumbrance and a
proper inquiry would have revealed what it was; or
(2) deliberately abstained from inquiry in an attempt to avoid
having notice; or
(3) omitted by carelessness or for any other reason to make an
inquiry which a purchaser acting on skilled advice ought to
make and which would have revealed the incumbrance.
The learned editors also say that a purchaser’s ordinary duties fall
into two main categories: inspection of the land, and investigation
of the vendor’s title.
130. As far as an inspection of the land is concerned, 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).
G6b. The Purchaser’s position

131. There was no dispute that the Purchaser did not inspect
the Property at any time prior to the completion of the purchase.
Ms Sy’s evidence was:
(1) She did intend to inspect the Property before completion but
did not do so because the Husband, through Yue Kee,
proposed to rent the Property upon completion and the
tenancy agreement was signed on 9 October 2008.
(2) She believed that inspection was unnecessary since the vendor
would continue to occupy the Property.
Ms Sy fairly accepted in cross-examination that had there been an

inspection, she would have known that the Wife was occupying
the Property and would have known about the Wife’s position of
not wanting to sell.
132. Ms Eu accepted that Wong Chim Ying remains good law.
She submitted that there is no direct authority suggesting how the
legal principle should apply in situations where the purchaser and
vendor enter into a post-completion rental arrangement. She further
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submitted that in a rental case, the tenant has to pay rent every
month and there would be a repeated and renewed
acknowledgement and representation every month that the landlord
is the owner and entitled to possession. I am unable to accept these
submissions:
(1) The law on what would amount to constructive notice is fairly

clear. I have already set out the legal principles above.
(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”.
G7. Conclusion
133. Accordingly, if (contrary to my conclusion on the
Constructive Trust Issue) the Wife has a beneficial interest in the
Property, I would have concluded that the Purchaser had
constructive notice of the Wife’s interest and would not be a bona
fide purchaser for value without notice.
H. The estoppel, waiver, acquiescence and laches issue

134. The Purchaser raised a number of distinct defences to
defeat the Wife’s claim. The Purchaser contended that by reason
of the Wife’s conduct, she is now barred from claiming her
beneficial interest in the Property. As pointed out by Ms Eu, these
defences are only applicable if (1) the Wife succeeds in her claim
to establish that she has some beneficial interest in the Property,
and (2) the Purchaser is not a bona fide purchaser for value without
notice.
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135. In view of my conclusion above on the Common Intention

Constructive Trust Issue, these defences strictly do not arise. On
the assumption that I am wrong on that issue, I now proceed to
discuss the various defences and make the necessary findings. Again,
everything I say on this issue is on the assumption that the Wife
has a beneficial interest in the Property under a common intention
constructive trust. Both Mr Wong and Ms Eu referred me to
numerous authorities on this issue. However, since what I say will
necessarily be obiter, I hope I will be forgiven for referring to only
some of the authorities.
H1. The relevant evidence and findings of fact

136. There are two areas in which I need to make findings of
fact for the purpose of making a determination on the application
of the defences relied upon by the Purchaser: (1) the Wife’s
knowledge of the sale of the Property by the Husband, and (2) the
Wife’s knowledge of the lease of the Property entered into by the
Husband.
H1a. Wife’s knowledge of sale of the Property

137. The Wife’s own evidence was that she knew about the
sale of the Property by the Husband on 1 October 2008. The
Husband, on the other hand, said in evidence that he told the Wife
about the sale of the Property within a few days of his signing of
the Provisional SPA on 18 July 2008. It is fair to record that the
Husband did say in cross-examination that he was not sure about
the exact timing.
138. The exact date on which the Wife learned about the sale
of the Property is not important. It is sufficient for me to find that
the Wife knew about the sale of the Property on 1 October 2008
at the latest.
H1b. Wife’s knowledge of lease of the Property

139. The Wife’s evidence was that she did not know about
any lease arrangement in relation to the Property until she received
an eviction notice in September 2010.
140. I am unable to accept the Wife’s evidence that she only
found out that she was occupying a leased property for the first time
in September 2010:
(1) First, the Husband gave evidence that he took the Wife and
the daughter to inspect other flats in North Point for rental
when the Wife refused to move to Tai Po. According to the
Husband, it was only when the Wife expressed no interest in
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renting other flats that he entered into a lease in respect of

the Property with the Purchaser on 9 October 2008. Although
there was other evidence given by the Husband that I would
not accept, the evidence that I just set out was given by the
Husband spontaneously on two separate occasions during the
trial (once when he was cross-examining the Wife and once
when he was being cross-examined by Mr Wong). I accept
the Husband’s account of the events. On that basis, it seems
to me more likely than not that the Wife knew that a leasing
arrangement had to be entered into after the sale of the
Property in October 2008.
(2) Second, the Husband also said in evidence that he told the
Wife about the tenancy and the rental of $9,500 shortly after
the tenancy agreement of 9 October 2008 was executed. The
Husband undertook the trouble to enter into the Tenancy
Agreement with the Purchaser and I see no reason why he
would not the Wife about the tenancy arrangement: the Wife
was after all still living at the Property. I also accept the
Husband’s evidence in this regard.
(3) Third, there was no dispute that the Wife knew about the
sale of the Property on 1 October 2008 and that she continued
to stay at the Property from October 2008 to September 2010
when she received the eviction notice. She was asked in
cross-examination why and how she could continue to stay
at the Property after October 2008. She told the Court that
she thought the problem had gone away. I find her answer
to be incredible, particularly in view of her own evidence that
(a) the Husband would not withdraw from the sale of the
Property and (b) she obtained no assistance during the visit
to Yue Kee.
141. Accordingly, I find that it is more likely than not the Wife
knew in October 2008 or shortly thereafter that there was some
lease arrangement in respect of the Property.
H2. Estoppel
142. 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 is now
estopped from asserting her interest.
143. Ms Eu appeared to rely on both the doctrine of estoppel
by representation and the doctrine of proprietary estoppel.
144. The essential elements of estoppel by representation are
(1) a representation or conduct amounting to a representation
intended to induce a course of conduct on the part of the person
to whom the representation is made, (2) an act or omission resulting
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from the representation, whether actual or by conduct, by the person

to whom the representation is made, and (3) detriment to such
person as a consequence of the act or omission. See Greenwood v
Martins Bank Ltd [1933] AC 51 at 57 (Lord Tomlin).
145. The essential elements of proprietary estoppel have been
described as follows:
(1) The owner of land induces, encourages or allows the claimant

to believe that he has or will enjoy some right or benefit over
the owner’s property (representation or assurance).
(2) In reliance upon this belief, the claimant acts to his detriment
to the knowledge of the owner (reliance).
(3) The owner then seeks to take unconscionable advantage of
the claimant by denying him the right or benefit which he
expected to receive (detriment).
See Taylors Fashions Ltd v Liverpool Victoria Trustees Co Ltd

[1982] QB 133 at 144 (Oliver J); Thorner v Major [2009] 1 WLR
776 at [29] (Lord Walker); Chan Gordon v Lee Wai Hing [2011]
2 HKLRD 506 at [28] (Deputy High Court Judge Queeny
Au-Yeung).
146. I should say at once that I find it somewhat odd for the
Purchaser to rely on the doctrine of proprietary estoppel to seek to
defeat the Wife’s claim. It is clear from the description of the
elements of this doctrine that it is used as a cause of action (and not
as a defence) to enforce or grant rights to those who have been
induced to invest in or improve on property owned by others either
as a consequence of their own mistake or by direct encouragement
or informal agreement. I am therefore not convinced that proprietary
estoppel can be used as a defence against the Wife in this case. In
any event, the three broad elements of proprietary estoppel appear
to coincide closely with the elements of estoppel by representation,
and it is not clear what additional benefit one can derive from the
reliance on proprietary estoppel as a defence if the doctrine of
estoppel by representation is applicable. For these reasons, I will
confine my discussion on the Purchaser’s defence of estoppel by
representation in the remaining part of this section.
147. Ms Eu submitted that a representation can be made by
way of silence or inaction. She relied on the proposition that the
duty necessary to found an estoppel by silence 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 by him to be
under a mistake as to their respective rights and obligations: see
Spencer Bower on The Law Relating to Estoppel by Representation
(4th ed, 2004) p.48 citing Moorgate Mercantile Co Ltd v Twitchings
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[1977] AC 890 at 903F (Lord Wilberforce). Ms Eu also submitted

that the duty to speak can arise in situations where there was no
contractual or pre-existing relationship between the parties: see
Fung Kai Sun v Chan Fui Hing [1951] AC 489 at 501–503 (Lord
Reid).
148. On the facts of the present case, I do not think the
authorities cited by Ms Eu assist the Purchaser. 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.
149. Ms Eu also relied on the case of Midland Bank Ltd v
Farmpride Hatcheries Ltd (1981) 260 EG 493 to found a case of
estoppel. In that case, a company mortgaged its property to a bank
and it was held that a contractual licensee who was in occupation
of a house under a licence from the company, of which he and his
wife were in complete control, to be estopped from relying on the
constructive notice doctrine against the bank. This was because he
had “set up a smoke-screen designed to hide even the possible
existence of some interest in himself which could not derogate from
the interest of the company ostensibly conferred by the mortgage”
(Shaw LJ at 497). In the present case, I do not find that the Wife
deliberately withheld information about her interest in the Property.
I do not think this case assists the Purchaser.
150. As the Purchaser has failed to establish the first element
for an estoppel by representation (namely the existence of a
representation), I do not propose to go on to discuss the remaining
elements. I conclude that the Purchaser’s defence of estoppel has
not been made out.
H3. Waiver
151. Further, Ms Eu submitted that the Wife’s inaction and/or
conduct constituted a pure waiver or a waiver by election.
152. Pure waiver can be summed up as “the unilateral divesture
of certain rights” or “the abandonment of a right in such a way that
the other party is entitled to plead the abandonment by way of
confession and avoidance if the right is thereafter asserted”: see Sean
Wilken QC & Karim Ghaly, The Law of Waiver, Variation, and
Estoppel (3rd ed., 2012) para.4.28.
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153. The principles of waiver by election were summarised by

Yuen JA in Large Land Investments v Cheung Siu Kwai [2003] 1
HKLRD 313 at [15]:
(1) A waiver by election occurs, in the context of a binding

contract, when a state of affairs comes into existence in which
one party becomes entitled, either under the terms of the
contract or by the general law, to exercise a right, and he has
to decide whether or not to do so.
(2) It is a prerequisite of election that the party making the
election must first be aware of the facts which have given rise
to the existence of his right.
(3) It may be that the party must also be aware of his legal right
of affirming or rescinding the contract when there has been
repudiation by the other party.
(4) Further, since a party who elects not to exercise a right which
has become available to him is abandoning that right, he will
only be held to have done so if he has so communicated his
election to the other party in clear and unequivocal terms.
154. It is not entirely clear from the Purchaser’s case as to what

was alleged to have been waived by the Wife. Insofar as the
Purchaser contended that the subject matter of the waiver was the
Wife’s interest in the Property, it seems clear to me that there could
not have been any such waiver because the Wife has not satisfied
the relevant formality requirements to dispose of her beneficial
interest in land. Insofar as the Purchaser contended that the subject
matter of the waiver was the Wife’s right to pursue her claim as a
beneficial owner of the Property, I do not consider that the facts of
the case support this contention. There was nothing to suggest that
the Wife actually knew of the identity of the Purchaser before she
received the eviction notice in September 2010. Ms Eu suggested
that the Wife could have found out the identity of the Purchaser
from the estate agents, or could have approached various
government departments or other people for assistance. That may
be true, but I do not think the law requires someone like the Wife
to have made enquiries about the identity of the Purchaser in the
circumstances of the present case. No authorities have been cited
to me to suggest that the Wife should have been fixed with
constructive knowledge of the identity of the Purchaser. As the
identity of the Purchaser was a pertinent fact which gave rise to the
existence of her right of claim, the Wife cannot be said to have
waived her right to pursue a claim against the Purchaser.
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H4. Acquiescence
155. Moreover, Ms Eu submitted that the Wife’s inaction
and/or conduct amounted to acquiescence.
156. The term “acquiescence” is used where a person having
a right, and seeing another person about to commit, or in the course
of committing an act infringing upon that right, stands by in such
a manner as to induce the person committing the act, and who
might otherwise have abstained from it, to believe that he assents
to its being committed, he cannot afterwards be heard to complain
of the act: see De Bussche v Alt (1878) 8 Ch D 286 at 314.
157. On the facts of this case, I do not think it can be said that
the Wife’s inaction had induced the Purchaser into acquiring the
Property.
H5. Laches
158. Finally, Ms Eu submitted that the Wife’s inaction and/or
conduct amounted to laches.
159. Laches essentially consists of a substantial lapse of time
coupled with the existence of circumstances which make it
inequitable to enforce the claim. Accordingly, delay alone is
insufficient to constitute laches. Further, there can be no
abandonment of a right without full knowledge of all the relevant
circumstances. See Snell's Equity (32nd ed., 2010) para.5-019.
160. The essence of equitable doctrine of laches was summarised
by Lord Selbourne LC in Lindsay Petroleum Co v Hurd (1873–74)
LR 5 PC 221, 239–240:
Now the doctrine of laches in Courts of Equity is not an arbitrary
or a technical doctrine. Where it would be practically unjust to
give a remedy, either because the party has, by his conduct, done
that which might fairly be regarded as a waiver of it, or where by
his conduct and neglect he has, though perhaps not waiving that
remedy, yet put the other party in a situation in which it would
not be reasonable to place him if the remedy were afterwards to
be asserted, in either of these cases, lapses of time and delay are
most material.
161. Mr Wong submitted the doctrine of laches has no
application where the Statute of Limitations applies. Specifically, he
submitted that laches has no application in the present case because
of the application of s.20(2) of the Limitation Ordinance (Cap.347)
which expressly allows the Wife to pursue her claim for the
beneficial interest in the Property within six years from the date on
which the right of action accrued.
162. In reply, Ms Eu submitted that s.20(2) of the Limitation
Ordinance has no application in the Wife’s claim against the
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Purchaser. She submitted that the “action by a beneficiary to recover

trust property” referred to in s.20(2) is only intended to cover a
claim by a beneficiary against the trustee for recovery of trust
property, and has no application in the present case where the Wife
is claiming against a third party non-trustee.
163. Given that s.20(1)(b) already provides for a claim by a
beneficiary to recover trust property from the trustee, it would be
odd for s.20(2) to repeat the same claim but to provide for a
different limitation period. It seems to me that on a proper
construction of s.20 of the Limitation Ordinance, the words “action
by a beneficiary to recover trust property” should be construed to
mean an action against non-trustees. I note that the learned editors
of Lewin on Trusts (18th ed., 2006) para.44-19 also take the same
view.
164. Accordingly, it seems to me that Mr Wong’s point that
the defence of laches cannot apply to the Wife’s claim against the
Purchaser is a valid one.
165. In any event, even if I am wrong on the construction of
s.20(2), laches would not have assisted the Purchaser because I do
not think that (1) there had been a substantial lapse of time; and
(2) the circumstances of the case do not appear to me to be
inequitable for the Wife to enforce her claim against the Purchaser.
H6. Conclusion
166. Accordingly, if (contrary to my conclusion on the
Constructive Trust Issue) the Wife has a beneficial interest in the
Property, the Purchaser’s defences in estoppel, waiver, acquiescence
and laches would have failed.
I. Conclusion
167. For all of the above reasons, I dismiss the Wife’s claims
against the Purchaser and the Husband. The issues in the Purchaser’s
Contribution Notice against the Husband do not arise. I make an
order nisi that the costs of the defendants in this action are to be
paid by the plaintiff, to be taxed if not agreed. The costs order nisi
shall be made absolute 14 days from the date of this judgment. The
Wife’s own costs are to be taxed in accordance with the Legal Aid
Regulations (Cap.91A).
Reported by Sarah Cheng
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[2017] 4 HKLRD 327
Primecredit Ltd
and
Yeung Chun Pang Barry
————
(Court of Appeal)
(Civil Appeal No 246 of 2016)
————
Lam V-P, Cheung and Kwan JJA

28 June, 21 July 2017
Land law — beneficial ownership — family home — in name of husband

and son — wife contributed to purchase — whether wife had beneficial
interest
Trusts — constructive trust — common intention constructive trust — family
home — not uncommon in context of Hong Kong Chinese family for parents
to acquire property in name of child and yet retain control and beneficial
ownership during their lifetime
Trusts — resulting trust — matrimonial home in name of husband and son
— wife contributed to purchase — wife had beneficial interest during her
lifetime — as for Chinese traditional thinking of leaving real property to
male descendant, this not likely to be immediate gift
Civil procedure — charging order — application — service could be directed
on any interested person — notice should be given to co-owners — Rules
of the High Court (Cap.4A, Sub.Leg.) O.50 r.2(2)
⼟土地法 — 實益擁有權 — 家庭住宅 — 以丈夫和兒⼦子的名義 — 妻⼦子作出
購買的分擔 — 妻⼦子是否有實益權益
信託 — 法律律構定信託 — 共同意圖的法律律構定信託 — 家庭住宅 — 在香
港中國家庭的情況⽗父⺟母以⼦子女名義收購物業及在⽣生的時間仍保持控制權
及實益擁有權，並非不普遍
信託 — 歸復信託 — 以丈夫和兒⼦子的名義持有的婚姻居所 — 妻⼦子作出
購買的分擔 — 妻⼦子於她在⽣生的時間有實益權益 — 對於將房產物業留留給
男性後裔的中國傳統思想⽽而⾔言，這看來來不似是當前的饋贈
⺠民事訴訟程序 — 押記令 — 申請 — 送達可針對任何有利利害關係的⼈人 —
應向共同擁有⼈人發出通知 — 《⾼高等法院規則》(第4A章，附屬法例例)第50
號命令第2(2)條規則
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327 2017/9/24—21:56
H and W had five children. The youngest, S, was their only son.
Their first flat was in W’s sole name. When it came to buying a
second family flat (the Property), W’s evidence was that, as the first
flat was in her name, she was not eligible for a Home Ownership
Scheme and so the application was made in H and S’s name and
there was a common intention “among the family” that the Property
would only pass to S, as the only male descendant, when she and
H had passed away. The purchase was funded by selling the first
flat and taking out a bridging loan. H and W contributed to the
mortgage repayments. H and S held the Property as joint tenants.
S became the sole legal owner in 2012 upon H’s death. The Property
was acquired when both H and W were in their 50s and it was their
matrimonial home until H’s passing. W continued to reside there.
Upon H’s passing, P then sought to enforce a charging order against
S, in relation to an unrelated loan taken out by S, seeking vacant
possession of the Property and an order for sale. At first instance
W’s claim that she was a beneficial owner of the Property was
rejected, finding, inter alia, that W’s evidence on common intention
was nebulous. W appealed.
Held, allowing the appeal as W was a beneficial owner, that:

Resulting trust
(1) (Per Kwan JA, Lam V-P and Cheung JA agreeing) A resulting
trust had been made out. This case concerned a couple in
their 50s with limited financial resources, who had spent a
substantial part of their resources on the purchase of the
Property as their matrimonial home, W being aged 51 at the
time of the purchase could look forward to a number of years
ahead, while S was only 21 at the time, had not completed
his studies, nor was he married. Even allowing for the Chinese
traditional thinking of leaving real property to the male
descendant, this would likely happen on the demise of the
parents, it would not be so likely for an immediate gift to be
made to S in these circumstances (McGrath v Wallis [1995]
2 FLR 114 applied). (See para.46.)
Common intention constructive trust
(2) (Per Cheung JA, Lam V-P agreeing) The beneficial interest
of W could also be asserted under the second limb of common
intention constructive trust (objective inference from conduct
of parties). Even where there was no express agreement
between W and S, the intention of W at the time of
acquisition, namely that she intended the Property to pass to
S as the only male descendant after she and H had passed
away, must be a relevant factor. The proper inference to be
drawn was that W was the beneficial owner of the Property
during her lifetime. There was nothing incredible or inherently
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327 2017/9/24—21:56
[2017] 4 HKLRD 327 Primecredit Ltd v Yeung Chun Pang Barry 329
improbable about such an intention particularly in the context

of a Hong Kong Chinese family where it was not uncommon
that parents acquired a property in the name of their children
and yet retained control and beneficial ownership of the
property during their lifetimes. More importantly, there was
W’s financial contribution. (See paras.2.9–2.10.)
(3) (Per Lam V-P, Cheung JA agreeing) W had a beneficial
interest based on constructive trust. The modern approach to
constructive trusts was to assess the common intention of the
parties by a holistic approach having regard to the context.
In a domestic context, particularly in relation to a matrimonial
home, the court was not constrained in that exercise by pure
direct monetary contributions to the purchase price. In a
Chinese setting, especially for the older generations where
explicit discussions on property rights within the family was
not that common, the court had to pay more regard to
circumstantial matters (Stack v Dowden [2007] 2 AC 432,
Jones v Kernott [2012] 1 AC 776, Mo Ying v Brillex
Development Ltd [2015] 2 HKLRD 985 applied). (See
paras.1.6–1.7.)
(4) (Per Kwan JA, disagreeing) The Judge was entitled to take
the view that the evidence on an arrangement or
understanding reached among the three parties regarding
common intention was so nebulous and vague that, on the
balance of probabilities, there was no common intention. (See
para.26.)
Charging orders — notice
(5) (Per Lam V-P) The following was drawn to the attention of
Masters. On an application for a charging order under O.50
r.2(2) of the Rules of the High Court (Cap.4A, Sub.Leg.),
the court may direct service on any interested person. A
co-owner, in particular a joint tenant, was an interested person.
In the interests of justice, notice should be given to such
persons before making any order absolute. (See para.1.9.)
Appeal
This was an appeal by the second defendant, Wong Ho, against a
judgment of Anthony Chan J handed down on 9 December 2016
granting the plaintiff ’s application for an order of sale of a property
(see [2016] HKEC 2667). The facts are set out in the judgment.
Mr Anthony PW Cheung and Mr Marco SP Tse, instructed by TK
Tsui & Co, for the 2nd defendant (appellant).
Mr Alvin Tsang, instructed by J Chan & Lai, for the plaintiff (1st
respondent).
The 1st defendant (2nd respondent), in person (absent).
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Legislation mentioned in the judgment

Rules of the High Court (Cap.4A, Sub.Leg.) O.50 rr.2(2), 7(1)

Air Jamaica Ltd v Charlton [1999] 1 WLR 1399, [1999] Pens LR
247
Au Yuk Lin v Wong Wang Hin Eddy [2013] 4 HKLRD 373
Bennet v Bennet (1879) 10 Ch D 474
Chan Yuen Lan v See Fong Mun [2014] SGCA 36
Cheuk Shu Yin v Yip So Wan (2012) 15 HKCFAR 344, [2013] 1
HKLRD 656, [2013] 1 HKC 374, [2013] CPR 115
Cheung Pui Yuen v Worldcup Investments Inc (2009) 12 HKCFAR
31
Drake v Whipp [1996] 1 FLR 826, [1996] 2 FCR 296, (1996) 28
HLR 531
Ho Wai Kwan v Chan Hon Kuen [2015] 1 HKLRD 901, [2015] 2
HKC 99, [2015] CPR 20
Hotung v Ho Yuen Ki [2005] 4 HKLRD 558, [2005] 2 HKC 457
Jones v Kernott [2011] UKSC 53, [2012] 1 AC 776, [2011] 3 WLR
1121, [2012] 1 All ER 1265, [2012] HLR 14
Laskar v Laskar [2008] EWCA Civ 347, [2008] 1 WLR 2695, [2008]
2 P & CR 14
Lee Tso Fong v Kwok Wai Sun [2008] 4 HKLRD 270, [2008] 4
HKC 36
Leung Wing Yi Asther v Kwok Yu Wah (2015) 18 HKCFAR 605
Lloyds Bank Plc v Rosset [1991] 1 AC 107, [1990] 2 WLR 867,
[1990] 1 All ER 1111, (1990) 22 HLR 349
Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1
Malahon Credit Co Ltd v Siu Chun Wah Alice [1988] 1 HKLR
196, [1987] 2 HKC 79, [1986–88] CPR 354
McGrath v Wallis [1995] 2 FLR 114
Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985, [2015]
3 HKC 104, [2015] CPR 199
Pang Ketian Sally v Tam Yuk Hung Annie (unrep., CACV
147/2013, [2014] HKEC 689)
Pettitt v Pettitt [1970] AC 777, [1969] 2 WLR 966, [1969] 2 All
ER 385, (1969) 20 P & CR 991
Piglowska v Piglowski [1999] 1 WLR 1360, [1999] 3 All ER 632,
[1999] 2 FLR 763
Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432, [2007] 2 WLR
831, [2007] 2 All ER 929, [2008] 2 P & CR 4
Suen Shu Tai v Tam Fung Tai [2014] 4 HKLRD 436, [2014] 4
HKC 537, [2014] CPR 293
Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336,
[2002] 3 HKLRD 1, [2002] 1 HKC 601
125
327 2017/9/24—21:56
Primecredit Ltd v Yeung Chun Pang Barry
[2017] 4 HKLRD 327 Lam V-P 331
Vandervell v Inland Revenue Commissioners [1967] 2 AC 291,

[1967] 2 WLR 87, [1967] 1 All ER 1
Westdeutsche Landesbank Girozentrale v Islington London Borough
Council [1996] AC 669, [1996] 2 WLR 802, [1996] 2 All ER
961, [1996] CLC 990
Yuen Yat Shan Fiona v Sit Hin Kau [2005] 4 HKC 170
Lam V-P
1.1 I have had 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]–[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 2nd defendant (be it presumed or presumption rebutted) at the
time the Property was acquired (under the resulting trust analysis)
or the common intention of the parents and the 1st 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 Yuk 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 the Property was acquired. In the present case, the
competing suggestions were: (1) the 2nd defendant together with
the deceased father had beneficial interest in the Property and the
1st 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 2nd
defendant did not have any beneficial interest in the Property whilst
the deceased father and 1st 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
2nd 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
1
Even on the minority view of Lord Neuberger, the presumption of resulting trust can be
rebutted by a common intention constructive trust, see [124].
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327 2017/9/24—21:56
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 to 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 v Dowden. In a Chinese setting,
especially for the older generations, where explicit discussions on
property rights within the family are 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
2nd defendant had a beneficial interest in the Property based on
constructive trust. Like His Lordship, I see nothing “nebulous” in
the 2nd defendant having an intention to pass the Property to the
1st defendant upon death but retaining a beneficial interest in the
meantime. The Judge’s observation on such intention at [20] of the
judgment below is, with respect, plainly wrong. The other matters
alluded to 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 O.50 r.2(2) of the
Rules of the High Court (Cap.4A, Sub.Leg.), in an application for
a 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
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327 2017/9/24—21:56
[2017] 4 HKLRD 327 Cheung JA 333
given the potential impact of a charging order on the interest of the

co-owners other than the judgment debtor, in the interests of justice
notice should be given to such persons before making any order
absolute. This is a matter which I would like to bring to the
attention of 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.
Cheung JA
2.1 I agree with the judgment of Lam V-P 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] 1 AC 107, 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, 1412:
Like a constructive trust, a resulting trust arises by operation of
law, though unlike a constructive trust, it gives effect to intention.
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327 2017/9/24—21:56
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, 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 the parties. A resulting trust is
not imposed by law against the intentions of the trustee (as is a
constructive trust) but gives effect to his presumed intention.
2.8 There are academic debates on which of the two doctrines
on resulting trust is to be preferred: see a discussion of this topic in
the Singapore case of Chan Yuen Lan v See Fong Mun [2014]
SGCA 36 at [38]–[52] referred to in Mo Ying v Brillex Development
Ltd [2015] 2 HKLRD 985 at [6.13].
2.9 It is not necessary in this judgment to resolve these two
opposite doctrines or the difference between the second limb of
common intention constructive trust and resulting trust. In my view,
apart from resulting trust, the beneficial interest of the mother can
also be asserted under the second limb of common intention
constructive trust. Even when there was no express agreement
between mother and son, the intention of the mother at the time
of acquisition must be a relevant factor. Specifically, the mother’s
evidence is, as summarised by the Judge, that it was intended that
the property would pass to the son as the only male descendant
after she and her husband passed away. The proper inference to be
drawn from this evidence is that the mother is the beneficial owner
of the property during her lifetime. In my view there is nothing
incredible or inherently improbable about such an intention
particularly in the context of a Hong Kong Chinese family where
it is not uncommon that parents would acquire a property in the
name of their children and yet retain control and beneficial
ownership of the property during their lifetime.
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327 2017/9/24—21:56
[2017] 4 HKLRD 327 Cheung JA 335
2.10 More importantly, there is the financial contribution by

the mother. The Judge was skeptical about the extent of contribution
by the mother in the matrimonial home, the proceeds of which
were used to acquire the property in question. What the Judge
seems to have overlooked is that the mother’s interest in the
matrimonial home is not solely determined by her financial
contribution but by reason of her status as a married woman.
2.11 The Judge also questioned, if the mother is the beneficial
owner, the need for the father to tell the son that he should allow
the mother to stay in the property after the father’s death. Again I
do not see anything odd in such a reminder when the mother is not
registered as an owner of the property.
2.12 In any event, the mother’s interest is well established under
resulting trust and as Kwan JA observed the Judge had erred on the
issue of advancement.
Presumption of resulting trust being a weak presumption?

2.13 Mr Alvin Tsang for the plaintiff argued that the
presumption of resulting trust and the presumption of advancement
are weak presumptions. He referred to the Court of Final Appeal’s
decision of Leung Wing Yi Asther v Kwok Yu Wah (2015) 18
HKCFAR 605 where Stock NPJ at [53] described these two
presumptions as arising as a matter of default where there is no
sufficient evidence to displace them. While Mr Tsang referred to
authorities where the Courts have expressly described the
presumption of advancement as a relatively weak presumption and
can be rebutted on comparatively slight evidence (Pettitt v Pettitt
[1970] AC 777 per Lord Upjohn at 814, Cheung Pui Yuen v
Worldcup Investments Inc (2009) 12 HKCFAR 31 per Litton NPJ
at [10.18], Laskar v Laskar [2008] 1 WLR 2695 per Lord Neuberger
of Abbotsbury at 2700 and Suen Shu Tai v Tam Fung Tai [2014]
4 HKLRD 436 at [10.17]), he was unable to produce any authority
at the hearing in respect of resulting trust. After the hearing, he
referred this Court to Vandervell v Inland Revenue Commissioners
[1967] 2 AC 291 where Lord Upjohn at 312C–F referred to resulting
trust and stated:
… But this is only a presumption and is easily rebutted. All the
relevant facts and circumstances can be considered in order to
ascertain A’s intentions with a view to rebutting this presumption.
2.14 This passage was referred to with approval in Hotung v
Ho Yuen Ki [2005] 4 HKLRD 558 at [134].
2.15 I just wish to point out that as resulting trust operates in
the absence of evidence of intention of the parties, it is not helpful
to use adjectives like “weak” to describe it. In ascertaining the
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327 2017/9/24—21:56
beneficial ownership of a party who provided the purchase price of

a property acquired in another person’s name, the issue of financial
contribution is clearly a most weighty consideration. Resulting trust
is still being relied upon to establish beneficial interest in authorities
such as the minority judgment of Lord Neuberger in Stack v
Dowden [2007] 2 AC 432 and adopted by the Singapore Court of
Appeal in Chan Yuen Lan.
Kwan JA
3. This is an appeal of the 2nd defendant, Madam Wong Ho
(Madam Wong), against the judgment of Anthony Chan J handed
down on 9 December 2016. The 1st defendant, Yeung Chun Pang
Barry (Yeung) is her son. He and his late father, Yeung Sheh Luk
(SL) have been the registered owners of a property in Richland
Gardens, No 80 Wang Kwong Road, Kowloon (the Property),
holding the same as joint tenants. He has become the sole owner
by operation of law on SL’s death in 2012. The Property is subject
to a charging order absolute to secure a judgment debt owed by
him to the predecessor of the plaintiff.
4. The plaintiff, Primecredit Ltd, applied to the Court in
September 2015 to enforce the charging order against Yeung by an
order of sale to discharge the outstanding balance of the judgment
debt. Madam Wong claimed to be a beneficial owner of the Property
and was joined as a party to the proceedings. She relied on common
intention constructive trust and resulting trust to establish her
interest. The Judge found after trial she is not a beneficial owner
and made a declaration that Yeung is the sole beneficial owner of
the Property. He ordered the sale of the Property within 90 days
and made consequential directions. Hence, this appeal was brought
by Madam Wong.
Background
5. The relevant background matters, taken largely from the
judgment below and other non-controversial facts, may be stated
as follows.
6. Yeung is the only son and youngest child of SL and Madam
Wong. He has four elder sisters. SL and Madam Wong were married
in 1953. Their five children were born between 1956 and 1963.
7. Like many others in Hong Kong, SL and Madam Wong
worked hard and tried to save as much as they could to buy a
property to live in. At the material time, SL was a technician
working in a dockyard. Madam Wong was a casual worker in a
canteen earning a very modest income. In 1978, a property in Che
Wah Building, No 8 Po Ying Lane, Kowloon (the Che Wah
Property) was purchased at $110,300 without the assistance of a
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327 2017/9/24—21:56
[2017] 4 HKLRD 327 Kwan JA 337
mortgage. It was registered in the sole name of Madam Wong. The

family moved into the Che Wah Property.
8. As the children grew up, they needed a bigger home in the
mid-1980s. With their limited financial resources, SL and Madam
Wong decided to apply to purchase a property under the
government sponsored Home Ownership Scheme (HOS). At that
time, SL and Madam Wong were in their fifties; Yeung was aged
21. He was still studying and had a part-time job at a convenience
store earning a small income. He was not financially independent.
9. An application was made in the name of SL and Yeung and
it was successful. The Property was purchased in the joint names
of SL and Yeung at $320,200. A down payment of $270,000 was
made and the balance was funded by a mortgage.2 The sale and
purchase agreement was signed in February 1985 and the assignment
in June 1985. As the Che Wah Property was in the course of being
sold, they needed a bridging loan. The Judge found Madam Wong’s
evidence of how a loan of $200,000 was obtained difficult to believe,
but thought that a bridging loan was required and it is not critical
where it came from.3
10. In November 1985, the Che Wah Property was sold at
$240,000. The proceeds were applied to pay off the loan. As for
the mortgage loan of $50,200, this was repaid by monthly instalments
by the joint efforts of SL and Madam Wong and it was discharged
in March 1988.
11. SL and Madam Wong moved into the Property with their
three unmarried children. It remained their matrimonial home until
SL passed away in 2012. A year after moving in, the third daughter
got married and moved out, followed by the fourth daughter two
to three years later.
12. In 1989, Yeung went to the United Kingdom to study
quantity surveying, supported financially in part by his parents. He
returned to Hong Kong in 1993 on completion of his studies and
lived with the family. In 1995, he purchased a property in Cartwright
Garden, Bonham Road, Hong Kong (the Cartwright Property) with
his girlfriend, with a mortgage loan from the plaintiff ’s predecessor,
GE Capital (Hong Kong) Ltd (GE Capital). They got married in
1997 and he moved out of the Property.
13. Yeung and his wife failed to keep up with the mortgage
instalments in 2000 and voluntarily surrendered possession of the
Cartwright Property for GE Capital to exercise its power of sale.
There was a deficit of $1,703,704.12 after deducting the proceeds
of sale from their indebtedness. GE Capital then brought proceedings
against Yeung in HCA 3549/2003 and obtained a default judgment
in October 2003. In December 2003, GE Capital obtained a charging
2
Judgment, [10]; Madam Wong’s evidence here was not challenged.
3
Judgment, [17].
132
327 2017/9/24—21:56
order absolute against the Property, at that time held in the joint
names of SL and Yeung. Yeung did not oppose the application for
charging order absolute. It was recited in the order that he was
absent. It is not clear on the available evidence whether the Court
had made directions under O.50 r.2(2), on making the charging
order nisi in respect of the Property which was held in joint names,
for the service of copies of the order to show cause and the
supporting affidavit on SL, who was clearly an interested person
mentioned in that provision.
14. The business of GE Capital was transferred to the plaintiff
when the former was wound up by members’ voluntary liquidation.
In 2013, the plaintiff obtained a court order that it be made a party
to HCA 3549/2003 in substitution for GE Capital.
15. GE Capital and the plaintiff did not enforce the charging
order while SL was alive as it would not be possible to obtain an
order for sale. Nor did Yeung, whose wife is a solicitor (and is
jointly liable for the mortgage debt), apply at any time to set aside
the charging order absolute under O.50 r.7(1). From December
2003 to August 2015, Yeung made regular payments of $3,000 a
month to settle in part his indebtedness. He paid a total sum of
$416,000.
16. The plaintiff later became aware of SL’s death in 2012 and
issued an originating summons in September 2015 in the present
proceedings against Yeung seeking vacant possession of the Property
and an order for sale. As in September 2015, the total indebtedness
to the plaintiff amounted to $3,056,641.87. The market value and
the value for sale under repossession of the Property under the
Secondary Market Scheme of the Housing Authority have been
estimated at $4.3 million and $3.44 million respectively. In
December 2015, a Master granted leave to Madam Wong to join
in the proceedings as the 2nd defendant.
17. As it is the claim of Madam Wong that the beneficial
ownership of the Property is different from the legal ownership, the
burden of proof is on her to establish this. Both Yeung and Madam
Wong gave evidence before the Judge. She was 82 years old at the
time and has some hearing problem. The Judge made no mention
that her evidence was affected in any or any significant way on
account of her old age.
Common intention constructive trust

18. The Judge first considered the evidence of Yeung and
Madam Wong to see if there had been any agreement, arrangement
or understanding reached between the parties that Madam Wong
was to have a beneficial interest in the Property. “The finding of
an agreement or arrangement to share in this sense can only … be
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327 2017/9/24—21:56
[2017] 4 HKLRD 327 Kwan JA 339
based on evidence of express discussions between the partners,

however imperfectly remembered and however imprecise their terms
may have been.” (Lloyds Bank Plc v Rosset [1991] 1 AC 107,
132F–G, per Lord Bridge of Harwich)
19. According to Yeung, he knew little about the acquisition
of the Property. He said his father told him that his name would be
borrowed for that purchase. He did not contribute to the purchase
in any way and regarded the Property as belonging to his parents.
He put it this way in his own words: “I guess that [SL] did this for
the traditional reason that he thought that real properties of the
family should be passed on to male descendants (ie myself) upon
his and my mother’s deaths.”4
20. The Judge found there is “little relevant evidence from
Yeung in respect of the issue to be resolved in this case”. In any
event, he was of the view that Yeung “is clearly a witness not to
be relied upon”.5 He rejected Yeung’s evidence there was an oral
agreement with the judgment creditor that no further action would
be taken against him if he paid $3,000 a month to repay his debt.
He found Yeung’s explanation that he used the Property as merely
his correspondence address unconvincing and thought it “quite
possible that Yeung is residing at the Property”.6 And the Judge
found the fact that Yeung did not defend the application for the
charging order absolute “speaks volumes”. He took into account
Yeung is a “sophisticated person” married to a solicitor and reasoned
that “there can be little doubt if the application was unfounded
because the Property did not belong to Yeung, he would have told
his parents to oppose it. His father was available to give evidence
then.”7
21. The Judge stated “there is no evidence of the intention of
SL or Yeung at the time of the acquisition of the Property”.8
22. Madam Wong filed three affirmations. As noted by the
Judge,9 the allegation of “common intention” only surfaced in her
third affirmation. In her two earlier affirmations, she appeared to
be advancing a case on resulting trust based on her financial
contribution to the purchase of the Property.10 She said this about
common intention in her third affirmation:11
Being the sole registered owner of the Che Wah Property, I was
not eligible to be an applicant under the said Home Ownership
4
Affirmation of Yeung filed on 18 January 2016, para.4; see also Judgment, [6].
5
Judgment, [14].
6
Judgment, [16].
7
Judgment, [22] and [15].
8
Judgment, [20].
9
Judgment, [20].
10
1st affirmation of Wong Ho made on 27 November 2015, para.2(I); 2nd affirmation of
Wong Ho filed on 17 December 2015, paras.11 and 12.
11
The Judge summarised this in [9] of the Judgment.
134
327 2017/9/24—21:56
Scheme at that time.12 Since [Yeung] is our only son, it was my

and my late husband’s common intention that any real property
belonging to myself and my late husband would eventually passed
[sic] on to [Yeung] as the only male descendant of our family after
both my and my late husband’s deaths. For the purpose of
succession planning and for the purpose of increasing the chance
of success in obtaining a HOS flat, an application was made in the
name of my late husband and [Yeung].13
… according to the understanding of all of us in our family, the
Property belonged to my late husband and myself, at least until
both of us have passed away.14
… the common intention among the family is that my late husband
and I were the beneficial owners of the Property. It is well
understood among all the family members including [Yeung].
[Yeung] has no beneficial interest in the Property at all before both
my late husband and I had passed away.15
23. The Judge found that even in the third affirmation, the
allegation of common intention is “nebulous”.16 On balance, he was
not satisfied there was any common intention at all.17
24. Mr Anthony Cheung, who appeared with Mr Marco Tse
for Madam Wong here and below, sought to challenge this finding
of fact of the Judge. This is a finding of primary fact, not even a
finding of fact based on a process of inference. What is more, it is
a finding based on the credibility and demeanour of the witnesses.
It is well established that in this kind of situation the appeal court
can only interfere if it is satisfied that the finding is plainly wrong.
25. Mr Cheung referred us to the oral evidence of Yeung18 and
Madam Wong19 on their explanation why Yeung’s name was used
in addition to SL’s in applying to purchase a flat under the HOS.
The Judge did not seem to mention specifically their oral evidence
in this respect in the judgment, but the mere fact he did not do so
should not lead to the conclusion that he had not taken this into
account, bearing in mind that he had just heard the evidence in the
12
There is detailed description of the procedure and requirements for application by
White Form and Green Form in the HOS in the judgments of Chan PJ and Lord
Hoffmann NPJ in Cheuk Shu Yin v Yip So Wan (2012) 15 HKCFAR 344 in [4] and
[20]. The eligibility of Madam Wong to apply under the HOS, the effect of an
application made in joint names and the basis on which a larger or smaller flat would
be allocated were not matters explored at the trial. The Judge proceeded on the basis
as claimed by Madam Wong, that she was not eligible to apply under the HOS and
the joint application in the names of SL and Yeung was submitted to increase the
chance of success.
13
At [7].
14
At [16].
15
At [21].
16
Judgment, [20].
17
Judgment, [21].
18
Transcript, p.14T–15A; p.26P–27L.
19
Transcript, p.41J–42B; p.42S–43A.
135
327 2017/9/24—21:56
[2017] 4 HKLRD 327 Kwan JA 341
two-day trial and the judgment was handed down in a little over a
week. More importantly, the oral evidence did not add significantly
to the narrative of the evidence set out in the judgment.
26. The repetition of the evidence given by Yeung and Madam
Wong does not begin to show any palpable error of the Judge to
warrant intervention in his finding of fact. The Judge is entitled to
take the view he did that the evidence on an arrangement or
understanding reached among the three parties regarding common
intention is so nebulous and vague that he cannot be satisfied on
balance there was such common intention.
27. Mr Cheung criticised the Judge for not going through the
two-limb analysis for common intention constructive trust, the first
being an agreement, arrangement or understanding reached between
the parties of the common intention that the property is to be shared
with the claimant beneficially, and the second being the conduct of
the parties as the basis from which to infer objectively a common
intention to share the property beneficially. In the latter 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”. (Lloyds Bank Plc v Rosset at 133A–B) He
contended that the Judge had only applied the first limb and not
the second.
28. I do not think there is substance in this criticism. The
Judge’s thinking process may be described as follows. First, he took
note of Madam Wong’s monetary contribution to the acquisition
of the Property and said this in [18] of the judgment:
Although the Che Wah Property was in Wong’s sole name, given
her modest income, more likely than not it was acquired with the
joint effort of her and her husband. However, on any view, Wong
had contributed to the acquisition of the Property. This is the
strongest point in her case.
29. In [19], he made reference to the proposition in Luo Xing
Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 at [38] and
[39] in these terms:
To constitute a common intention constructive trust, it is essential
for there to be a common intention on the part of the owner(s)
and the claimant regarding their shared beneficial interest in the
property …
30. I do not think the Judge has cited the above proposition
out of context, as submitted by Mr Cheung. The similarity between
Luo Xing Juan and the present case is that both involved three
parties. Having considered the evidence, and having come to the
conclusion in [21] that on balance he could not be satisfied there
136
327 2017/9/24—21:56
was any common intention on the part of the property owners (SL
and Yeung) and the claimant (Madam Wong), the Judge reached
the view in [23] that this case depends on whether Madam Wong
can make out her claim based on resulting trust, the principle being
that where a person purchases property with his money but in the
name of another, in the absence of contrary evidence, there is a
presumption that the property is held by the owner under a resulting
trust in favour of the person who paid for the property.
31. I could detect no error of law in this approach. The Judge
had first approached the matter to see if a common intention
constructive trust could be inferred, but found on the evidence a
common intention of the owners and the claimant as to the basis
on which the beneficial interests would be held could not be
deduced. It was in those circumstances that he considered a resulting
trust. I have had the benefit of reading in draft the judgments of
Lam V-P and Cheung JA. I respectfully differ from them in that I
do not think the Judge was clearly wrong in holding on the evidence
that a common intention could not be inferred. And, it is on the
question whether there is contrary evidence (as the Judge later
found) to rebut the presumption of resulting trust in favour of
Madam Wong that I have difficulty with the judgment below.
Resulting trust
32. In [24], the Judge mentioned the presumption of
advancement as a counter-presumption to that of resulting trust.
But he did not apply the presumption of advancement, as Mr Alvin
Tsang, who appeared for the plaintiff at the trial and on appeal,
urged him to do, noting in [25] that “it is common ground that the
modern approach is to rely upon the evidence to ascertain the
intention of the person who paid for the property”.
33. There is therefore no need to deal with Mr Cheung’s
contention that the Judge had erred in applying the presumption of
advancement (because the Judge evidently did not) as the law at
the time the Property was purchased in 1985 was that this
presumption did not apply to a mother and dependent child, and
the law in Hong Kong was changed in that respect only in 2008
with the decision of Deputy Judge Anthony To in Lee Tso Fong v
Kwok Wai Sun [2008] 4 HKLRD 270. In any event, it does not
seem to me that this contention can be right. All that was held in
Lee Tso Fong was that the rationale for not applying the
presumption of advancement to a mother and dependent child had
changed over time from the days of Bennet v Bennet (1879) 10 Ch
D 474 on account of changing socio-economic conditions and the
recognition of the obligation of a mother to provide support for a
child. It was not in 2008, but much earlier, that changes in
137
327 2017/9/24—21:56
[2017] 4 HKLRD 327 Kwan JA 343
socio-economic conditions came about thereby removing the

rationale for not applying this presumption (Lee Tso Fong at [14]
and [15]; see also Suen Shu Tai v Tam Fung Tai [2014] 4 HKLRD
436 at [10.15]).
34. I turn to the evidence that the Judge considered sufficient
to rebut the presumption of resulting trust.
35. Whilst the Judge found there was insufficient evidence of
the common intention of the three parties, Madam Wong had given
evidence as to her intention at the time of acquisition. She asserted
that she was only in her fifties at the time, that Yeung was not
meant to be a true owner of the Property when he became a
registered owner, and that the Property would be left to Yeung
only when SL and she had passed away.20
36. The Judge however was “not inclined to accept her bare
assertion when she faces the prospects of losing her home”.21 He
found that apart from her bare assertion, there was nothing to
counterbalance these aspects of the evidence that he had considered:22
(1) Madam Wong intended to give the Property to Yeung her

only son. This is underlined by: (a) the fact that the name of
one of her two unmarried daughters could have been used to
answer the need to have an extra person named as purchaser;
and (b) she made no attempt to have herself named as an
owner of the Property after the Che Wah Property was sold.23
(2) From Madam Wong’s point of view, there was no risk in
giving the Property to her son during her lifetime because it
would be held jointly with her husband.24
(3) The plaintiff ’s application for a charging order absolute was
not defended.25
(4) The evidence of both Yeung and Madam Wong was that SL
had told his son to allow his mother to continue to reside at
the Property after he passed away.26
37. As the Judge was of the view “there is nothing to

counterbalance the above evidence” apart from Madam Wong’s
bare assertion of her intention at the time of acquisition, the Judge
concluded that he “cannot be satisfied that Wong has discharged
her burden of proof that her intention was that her son would hold
20
Transcript, p.49F–G; p.56C–J; see also Judgment, [20].
21
Judgment, [26].
22
Judgment, [29].
23
Judgment, [26].
24
Judgment, [27].
25
Judgment, [27].
26
Judgment, [28].
138
327 2017/9/24—21:56
the Property (or any part thereof) for her benefit” and “more likely
than not, the purchase was a gift from her to her son”.27
38. The above is a finding of secondary fact based on inference
drawn from findings of primary fact. But the finding of fact thus
arrived at was not based purely on inferences, or otherwise has
nothing to do with the witnesses’ demeanour or the trial judge’s
having received the evidence at first hand. So in this situation the
appeal court would adopt the same approach as regards a finding
of primary fact. In other words, it should only disturb such finding
of fact if satisfied that the same is “plainly wrong”. (Pang Ketian
Sally v Tam Yuk Hung Annie (unrep., CACV 147/2013, [2014]
HKEC 689, 25 April 2014) at [26]–[32].
39. I also bear in mind the well-known statements of Lord
Hoffmann in Piglowska v Piglowski [1999] 1 WLR 1360, 1372D–H
on the evaluation of facts by a trial judge as an inherently incomplete
statement of the impression upon him by the primary evidence, that
his expressed findings are surrounded by a penumbra of imprecision
as to emphasis, relative weight, minor qualification and nuance, of
which time and language do not permit exact expression but which
may play an important part in his overall evaluation.
40. Last but not least, what weight should be given to a
particular piece of evidence is a matter for the trial judge.
41. With the above guiding principles, I examine the evidence
regarded by the Judge as sufficient to counterbalance Madam Wong’s
evidence of her intention.
42. The Judge attached importance to Madam Wong’s evidence
that “she intended to give the Property to her only son”. But she
had adamantly denied it was meant to be an outright gift and had
throughout qualified that by saying that the Property would be left
to her son only when she and SL had passed away. The fact that
the name of one of her unmarried daughters could have been used
but was not, and that she made no attempt to have herself named
as an owner after the Che Wah Property was sold cannot be
regarded as inconsistent with an intention that the Property would
eventually be given to her son upon SL’s death and her own. The
Judge would appear to have misdirected himself as to the effect of
certain evidence which he understood to support his conclusion
(Ting Kwok Keung v Tam Dick Yuen (2002) 5 HKCFAR 336 at
[45]).
43. The fact that there was no risk from Madam Wong’s point
of view in putting the Property under Yeung’s name during her
lifetime as Yeung would be a co-owner with SL is likewise a neutral
factor. It is equally consistent with an intention to leave the Property
to Yeung only on the parents’ demise.
27
Judgment, [29].
139
327 2017/9/24—21:56
[2017] 4 HKLRD 327 Kwan JA 345
44. As for the fact that the plaintiff ’s application for a charging
order absolute was not defended, Madam Wong gave evidence she
only knew about the order at the end of 2015.28 This was supported
by Yeung’s evidence.29 The Judge had made no finding as to her
state of knowledge. It would not be right to draw an adverse
inference against her premised on her choice not to defend the
application when there was no finding she had known of the order
long before the plaintiff sought to enforce it in September 2015.
45. As for the evidence that SL had told Yeung to allow Madam
Wong to continue to reside in the Property after SL passed away,
the Judge took the view this would militate against the proposition
that Madam Wong is a beneficial owner. But there could well be
other cogent reasons why SL should find it necessary to enjoin or
exhort his son before his death to allow Madam Wong to continue
to live in the Property. It was not explored in evidence with Yeung
or Madam Wong.
46. The Judge did not mention the inherent probabilities in his
evaluation of the facts when he considered whether there was
sufficient evidence to rebut the presumption of resulting trust in
Madam Wong’s favour. We are here concerned with a couple in
their fifties with limited financial resources, who had spent a
substantial part of their resources on the purchase of a property as
their matrimonial home. At the age of 51, Madam Wong could
reasonably look forward to a number of years ahead. Their son was
then aged only 21, had not completed his studies and had not got
married. Even allowing for the Chinese traditional thinking of
leaving real property to the male descendant, this would likely
happen on the demise of the parents, it would not be so likely for
an immediate gift to be made to the son in these circumstances.
Similar doubts were raised by Nourse LJ in McGrath v Wallis [1995]
2 FLR 114, 121H — there was no real reason for the parent’s
wishing to divest himself of his interest in the property and no special
reason for the parent’s wishing to benefit the child at that time.
47. When Madam Wong’s evidence of her intention is
considered against the context of inherent probabilities, there is
really nothing so inherently incredible about her assertion.
48. The Judge has misdirected himself on the evidence and did
not appear to have considered the inherent probabilities in his
evaluation of the facts. Even though this Court does not enjoy the
advantages of the Judge who received the evidence at first-hand, I
am nevertheless satisfied he is plainly wrong in his conclusion on
the facts that there was sufficient evidence to rebut the presumption
of a resulting trust in favour of Madam Wong.
28
Judgment, [11]; transcript, p.42B–43E.
29
Transcript, p.17O–R, p.18A–19D.
140
327 2017/9/24—21:56
49. I would allow the appeal of Madam Wong, set aside the
declaration that Yeung is the sole equitable and beneficial owner
of the Property, the order for delivery up of vacant possession, the
order for sale of the Property, and the consequential directions.
50. I would also set aside the costs order below and make an
order that the plaintiff is to pay the costs of Yeung and Madam
Wong of the action.
51. Costs of the appeal should follow the event. There would
be an order nisi that the plaintiff is to pay Madam Wong’s costs of
the appeal. I am not minded to give a certificate for two counsel
for the appeal.
52. No relief has been sought by Madam Wong in the Court
below or on appeal regarding any declaration in her favour30 or the
setting aside of the charging order absolute. I think it would be best
for her to pursue such remedy as she may be advised in other
proceedings.
Reported by Neerav Srivastava
30
There was suggestion by Mr Cheung that the Property belongs entirely to Madam Wong
after SL passed away but that point was not pressed in the course of the trial, see Judgment,
[8].
141
327 2017/9/24—21:56
318 HONG KONG COURT OF FINAL APPEAL REPORTS (1997–98) 1 HKCFAR
Sky Heart Ltd A

and
Lee Hysan Co Ltd
B
Litton, Ching and Bokhary PJJ, Nazareth and Lord Hoffman NPJJ
Final Appeal No 9 of 1998 (Civil)
1, 2 and 14 December 1998
Land law — restrictive covenants — enforcement in equity — passing of benefit C

— building scheme — essential requirements test — inference of common
intention not excluded simply because vendor had other land which would be
benefited by scheme — equitable relief — party seeking enforcement allowed
to have purpose other than protecting property
D
Land law — covenants — enforcement — construction of s.41(2)(c), (3) —
application to building schemes — Conveyancing and Property Ordinance
(Cap.219) s.41(2)(c), (3)
Civil procedure — Court of Final Appeal — practice of Court with regards to
disturbing concurrent findings of fact by lower courts E
[Conveyancing and Property Ordinance (Cap.219) s.41]
R was once the owner of a plot of land divided into sections and sub-sections.
R agreed (the agreement) to sell a section (Section Q) to X. The agreement
contained, inter alia, a covenant to erect, keep and maintain domestic buildings F
of certain specifications and a covenant that X would not erect any building
other than as provided (the restrictive covenants). X then acting as a confirmor
sub-sold all the sub-sections. The assignments of the sub-sections, which were
in identical terms and made by reference to a common plan, incorporated, inter
alia, the restrictive covenants. A subsequently acquired two of the sub-sections G
and planned to demolish the dwelling houses on it and build a multi-storey
commercial building. At trial, R sought an injunction to restrain A from acting
in breach of the restrictive covenants on the basis that there was a building
scheme in Section Q and that it could enforce the covenants under s.41 of the
Conveyancing and Property Ordinance (Cap.219). Section 41(2) provided that H
it applied to any covenant “ … (c) which is expressed and intended to benefit
the land of the covenantee.” Section 41(3) provided that such a covenant was
enforceable against, inter alia, “the covenantor and his successors in title” by,
inter alia, the “covenantee and his successors in title.” The Judge found (see
[1997] 1 HKC 313) that there was a building scheme and R, as the owner of a I
subsequently acquired flat in Section Q, could enforce the restrictive covenants
in equity. She further found that s.41 applied to the covenants, specifically that
the requirements of s.41(2)(c) had been met and that under s.41(3), R an original
covenantee who no longer held an interest in the land could enforce the
covenants. The Judge granted R an injunction. The Court of Appeal in J
142
R24_[1999]1_0100 318 7/11/08, 6:21 PM

Sky Heart Ltd v Lee Hysan Co Ltd
(1997–98) 1 HKCFAR Sky Heart LtdLitton
v LeePJHysan Co Ltd 319
A dismissing A’s appeal upheld the Judge’s finding that there was a building
scheme, but disagreed that s.41(3) conferred a right on the original covenantee
to enforce the covenants after it had parted with the land to be benefited and
exercised its discretion to award an injunction. A appealed arguing that the
concurrent findings by the courts below that there was a building scheme was
B incorrect, specifically the finding of fact that there was a common intention
was incorrect as, inter alia, the restrictions in the covenants were imposed solely
to protect the value of the other sections in the plot owned by R and were not
for the benefit of the sub-purchasers inter se. In determining this the Court
looked into what its practice should be with regards to disturbing concurrent
C findings of fact. Secondly A argued it was inequitable to grant an injunction as
R’s purpose in seeking enforcement was not to protect the flat but to preserve
the building scheme. Finally the Court looked into the construction of s.41(2)(c),
(3) and their application to a building scheme.
D Held, dismissing the appeal, that:

Interference with concurrent findings of fact
(1) (Per Bokhary PJ) As a matter of general practice the Court of Final Appeal
would not disturb concurrent findings of fact by the courts below. This
approach was the same as that of the Privy Council save that an appellant
E would never face the additional obstacle of appearing before a final appellate
court less familiar with local conditions than the courts below. The practice
was not obviated by a member of the Court of Appeal dissenting or by
differences in the reasons which brought the judges to the same finding of
fact. In order to obviate the practice there had to be some miscarriage of
F justice or violation of some principle of law or procedure. A miscarriage of
justice meant such a departure from the rules which permeated judicial
procedure as to make that which happened not in the proper sense judicial
procedure. The violation of some principle of law or procedure had to be
such an erroneous proposition of law that if that proposition was corrected
G the finding could not stand. Alternately it might be the neglect of some
principle of law or procedure, whose application would have had the same
effect. The question whether there was evidence on which the courts could
arrive at their finding was such a question of law. Also, the question of
admissibility of evidence was a proposition of law, but it had to be one such
H as to affect materially the finding. Further the practice was not cast-iron and
there might occur cases of such an unusual nature as would constrain the
Court to depart from the practice (Umrao Begam v Irshad Husain (1894)
LR 21 IA 163, Moung Tha Hnyeen v Moung Pan Nyo (1900) LR 27 IA 166,
Srimati Bibhabati Devi v Kumar Ramendra Narayan Roy [1946] AC 508
I followed, Dart Industries Inc v Decor Corp Pty Ltd (1993-94) 179 CLR
101, Smith New Court Securities Ltd v Citibank NA [1997] AC 254
considered). (See pp.333A–338A.)
Whether building scheme
(2) (Per Bokhary PJ) The concurrent finding that there was a building
J scheme would not be interfered with. There was nothing exceptional
143
R24_[1999]1_0100 319 7/11/08, 6:21 PM

about the concurrent findings of fact that justified intervention. A

(See p.338B–D.)
(3) (Per Litton PJ) Where the covenants in the deeds of assignment could be
treated as constituting a local law for the area of the scheme then it
followed that there was a community of interest and reciprocity of
obligations as between the assignees and persons deriving title from them; B
the restrictions were for the benefit of all the covenantors, thus giving
rise to the equity in a case such as the present (Brunner v Greenslade
[1971] Ch 993, Spicer v Martin (1888) 14 App Cas 12 considered). (See
pp.328E–329A.)
(4) (Per Litton PJ) Also, the inference of a common intention was not to be C
excluded simply because the vendor had other land in the vicinity which
would be benefited by the scheme. (See pp.329G–330A.)
Whether an injunction should have been granted
(5) (Per Litton PJ) The injunction would not be interfered with. R had not
acted inequitably. Further equity allowed a party seeking to enforce a D
restrictive covenant to have an ulterior purpose other than protecting their
property. The “wishes” of the party seeking to enforce the covenant were
not relevant (Chambers v Randall [1923] 1 Ch 149 considered). (See
pp.331A–332J.)
Construction of s.41 E
(6) (Per Lord Hoffman NPJ) Section 41 must have been intended to apply to
building schemes. The Judge’s answer to the question of whether the
covenants were “expressed” to be for the benefit of the rest of Section Q
was right [Editor’s note: The Judge discussed the “expressed” requirement
at [1997] 1 HKC 313 at pp.338A–339C]. (See p.340G–H.) F
(7) (Per Lord Hoffman NPJ) The requirement in s.41(2)(c) that the “land
to be benefited be that of the covenantee or his successors in title”
was met in the case of a building scheme. In cases such as building
schemes, in which the general law permitted the benefit to be taken
for land which had already been assigned, “successors in title” of the G
common vendor must be read to include persons who had already
succeeded to his title in respect of other parts of the scheme. (See
p.340H–I.)
(8) (Per Lord Hoffman NPJ) However, a “covenantee” in s.41(3) meant a
covenantee who still had an interest in the land for the benefit of which H
the covenant was taken. A restrictive covenant was by nature a right
appurtenant to a dominant tenement; there was no other form in which it
could exist as a proprietary interest of which the burden ran with the
servient tenement (London and South Western Rly v Gomm (1882) 20 Ch
562, London County Council v Allen [1914] 3 KB 642 considered). (See I
pp.340I–342A.)
(9) (Per Lord Hoffman NPJ) Therefore although the requirements of s.41(2)(c)
had been met, R had not satisfied the requirements of s.41(3). (See
pp.340I–342B.)
J
144
R24_[1999]1_0100 320 7/11/08, 6:21 PM

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146
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A !" !"#$%&'()#*$+,-./012! içåÇçå=~åÇ

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B
Sir John Swaine SC and Mr JJE Swaine, instructed by MK Kwan & Co, for the
appellant.
Mr Denis Chang SC, Mr Edward Chan SC and Mr Wong Yan Lung, instructed
by Johnson Stokes & Master, for the respondent.
C
Legislation mentioned in the judgment:
Conveyancing and Property Ordinance (Cap.219) s.41
Hong Kong Court of Final Appeal Ordinance (Cap.484) s.22(1)(a)
Law of Property (Enforcement of Covenants) Ordinance 1956
D
Cases cited in the judgment:
Bank of England v Vagliano Brothers [1891] AC 107
Brunner v Greenslade [1971] Ch 993
Chambers v Randall [1923] 1 Ch 149
E Dart Industries Inc v Decor Corp Pty Ltd (1993–94) 179 CLR 101
De Mattos v Gibson (1858) 4 De G & J 276
Elliston v Reacher [1908] 2 Ch 374
London and South Western Rly v Gomm (1882) 20 Ch 562
London County Council v Allen [1914] 3 KB 642
F Montgomerie & Co v Wallace-James [1904] AC 73
Moung Tha Hnyeen v Moung Pan Nyo (1900) LR 27 IA 166
Smith New Court Securities Ltd v Citibank NA [1997] AC 254
Spicer v Martin (1888) 14 App Cas 12
Srimati Bibhabati Devi v Kumar Ramendra Narayan Roy [1946] AC 508
G Tulk v Moxhay (1848) 2 Ph 774
Umrao Begam v Irshad Husain (1894) LR 21 IA 163
Other materials mentioned in the judgment:

Halsbury’s Laws of England, Vol.10, (4th ed.) para.741 at p.338
H David O’Brien, “Special Leave to Appeal”, The Law and Practice of
Applications for Special Leave to Appeal to the High Court of Australia
(1996) p.74
Peter Willoughby “The Enforcement of Obligations relating to Control and
Management of High-Rise Buildings” (1977) 7 HKLJ 81
I
Litton PJ:
Introduction
This appeal concerns the effect of covenants contained in an assignment
J of properties in Causeway Bay now owned by the appellant (defendant).
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R24_[1999]1_0100 323 7/11/08, 6:21 PM

The assignment is dated 26 April 1954. The properties are Nos 6 and A
8 Kai Chiu Road which form part of a block of 16 houses standing on
Section Q of Inland Lot No 29. Section Q was carved out of Inland Lot 29,
a very large piece of land, which the respondent (plaintiff) had owned in
its entirety at one time. Nos 6 and 8 Kai Chiu Road stand on sub-section 8
of Section Q. B
The history giving rise to this appeal is as follows. In December 1953 the
plaintiff entered into an agreement with one Pang Sang to sell to Pang Sang
land “intended to be registered in the Land Office as Section Q of Inland Lot
No 29”. The agreement provided for covenants to “keep and maintain …
European style dwelling houses of a uniform design to be completed within C
eighteen months … of cement concrete with steel windows teak-wood flooring
and servants stairs besides the main stairs … and to keep the minimum frontage
of each house not less than twenty-three feet facing Kai Chiu Road and Pak
Sha Road respectively but such houses to be without balconies or verandah …
with the general specifications and in conformity with the levels to be supplied D
by [the plaintiff], the plans of such dwelling houses to be first submitted to
and approved by [the plaintiff] whose approval shall not be unreasonably
withheld.” The agreement allowed the use of the ground floor of the houses
for business purposes, but certain business were expressly excluded, as were
“offensive noisome and noxious trades cabarets studios or any other similar E
purposes”. The agreement required Pang Sang and his assignees to permit the
plaintiff “or owner or owners of the adjoining premises to make connections
to the drains on either side of the adjoining premises”. Pang Sang further agreed
to prepare footpaths abutting the four sides of Section Q and to meet the cost
of forming and surfacing half the width of the roads called Kai Chiu Road, F
Pak Sha Road, Yun Ping Road and Lee Garden Road abutting Section Q as
shown on the plan attached to the agreement and to maintain the same to the
satisfaction of the Public Works Department and Urban Council. The plaintiff
agreed to grant a right of way over Kai Chiu Road and Pak Sha Road (then
forming part of Inland Lot 29) until such roads were surrendered to the G
government.
Pang Sang sub-sold all of Section Q and thereafter acted as “confirmor” in
the subsequent assignments: There were eleven assignments for the various
sub-divisions of Section Q: ten were executed on 26 April 1954, the remaining
one on 13 May 1954. H
Nothing turns on the precise terms of the covenants in the assignments.
They are in identical terms. As noted by the trial Judge (Mrs Justice Le Pichon)
they have the common features:
• All recited the registration of Section Q at the Land Office and the I
Pang Sang Agreement.
• Pang Sang was a party as confirmor and in cases where there had
been more than one sub-sale as first confirmor.
• All were made by reference to a common plan prepared by an architect
Wong Cho Tong showing Section Q and its various sub-sections (with J
148
R24_[1999]1_0100 324 7/11/08, 6:21 PM

(1997–98) 1 HKCFAR Litton PJ 325
A dimensions) including a system of interlocking staircases between the

houses to be erected. Sixteen houses were to be built.
• All were with the benefit of rights of way:
(a) over Kai Chiu Road and Pak Sha Road which were still vested in
B the vendor;
(b) over such parts of the scavenging lane (which bisected Section Q)
as did not form part of the premises assigned;
(c) over the common staircases shared with the adjoining building.
C • All assignments were subject to the rights of way in paras.(b) and (c)
above.
• All contained identical covenants by the purchasers in favour of the
vendor “with intent to bind all persons in whom the premises thereby
assigned should for the time being be vested” but not so as to be
D personally liable after parting with the premises assigned.
• The covenants are identical to those in the Pang Sang Agreement
save that in relation to the sub-section assigned, the number of houses
to be erected is specified: for the larger sub-sections namely, subs-s.6,
8, 9, 10 and RP of Section Q, two houses rather than one were to be
E built and the words “with the adjoining buildings” were added to the
requirement that the houses be of a uniform design (which was in the
Pang Sang Agreement).
In about May 1992 the plaintiff came to know of the defendant’s purchase of
F No 8 Kai Chiu Road so it wrote and reminded the defendant of the restrictive
covenants. The plaintiff was told that the defendant’s purpose in acquiring No 8
was to use it as a restaurant and dormitory for the staff and the defendant had
no intention of redeveloping No 8.
In August 1992 the defendant acquired the ground and first floors of No 6
G Kai Chiu Road and the remaining three floors of No 6 thereafter. In May 1994
the defendant’s solicitors wrote to the plaintiff to say that it intended to redevelop
Nos 6 and 8. In response to the plaintiff’s request for confirmation that the
redevelopment would not constitute a breach of the covenants the defendant’s
solicitors, by letter dated 24 January 1995, said:
H
We refer to your letter dated 16 November 1994 upon which we have
obtained leading counsel’s opinion. We would like to inform you of our
client’s position as follows:
I 1. Our client intends to redevelop its property by erecting a multi-storey

commercial building with shops on the ground floors. Our client is in
the course of doing so.
2. Your client has already disposed of the land for the benefit of which
the restrictive covenant was taken. In the circumstances, your client
J can no longer enforce the restrictive covenant.
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3. In any event, no court will enforce the restrictive covenant in the light A
of the complete change in the character of the neighbourhood…
In April 1995 the plaintiff acquired the First floor of No 10 Kai Chiu Road in
order to strengthen its case for enforcing the covenants against the defendant.
B
The proceedings
The plaintiff issued its writ on 15 August 1995 seeking an injunction to restrain
the defendant from acting in breach of the covenants and from interfering with
the plaintiff’s rights of way (as owner of the First floor of No 10 Kai Chiu C
Road) over the defendant’s property and for damages.
Le Pichon J, in a judgment remarkable for its clarity and care, found for the
plaintiff and ordered an injunction to be issued. The effect of the judgment is
as follows:
D
(a) She found as a fact that the covenants affecting each of the sub-
sections of Section Q were intended to be enforceable by the owners
of the respective properties inter se, as the covenants gave effect to
a building scheme devised by the plaintiff for the 16 interlocking
dwelling houses covering the whole of Section Q. The defendant failed E
to establish such change in the neighbourhood since 1954 as to destroy
the object to be attained by those covenants. The plaintiff, as owner
of the First floor of No 10 Kai Chiu Road, was therefore entitled
to the benefit of the covenants, and had the right in equity to enforce
them. F
(b) She also found that the plaintiff, as the original covenantee, was entitled
to enforce the covenants under s.41 of the Conveyancing and Property
Ordinance (Cap.219).
(c) She held that an injunction was the appropriate remedy.
G
The Court of Appeal, by a majority, upheld Le Pichon J’s judgment. The
judges were unanimous in upholding the trial Judge on point (a) as
summarised above, but Godfrey JA dissented on point (c): he concluded
that as the plaintiff had divested itself of all interest in Section Q after the
assignments to the sub-purchasers, and did not claim to be entitled to H
enforce the covenants for the benefit of land outside Section Q, the plaintiff
was not entitled to equitable relief. His reasoning for refusing an injunction
is as follows: The plaintiff sought the intervention of equity, not for the
purpose of protecting the First floor of No 10 which it had acquired recently,
but for an ulterior purpose, since the acquisition of part of No 10 was purely I
for the purpose of litigation; it had no substantial interest in land to be
protected by the grant of an injunction. The other two Justices of Appeal
did not agree.
All three Justices of Appeal questioned the trial Judge’s construction of
s.41 of the Conveyancing and Property Ordinance (Cap.219)(CPO); they did J
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A not think that it went so far as to confer a right on a covenantee to enforce

covenants after the covenantee has parted with the land to be benefitted. This
however was not essential to the outcome of the appeal to the Court of Appeal,
though it meant that as the trial Judge had, in ordering the injunction, based her
exercise of discretion on an erroneous basis, the discretion to grant equitable
B relief had to be exercised afresh.
Appeal to the Court of Final Appeal

In its notice of appeal the appellant contends:
C
(1) The Court of Appeal was wrong to hold that Section Q of Inland Lot 29
constituted in equity a building scheme or scheme of development.
(2) The Court of Appeal was wrong to hold that there was not such a change
in the character of the neighbourhood so that the object of the building
D scheme or scheme of development as aforementioned was at an end.
(3) The Court of Appeal (Godfrey JA dissenting) was wrong to hold that the
Plaintiff was entitled in any event to a permanent injunction.
Before this court, ground (2) was abandoned by the appellant. Rightly so. The
E findings of fact made by the Judge are well supported by the evidence. I need
say no more about that ground.
What it boils down to is this: the appeal must fail unless the appellant is
able to persuade this court to reverse the concurrent findings of the courts below
as set out in ground (1), or succeeds in showing that the exercise of discretion
F by the majority of the Court of Appeal in granting an injunction was wrong in
principle.
Equity versus common law

G The difficulty which arises in this case is this. The deeds of assignment of
the 11 sub-sections of Section Q do not say expressly that the assignee of
each sub-section binds himself to each of the other ten assignees and their
successors-in-title to observe the covenants, nor do they say that each
assignee shall have the benefit of the covenants contained in the other
H ten assignments. If the assignees are to have rights and obligations inter
se with regard to the covenants, transcending the ordinary common law
rules precluding the parties from suing in these circumstances, it must be
because, first of all, there was a common intention that it should be so, and
the circumstances are such that an equity arises which enables the assignees
I to enforce the covenants inter se. How, then, does this equity arise? The
case law establishes that where, as a fact, a common vendor has laid out a
piece of land in plots for the purpose of a general development, and puts
forward a building scheme in relation to that piece of land, then such equity
may arise, because the purchasers of the separate plots have a common
J interest in preserving the integrity of the development.
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The common intention A

The crucial question in this case is therefore this: was there, at the time of the
assignment of the various sub-sections of Section Q to the purchasers, a common
intention that the covenants relating to those sub-divisions should be enforceable
by the purchasers and their successors-in-title inter se? Or, more precisely, in
B
relation to sub-section 8 (Nos 6–8 Kai Chiu Road), did the parties intend that
the covenant to “maintain on the premises … two European-style houses of a
uniform design with the adjoining buildings” be enforceable by the owner of
the adjoining lot, that is sub-section 6, Nos 10–12 Kai Chiu Road and his
successors-in-title? The question can only be answered by an examination of
C
all the underlying circumstances.
The Building Scheme

The Judge discharged her fact-finding role with meticulous care. She noted
D
that there were four sub-sales on the same day that Pang Sang entered into the
agreement to purchase Section Q and that within a period of about two months
all the sub-sections of Section Q had been sold. She noted the time when detailed
building plans for the development were submitted to the Building Authority;
from this and from other circumstances she concluded that there was, from the
E
outset, a building scheme relating to the whole of Section Q. This finding is
unimpeachable and was upheld by the Court of Appeal.
Reciprocity of obligations
F
What, then, follows from this finding? The Judge, at p.28 of her judgment,
said this:
The covenants were designed to achieve uniformity in the design of the

buildings as well as uniformity of user. The user envisaged was primarily
G
residential use with business being allowed on the ground floor subject to
the prohibition of certain businesses and an anti-nuisance covenant. Implicit
in the notion of uniformity in design is the creation of a sense of order to
avoid the possibility of having a collection of incongruous buildings
haphazardly arranged or juxtaposed on the site. Similarly, the user restriction
H
was plainly aimed at ensuring that activities not in keeping with the
development created could not be conducted. These restrictions together
created a local law. Were they calculated to enhance the value of the lots
offered for sale? I think the answer must be in the affirmative. In ascertaining
the intention, one has to view the circumstances as at the time the
I
restrictions were imposed, i.e. the early 1950s. I have little difficulty in
finding that the local law was intended to enhance the value of the lots
offered for sale.
The reference in the passage quoted above to local law is a reference to cases
J
like, for example, Brunner v Greenslade [1971] Ch 993 where at p.1004-D,
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A Megarry J referred to the “concept of a local law for the area of the scheme”.
Where the covenants in the deeds of assignment can be treated as constituting
a local law for the area of scheme (here, Section Q) then it must follow that
there is a community of interest and reciprocity of obligations as between the
assignees and persons deriving title from them; the restrictions are for the benefit
B of all the covenantors, thus giving rise to the equity in a case such as this: see
Spicer v Martin (1888) 14 App Cas 12 at p.25 to the same effect. In these
circumstances the covenants are enforceable as between the covenantors and
their successors-in-title inter se.
C
The appellant’s case
Counsel for the defendant says this: the finding of a general development scheme
relating to Section Q does not provide the whole answer. Section Q was only a
small portion carved out of Inland Lot 29; in devising a development scheme
D for Section Q and selling Section Q to Pang Sang, the plaintiff could not have
intended to relinquish control over Section Q as the original covenantee, leaving
it to the sub-purchasers to decide whether or not to enforce particular covenants
affecting Section Q; such a policy would have led to the depreciation of the
neighbourhood and damage to the nearby properties belonging to the plaintiff.
E Counsel says that the inference to be drawn from all the facts is that the
restrictions in the covenants were imposed solely for the plaintiff’s benefit, to
protect the value of its nearby properties, not for the benefit of the purchasers
inter se. Thus the common intention necessary to give rise to the equity has not
been made out.
F Quite apart from the difficulty inherent in the defendant’s present
position – that of inviting us, as the final appellate court, to make a factual
finding impliedly rejected by the two courts below – there is this further
difficulty: The covenants are not expressed to benefit other land belonging
to the plaintiff: The recital to the assignment merely refers to Section Q of
G Inland Lot No 29 being vested for the residue of the term of years in the
vendor; it refers to no other land of the vendor.
Counsel for the defendant is right to this extent: it would seem, as a matter
of common-sense, that when the plaintiff devised the building scheme for
Section Q in 1953, prior to its sale to Pang Sang, it must have thought that such
H a scheme would enhance the tone of the neighbourhood; it is hardly likely that
the plaintiff intended a scheme which would have the effect of depreciating
the value of nearby properties owned by it. But the inference of common
intention is not excluded simply because the vendor has other land in the vicinity
which would be benefitted by the scheme. This point was specifically dealt
I with by Rogers JA in the Court of Appeal when he said:
There are two matters to which I would refer in particular. The first is
the suggestion that the covenants were taken for the benefit of other
land which [the plaintiff] or its closely associated companies retained in
J the vicinity. Even if that were so, that cannot be determinative. In the
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R24_[1999]1_0100 329 7/11/08, 6:21 PM

case of Elliston v Reacher [1908] 2 Ch 374 at p.384 Parker J specifically A

included in the description of the third criteria for a building scheme that
the requisite intention can exist whether or not the restrictions were
also intended to be and were for the benefit of other land retained by
the vendor.
B
This is plain common-sense.
“Similar fact” evidence

Counsel for the defendant makes this further point: If the court examines how C
the plaintiff dealt with some other sub-divisions of Inland Lot 29 from time to
time, the court would be driven to conclude that the plaintiff’s “policy” has
always been to assert control over development within those subdivisions, by
exacting the payment of premium for relaxing the restrictive covenants: a policy
inconsistent with allowing the covenantors themselves to enforce the covenants D
inter se.
This argument, although slightly dressed up in different language, is not
new. It was at the forefront of the defendant’s case at trial. The Judge examined
some of the instances of relaxation of covenants in detail: in particular the
transactions involving Sections O and K in Inland Lot 29. She concluded that E
the defendant’s reliance on those transactions was misplaced: The plaintiff’s
dealings with Sections O and K could offer no clue as to the plaintiff’s intentions
vis-a-vis Section Q. The Court of Appeal went further. All three Justices of
Appeal concluded that the evidence was a distraction and should not have been
admitted. I agree. F
The transactions, whereby the plaintiff received payment for relaxing
restrictive covenants relating to other parts of Inland Lot 29, first took place, in
respect of Section K, some twenty years after the assignments in question: and
in relation to Section O even later: they could hardly constitute evidence as to
the plaintiff’s intentions back in 1954. I need say no more about this point. G
What, then, is left of the defendant’s case? The core of its case, as put to us
by counsel, is this: The plaintiff imposed the restrictions on the use of Section Q
for its own benefit (in the sense of being able to exact a premium for their
relaxation) and for the benefit of other land in Inland Lot 29, not for the benefit
of the purchasers inter se; therefore, as owner of the First floor of No 10 Kai H
Chiu Road, deriving title from the original purchaser, the plaintiff cannot enforce
the covenants against the defendant. But the defendant’s argument suffers from
this oddity: it has never been the defendant’s contention that the covenants
were expressed to benefit other land owned by the plaintiff: therefore the
common law requirement that the benefit of the covenant must touch and I
concern the land of the covenantee has not, on the defendant’s case, been made
out either. And there is of course no privity of contract between the plaintiff
and the defendant; they are strangers to each other; no claim can arise in common
law. And since, on the defendant’s case, no rights can arise from equity, what
it means is that, on the defendant’s argument, no one can sue to enforce the J
154
R24_[1999]1_0100 330 7/11/08, 6:21 PM

A covenants: neither the plaintiff as the original covenantee nor any of the
covenantors or their successors-in-title; the covenants are dead letters. This is
a startling result.
The remedy of injunction

B
As Rogers JA has noted in his judgment, the plaintiff’s position with regard to
the restrictive covenants affecting Section Q has been consistent throughout: it
considered that those covenants should be maintained and observed. It matters
not how its position is grounded in the law: that is, whether as owner of the
C First floor of No 10 Kai Chiu Road suing in equity, or as the original
convenantee, claiming under s.41 of the Conveyancing and Property Ordinance
(Cap.219), or both. If, as the Court of Appeal has found, it’s claim to relief
against the defendant rests purely upon equitable grounds, and it has no claim
arising from statute, then the question must be asked: Has the plaintiff acted in
D such a way vis-a-vis the defendant as to make it inequitable for an injunction to
be granted in the plaintiff’s favour? It has not been suggested that the well-
known bars to equitable relief – laches, acquiescence, waiver, misrepresentation
– are remotely relevant in the present case. As put succinctly by Mortimer V-P
in the Court of Appeal:
E
As is clear from the pleadings, the plaintiff’s approach and stance has been
consistent. It intended to enforce the covenant as the original covenantee
but, because of uncertainty as to the meaning of s.41, was advised that it
should strengthen its case by the purchase of Flat 10. This it did. Its motive
F remained to enforce the covenant and maintain the building scheme.
It seems to me that prima facie as owner of Flat 10 within the building
scheme, it has a legitimate interest in preserving the scheme even if originally
the legal basis for its claim was wrong. I agree with the Judge that there is
nothing here to impugn the plaintiff’s bona fides. Nor can it be seriously
G argued that its conduct in purchasing the flat was motivated by the prospect
of financial gain or a desire to injure the defendants or some other
inequitable intention. As owner of No 10 it has a right to protect by the
maintenance of the scheme.
As the building scheme is still in existence and is neither obsolete nor
H futile, the only way in which the plaintiff can maintain the building scheme
and be granted a meaningful remedy as owner of No 10 is by way of
injunction.
And, as Rogers JA observed:

I
If the Court were to refuse an injunction the practical effect would be to
destroy the building scheme. Not only would the present plaintiff be
deprived of the benefit of an injunction but all other owners of houses
and flats in Section Q would be put in a position where they would not
J benefit from the action brought by the plaintiff. After the defendant’s
155
R24_[1999]1_0100 331 7/11/08, 6:21 PM

proposed redevelopment has taken place it would be almost certainly A

impossible to say that the building scheme remained intact.
Godfrey JA based his dissent upon this reasoning: that the plaintiff sought the
intervention of equity not for the purpose of protecting its property (the First
floor of No 10) but for “an ulterior purpose”: its desire to preserve the building B
scheme. At p.7 of his judgment he said:
The rule of equity which permits the original covenantee (or his successor
in title) to enforce a restrictive covenant against one who is not the original
covenantor was created for, and only for, the protection of an interest in C
land which the original covenantee (or his successor in title) genuinely
wishes to protect for its own sake, not for some collateral purpose. In my
judgment, an injunction to enforce a restrictive covenant against a successor
in title of the original covenantor should be granted only to secure to the
applicant some practical benefit of substantial value to him as owner of D
some land for the advantage of which he claims the benefit of the covenant.
(Emphasis added).
The words italicised in the above passage, as it seems to me, put a gloss on the
“rule of equity” which is unwarranted. How are the “wishes” of the party to be E
ascertained and by what yardstick are they to be measured? What if, in answer
to inquiries about his “wishes” he merely says: my wish is to assert a right of
property which I am advised I have? What, in this context, does “collateral
purpose” mean?
Godfrey JA, in his judgment, refers to Chambers v Randall [1923] 1 Ch 149. F
There, the covenant was expressed to be for the protection of adjoining land of the
vendor; the vendor had disposed of that land before his death and his executors
sought to enforce the covenant against an assignee of the covenantor: In other
words, there was no longer any right of property which the covenant was intended
to protect. Here, the opposite is the case. The Court of Appeal unanimously came G
to the view that there was a building scheme for Section Q, and that it remained
intact: it follows that owners of units within the scheme have, in the eyes of the
law, rights of property which the law would, by the exercise of its equitable
jurisdiction, protect. Far from Chambers v Randall [1923] 1 Ch 149 being an
authority for Godfrey JA’s proposition, it seems to me to be against it. H
In argument, counsel for the defendant says that the plaintiff has not shown
bona fides in bringing proceedings against the defendant; that the First floor of
No 10 was acquired at a price which did not reflect commercial reality, and
was purely for the purpose of stopping the defendant’s proposed development;
the court therefore ought not to go to the aid of the plaintiff. I
As it seems to me, the plaintiff’s position is simple: it is not suggested that
the plaintiff has misled the defendant in any way or acted vis-a-vis the defendant
unconscionably, beyond asserting its own right of property. Its entitlement to
relief is no more and no less than that of the previous owner of the First floor
of No 10 and, as a plaintiff in court, seeking equitable relief, it matters not how J
156
R24_[1999]1_0100 332 7/11/08, 6:21 PM

A or why the plaintiff became owner or what price it paid: its rights vis-a-vis the
defendant are the same.
I would uphold the majority of the Court of Appeal in ordering an injunction
in favour of the plaintiff.
B
Conveyancing and Property Ordinance (Cap.219) s.41
Section 41, as it stands is not an easy provision to construe. I have read Lord
Hoffmann’s judgment on this aspect of the appeal in draft and agree with it.
The only observation I would make is this: it seems to me to strain the statutory
C language in s.41(2)(c) to breaking point by saying that, in the circumstances of
this case, the covenants were “expressed” to benefit the land of the covenantee
(the plaintiff) and its successors in title. Ten of the eleven assignments were
executed on the same day. At the time when the covenants were “expressed”,
the plaintiff held the bare legal title to the land: a title which it then immediately
D conveyed to the covenantors. It is difficult to imagine that s.41(2)(c) was
intended to cover such a situation.
Conclusion
E For the reasons above, I would dismiss the appeal, with costs to the plaintiff.
Ching PJ:
I agree with the conclusions and with the reasons given by the other members
of this Court and I agree that this appeal is to be dismissed.
F
Bokhary PJ:
I am in complete agreement with Mr Justice Litton PJ and Lord Hoffmann. For
the reasons which they give, I too would dismiss this appeal with costs. There
is only one matter in respect of which I propose to add something of my own,
G namely, the proper approach for this Court to adopt in regard to appeals against
concurrent findings of fact. In concluding that a building scheme exists on
Section Q of Inland Lot No 29, the trial Judge made factual findings to this
effect: the section had been subdivided into eleven sub-sections; and it was the
intention of the common vendor and the purchasers of those sub-sections to
H impose a scheme of mutually enforceable restrictions in the interest of those
purchasers and their successors. Those findings were supported by the Court
of Appeal. Accordingly the existence of such subdivision and intention comes
to this Court by way of concurrent findings of fact. Nevertheless the appellant
asks us to disturb those findings.
I This appeal is the first one in which this Court has been invited to disturb
concurrent findings of fact. The Judicial Committee of Privy Council’s approach
to appeals against concurrent findings of fact is well known. In the leading case of
Srimati Bibhabati Devi v Kumar Ramendra Narayan Roy [1946] AC 508 at pp.521–
522 the Privy Council (in an advice delivered by Lord Thankerton) laid down
J eight propositions as to the general practice of their Lordships’ Board in regard to
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appeals against concurrent findings of fact and the nature of the special A
circumstances which would justify a departure from such practice:
(1) That the practice applies in the case of all the various judicatures
whose final tribunal is the board.
(2) That it applies to the concurrent findings of fact of two courts, and B
not to concurrent findings of the judges who compose such courts.
Therefore a dissent by a member of the appellate court does not
obviate the practice.
(3) That a difference in the reasons which bring the judges to the same
finding of fact will not obviate the practice. C
(4) That, in order to obviate the practice, there must be some miscarriage
of justice or violation of some principle of law or procedure. That
miscarriage of justice means such a departure from the rules which
permeate all judicial procedure as to make that which happened
not in the proper sense of the word judicial procedure at all. That D
the violation of some principle of law or procedure must be such an
erroneous proposition of law that if that proposition be corrected
the finding cannot stand; or it may be the neglect of some principle
of law or procedure, whose application will have the same effect.
The question whether there is evidence on which the courts could E
arrive at their finding is such a question of law.
(5) That the question of admissibility of evidence is a proposition of
law, but it must be such as to affect materially the finding. The question
of the value of evidence is not a sufficient reason for departure from
the practice. F
(6) That the practice is not a cast-iron one, and the foregoing statement
as to reasons which will justify departure is illustrative only, and there
may occur cases of such an unusual nature as will constrain the
board to depart from the practice.
(7) That the board will always be reluctant to depart from the practice in G
cases which involve questions of manners, customs or sentiments
peculiar to the country or locality from which the case comes, whose
significance is specially within the knowledge of the courts of that country.
(8) That the practice relates to the findings of the courts below, which
are generally stated in the order of the court, but may be stated as H
findings on the issues before the court in the judgments, provided
that they are directly related to the final decision of the court.
To what extent should this Court’s approach be different? As it seems to me,

when a legal system devises its approach to appeals against concurrent findings I
of fact, its broad objective should be twofold:
(1) An acceptable balance between, on the one hand, due access to the courts
(including, where appropriate, the highest court) and, on the other hand,
a reasonably early end to litigation. J
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(1997–98) 1 HKCFAR Bokhary
Litton PJ
PJ 335
A (2) For the purpose of achieving that balance, a proper distribution of function
between three court levels: first instance; intermediate appeal; and final
appeal.
In the days when the Privy Council exercised the jurisdiction which this Court
B has exercised since 1 July 1997 their Lordships were, unlike this Court now,
hearing final Hong Kong appeals as appeals from overseas. And the Privy
Council always recognised that local conditions would naturally be better known
to local courts than to their Lordships. Undoubtedly this was one of the reasons
for, and one feature of, the Privy Council’s reluctance to disturb concurrent
C findings of fact. But it was by no means the only reason for, or the only feature
of, such reluctance. That is apparent from this passage in the Privy Council’s
advice delivered by Lord Hobhouse in Moung Tha Hnyeen v Moung Pan Nyo
(1900) LR 27 IA 166 at p.167:
D This case is one which very decidedly falls within the valuable principle
recognised here, and commonly observed in second Courts of Appeal that
such a court will not interfere with concurrent judgments of the courts
below on matters of fact, unless very definite and explicit grounds for that
interference are assigned. In all probability their Lordships would be doing
E a great deal more harm than good if they were induced to disturb
judgments arrived at by the local judges on such criticisms as have been
assigned in this argument (Emphasis added).
Exactly the same point may be made on the strength of what the Privy Council
F had said (also in an advice delivered by Lord Hobhouse) in the earlier case of
Umrao Begam v Irshad Husain (1894) LR 21 IA 163 at p.166:
This is not only a question of fact, but it is one which embraces a great
number of facts whose significance is best appreciated by those who are
G most familiar with Indian manners and customs. Their Lordships would
be specially unwilling in such a case to depart from the general rule, which
forbids a fresh examination of facts for the purpose of disturbing concurrent
findings by the lower courts (Emphasis added).
H Indeed the same point emerges from the eight propositions laid down in Srimati
Bibhabati Devi v Kumar Ramendra Narayan Roy [1946] AC 508 at pp.521–522.
As we have seen, only the seventh proposition is directed to local conditions.
Let us now consider the House of Lords’ approach to appeals against
concurrent findings of fact. It is highly instructive to do so. This is because the
I House of Lords – unlike the Privy Council but like this Court – is a final appellate
court whose capacity for revisiting the facts is never limited by an imperfect
familiarity with local conditions.
I am unaware of – and doubt that there exists – any clearer statement of the
House of Lords’ current approach than this one by Lord Steyn in Smith New
J Court Securities Ltd v Citibank NA [1997] AC 254 at p.275A–C:
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While the jurisdiction of the House is not in doubt, it is most reluctant to A

disturb concurrent findings of fact. There are two reasons for this approach.
First the prime function of the House of Lords is to review questions of
law of general public importance. That function it cannot properly discharge
if it often has to hear appeals on pure fact. This point is underlined by the
fact that, despite the economy of presentation of counsel, the hearing on B
liability lasted more than three days. Secondly, in the case of concurrent
findings of fact, the House is confronted with the combined views of the
first instance judge and the Court of Appeal. A suggestion that the House
can be expected to take a different view on concurrent findings of fact
generally gives rise to an initial sense of disbelief. (Emphasis in the original) C
Perhaps that approach involves a development since older decisions of the House
of Lords such as Montgomerie & Co v Wallace-James [1904] AC 73. Perhaps
not. For what Lord Davey said in Montgomerie & Co v Wallace-James [1904]
AC 73 at p.82 is that the House of Lords did not follow “any rule of practice D
(such as is followed by the Judicial Committee in Indian appeals at any rate)
that [the House of Lords] will not entertain an appeal on a question of fact
where there have been concurrent findings in the Courts below”. And, as we
have seen, the Privy Council’s practice is by no means so absolute as never at
all to entertain an appeal against concurrent findings of fact under any E
circumstances.
The prime function of this Court is the same as that of the House of Lords
as identified in Lord Steyn’s first reason, namely, to review questions of law of
general public importance. This is not altered by the fact that (by reason of
s.22(1)(a) of the Hong Kong Court of Final Appeal Ordinance (Cap.484) an F
appeal lies to this Court “as of right” from any non-interlocutory judgment of
the Court of Appeal in any civil cause or matter:
… where the matter in dispute on the appeal amounts to or is of the

value of $1,000,000 or more, or where the appeal involves, directly or G
indirectly, some claim or question to or respecting property or some civil
right amounting to or of the value of $1,000,000 or more …
To begin with, prior to 1 July 1997 final appeals from Hong Kong to the Privy
Council (whose strict practice in regard to concurrent findings we have seen) H
also lay as of right in circumstances such as those identified above. Moreover
it would appear that certain appeals (namely non-interlocutory appeals from
the Court of Session in Scotland save those under certain statutes) do lie to the
House of Lords as of right: see Halsbury’s Laws of England, Vol.10, (4th ed.)
para.741 at p.338. In any event, ironically or otherwise, the strongest I
consideration in the present connection may be this. If this Court is statutorily
more exposed than the House of Lords to a flood of appeals on the facts, then
that would seem a cogent reason why we ought to preserve our prime function
by according at least as much respect to concurrent findings of fact as the House
of Lords does nowadays. J
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(1997–98) 1 HKCFAR Bokhary
Litton PJ
PJ 337
A It should of course be understood that that is not the only reason. The other,
and complementary, reason is really as simple as this. Findings of fact are
inherently difficult (although by no means impossible) to upset on appeal. And
it is only natural that they become even more difficult (although still not
invariably impossible) to upset once they have gained the added weight of
B having been affirmed on appeal. To upset them thereafter naturally requires
something special.
The question of local conditions apart, I see no significant difference between
the substance of the House of Lords’ approach to appeals against concurrent
findings of fact and that of the Privy Council. However the Privy Council’s
C jurisprudence on the point has been the subject-matter of more frequent and
detailed judicial pronouncements than that of the House of Lords. Accordingly
one can gain more practical guidance by consulting the former than by
consulting the latter.
I pause to mention that I have of course been interested to know what wisdom
D we may learn by consulting the practice of the High Court of Australia. It would
appear that their Honours’ position in this regard has, since 1 June 1984, been
governed by legislation imposing a requirement for special leave. This statement
is to be found in David O’Brien “Special Leave to Appeal” in The Law and
Practice of Applications for Special Leave to Appeal to the High Court of
E Australia (1996) at p.74:
… a proposed appeal which exclusively involves or turns upon an error

of fact … will not attract special leave. A fortiori, where there are concurrent
findings of fact by the primary judge and the intermediate appellate court.
F
The accuracy of Mr O’Brien’s statement appears to be supported by the High
Court of Australia itself in this passage from the joint judgment of Mason CJ
and Deane, Dawson and Toohey JJ in Dart Industries Inc v Decor Corp Pty
Ltd (1993–94) 179 CLR 101 at p.121:
G
It follows from what has been said above that, if special leave were granted,
the cross-appeal would necessarily turn upon a question of fact upon
which there are concurrent findings by the trial judge and the Full Court
against Decor and Rian. It would for that reason be inappropriate to grant
H special leave to cross-appeal.
For these reasons we would dismiss the appeal and refuse special
leave to cross-appeal.
McHugh J delivered a separate judgment, but (as one sees at p.136) agreed
I with the rest of their Honours that special leave to cross-appeal should be refused
for the reasons which they gave.
In my judgment, this Court’s proper approach to appeals against concurrent
findings of fact must be the same as that of the Privy Council subject only to
this. In those rare and exceptional cases in which an appellant has otherwise
J got a viable challenge to even concurrent findings of fact, he will never face in
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this Court the additional obstacle (which appellants before the Privy Council A
have sometimes faced) of appearing before a final appellate court less familiar
than the courts below with local conditions. In using the expression “local
conditions” I mean to cover how, in situations such as the one which any given
case concerns, people like the parties to that case generally tend to behave,
view things, go about their lives and businesses, understand each other and so B
on.
On the foregoing principles, I do not think that the appellant can begin to
make good its attack on the concurrent findings of the subdivision and intention
pertaining to the building scheme relied upon by the respondent. There is nothing
exceptional about those concurrent findings of fact. True it is that the trial C
Judge’s findings of such subdivision and intention were based, not on forming
an impression of witnesses or anything of that nature, but rather on drawing
inferences and, what is more, doing so in respect of events of many years ago.
But that means no more than that her findings were very properly open to review
by the Court of Appeal. That court has conducted a proper review of her findings. D
And it has, in a judicial manner, arrived at the conclusion that her findings,
likewise arrived at in a judicial manner, are to be affirmed. There the matter
must rest.
Nazareth V-P: E
I agree that the appeal should be dismissed for the reasons given by the other
members of this Court.
Lord Hoffmann NPJ:

I agree that the appeal should be dismissed for the reasons given by Litton PJ. F
I also agree, save on one point, with the admirably lucid and convincing
judgment of Le Pichon J. It is only on the construction of s.41 of the
Conveyancing and Property Ordinance (Cap.219) that, in common with the
Court of Appeal, I must respectfully differ.
Section 41 represents the third attempt of the legislature to adapt the common G
law and equitable rules concerning covenants which affect land to the special
needs of Hong Kong conveyancing. The problems to which they were addressed
arose chiefly out of the practice by which a developer of a block of flats held
under a Crown lease disposes of the flats by assigning to each purchaser an
undivided share in the whole building, carrying with it the right to occupy a H
particular flat: see Peter Willoughby “The Enforcement of Obligations relating
to Control and Management of High-Rise Buildings” in (1977) 7 HKLJ 81. It
is customary in such cases for the purchasers to enter into a Deed of Mutual
Covenant with the vendor, dealing with such matters as the use of the flat,
maintenance charges, payment of a share of the crown rent, use of the common I
parts and so forth. The intention is that these covenants should be enforceable
not only by the vendor (and sometimes a management company to which he
may assign their benefit) but also by the flat-owners and their successors in
title against each other. But common law and equity put two serious difficulties
in the way of such a scheme. First, the burden of restrictive covenants can be J
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(1997–98) 1 HKCFAR Lord Hoffmann
Litton PJ NPJ 339
A made to run with the land but the burden of positive covenants (such as
obligations to pay maintenance charges etc) cannot. Secondly, covenants have
to be imposed on a servient tenement for the benefit of a dominant tenement.
But the parties to such a scheme do not own separate tenements. Each is owner
of an undivided share in the whole building.
B The Law of Property (Enforcement of Covenants) Ordinance 1956 dealt
with the first difficulty, but in rather a narrow way. The legislation was limited
to flats and certain particular kinds of covenant. In 1984 it was replaced by
s.41 of the Conveyancing and Property Ordinance (Cap.219), which dealt with
both points. It provided in general terms that a covenant should not be
C unenforceable by reason only of the fact that it was positive or was made
between owners of the same land. It was thus framed in negative terms,
removing the specified grounds upon which a covenant might not be enforceable
at common law or equity but leaving it open to objection on any other ground
which might be available. In 1988 it was replaced by the present s.41, of which
D I need quote only the following subsections:
(1) This section applies to an express covenant and a covenant implied

by or under this Ordinance or any other law.
(2) This section applies to any covenant, whether positive or restrictive
E in effect –
(a) which relates to the land of the covenantor;

(b) the burden of which is expressed or intended to run with the
land of the covenantor; and
F (c) which is expressed and intended to benefit the land of the
covenantee and his successors in title or persons deriving title
to that land under or through him or them.
(3) Notwithstanding any rule of law or equity… a covenant shall run

G with the land and, in addition to being enforceable between the
parties, shall be enforceable against the occupiers of the land and
the covenantor and his successors in title and persons deriving title
under or through him or them by the covenantee and his successors
in title and persons deriving title under or though him or them.
H …
(7) A covenant shall be enforceable under this section whether or not
the covenant is between owners of the same land.
It will be seen that the legislative technique has changed. A covenant which
I satisfies the terms of s.41(1) and (2) will run with the land in accordance with
s.41(3), notwithstanding any rule of law or equity. In such a case, it is
unnecessary to go beyond the terms of the Ordinance and the fact that for some
other reason the covenant might not have run with the land at common law or
equity is irrelevant. The section is therefore a partial codification of the law. It
J is a codification because, so far as it goes, it is complete in itself but partial
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because it does not prevent a covenant falling outside its terms from running A
with the land under the old common law and equitable rules.
In this case the plaintiff says that the relevant covenants fell within the
code, in that they satisfied s.41(1) and (2) and that accordingly they ran with
the land and were enforceable under s.41(3). The question of whether they
satisfied the requirements of the section and in particular s.41(2)(c) is by no B
means without difficulty – difficulties of which Le Pichon J was acutely
conscious. It may be that the draftsman has not entirely avoided one of the
common perils of codification, namely the choice of a form of words which
does not do full justice to the complexity of the law it is intended to restate. It
is certainly not easy to apply s.41(2)(c) to covenants which are mutually C
enforceable under the principle of Elliston v Reacher [1908] 2 Ch 374. Two
problems were identified by the Judge. First, s.41(2)(c) by its pointed contrast
with s.41(2)(b), demands that the covenant be not only intended but also
expressed to be for the benefit of the dominant tenement. It is however
characteristic of building scheme cases that the rights of purchasers to enforce D
the covenants against each other are often based simply upon the intention of
the parties, inferred from the terms of the terms of the covenants, the layout of
the plots and other surrounding circumstances. Le Pichon J was able to hold
that the covenants relied upon by the plaintiff satisfied the statutory requirements
despite the fact that unlike certain other covenants in the same instrument (e.g. E
against nuisance) they said nothing about the land intended to benefit. Secondly,
the dominant land is required to be the land of “the covenantee and his successors
in title or persons deriving title to that land under or through him or them.” In
the case of a building scheme, however, the covenants in all the conveyances
after the first plot sold will be in part for the benefit of land which the common F
vendor has already sold. In the present case, Le Pichon J was able to hold the
paragraph satisfied because the dominant plot, although contracted to be sold,
had not yet been assigned. But that is a special feature of this transaction; it
could easily have been the case that the conveyance of the dominant tenement
had already taken place. G
For my part, the overriding consideration is that s.41 must have been intended
to apply to building schemes. The background material to which the Judge
referred makes this clear. Somehow, therefore, the language has got to be made
to fit and this the Judge valiantly attempted to do. I am inclined to think that
her answer to the question of whether the covenants were “expressed” to be for H
the benefit of the rest of Section Q was right, but this may only show that for
me, in a case like this, the distinction between “expression” and “intention”
(objectively ascertained) is somewhat elusive. Nor would I disagree with her
solution to the problem of previous sales. Another more general answer to the
latter question may be that in cases such as building schemes in which the I
general law permits the benefit to be taken for land which has already been
assigned, “successors in title” of the common vendor must be read to include
persons who have already succeeded to his title in respect of other parts of the
scheme. At any rate, I am willing for present purposes to assume that the Judge
was right in holding that the requirements of s.41(2)(c) were satisfied. J
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(1997–98) 1 HKCFAR Lord Hoffmann
Litton PJ NPJ 341
A That, however, takes the plaintiff only part of the way. It means that the
covenants will run with the land and be enforceable by the persons specified in
s.41(3): “the covenantee and his successors in title etc.”. The question is whether
he qualifies as such a person. The plaintiff says that he is the covenantee. Once
a covenantee, always a covenantee. It does not matter whether he has retained
B any interest in the land. Section 41(3), says Mr Chan SC, who argued this
point, is expressed to override the rules of law and equity and in this instance
has abolished the rule in London County Council v Allen [1914] 3 KB 642
which requires a plaintiff enforcing a covenant to have an interest in land for
the benefit of which it was taken.
C I do not agree. It is true that a code should not be interpreted on the
assumption that it was not intended to change the previous law (Bank of England
v Vagliano Brothers [1891] AC 107, per Lord Herschell at pp.144–145),
particularly when the words “notwithstanding any rule of law or equity” make
it clear the some change was intended. It does not follow, however, that every
D previous rule of law and equity was intended to be changed. The changes which
s.41 undoubtedly makes in the rules about positive covenants and jointly owned
land are sufficient to provide work for the opening words on which Mr Chan
relies. And in cases of ambiguity, it is permissible to look at the previous law
as an aid to the construction of the code.
E Mr Chan says there is no ambiguity. Covenantee means covenantee. But in
my view an ambiguity, to say the least, is raised by the anomaly to which Mr
Chan’s construction would give rise. To qualify at all, the covenant must, under
s.41(2)(c) be “expressed and intended to benefit the land of the covenantee”.
To this extent, the section reflects the rule in London Country Council v Allen
F [1914] 3 KB 642. A restrictive covenant in gross will not run with the land. On
Mr Chan’s construction, however, once this initial qualification has been
satisfied, the covenantee can at once dispose of all interest in the land but
continue to be able to enforce what, so far as he is concerned, is now a mere
covenant in gross. This seems to me a whimsical result. The various changes
G in the common and law and equity which are made by s.41 can all be related to
the particular needs of Hong Kong conveyancing. But there is no rational
explanation for the change which Mr Chan claims to have been made.
If one then looks at the general law of restrictive covenants, it becomes
apparent that the plaintiff’s argument would not merely change some rule of
H law or equity but completely alter the accepted juridical character of a restrictive
covenant. For some twenty years after Tulk v Moxhay (1848) 2 Ph 774, English
law entertained the idea that the basis of a restrictive covenant was contractual
and that rights under a contract affecting any kind of property could be enforced
against a successor in title who had notice. The course of this lengthy flirtation
I is charted by Scrutton J in London County Council v Allen [1914] 3 KB 642;
its high point is the notorious judgment of Knight Bruce LJ in De Mattos v
Gibson (1858) 4 De G & J 276. But in London & South Western Rly v Gomm
(1882) 20 Ch 562 at p.583, Jessel MR said that a restrictive covenant was not a
mere contract but an interest in land, analogous to a negative easement. It is by
J nature a right appurtenant to a dominant tenement; there is no other form in
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which it can exist as a proprietary interest of which the burden runs with the A
servient tenement. This view of the matter was established beyond doubt in
London County Council v Allen [1914] 3 KB 642 and is, as I say, reflected in
s.41(2). I therefore agree with the Court of Appeal that it is inconceivable that
s.41(3) was intended to change the very nature of a restrictive covenant. As for
positive covenants, the object of the legislation is to equate positive with B
restrictive covenants and it cannot therefore have been intended to treat them
differently. It follows that in my opinion, “covenantee” in s.41(3) means a
covenantee who still has an interest in the land for the benefit of which the
covenant was taken.
C
Litton PJ:
This appeal is dismissed with costs to the plaintiff.
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HONG KONG COURT OF FINAL APPEAL ORDINANCE
(6) If there is no judgment or order which is that of the majority of the
judges sitting, a rehearing shall be ordered.
(7) If a judge is absent for any cause after the hearing of the appeal has
commenced but before the determination of the appeal, the appeal may
with the consent of all the parties be continued with the remaining judges
being not less than 4.
(8) No judge shall sit as a member of the Court on the hearing of, or
on the determination of any application in proceedings incidental or
preliminary to—
(a) an appeal from a judgment or order made by him or by a court in
which he was sitting as a member;
(b) an appeal against a conviction before him or a sentence passed
by him.
In Mok Kin Kau v. HKSAR (2008) 11 HKCFAR 1 (at para.2) the Court of E2/16/1
Final Appeal held that:
“An uncontested appeal can be allowed without putting any party to the expense of an
oral hearing if it can readily be seen, even without the assistance of oral argument, that
the appeal should be allowed. Where costs remain in issue, they can be dealt with on
written submissions. In this uncontested appeal, costs are not in issue.”
Used sparingly, the Mok Kin Kau procedure, has proved useful. It was laid
down in 2008. Since then appeals have been allowed thereunder at the rate
of one appeal per year: in Chiu Hoi Po v. Commissioner of Police (2009) 12
HKCFAR 597; in Mahabobur Rahman v. HKSAR (2010) 13 HKCFAR 20; and
in Van Huijstee v. HKSAR, FACC 14/2010, 22 March 2011.
Powers of the Court

17.—(1) The Court may confirm, reverse or vary the decision of the court E2/17
from which the appeal lies or may remit the matter with its opinion thereon
to that court, or may make such other order in the matter, including any
order as to costs, as it thinks fit.
(2) For the purpose of disposing of an appeal, the Court may exercise
any powers of the court from which the appeal lies (including the power to
order a retrial), or may remit the case to that court.
(3) Where the Court restores a conviction, it may make—
(a) any order for the restitution of property which the court of trial
could have made; and
(b) any compensation order which the court of trial could have
made under section 73 of the Criminal Procedure Ordinance
(Cap. 221).
(4) The Court may from time to time adjourn the hearing of any appeal.
(5) Any provision in this or any other Ordinance which authorizes or
requires the taking of any steps for the execution or enforcement of a judg-
ment or order of the Court of Appeal or the Court of First Instance applies
in relation to a judgment or order of the Court as it applies in relation to
a judgment or order of the Court of Appeal or the Court of First Instance.
(Amended 120 of 1997 s.9)
Commentary—The Court of Final Appeal’s practice with regard to appeals against con- E2/17/1
current findings of fact was considered in Sky Heart Ltd v. Lee Hysan Co. Ltd (1997–98) 1
H.K.C.F.A.R. 318 at 333F to 338G. It was held, per Bokhary P.J., that the approach adopted
by the Court of Final Appeal in this regard is the same as that of the Privy Council, subject
to one qualification. Unlike the Privy Council, the capacity of the Court of Final Appeal to
revisit facts is not inhibited by a less than perfect appreciation of local conditions. Where
there are concurrent findings of fact, the Court of Final Appeal would not, as a matter of
general practice, review such findings unless there is some miscarriage of justice or vio-
lation of some principle of law or procedure. See Wu Yee Pak v. Un Fong Leung (2004) 7
243
167
PART E – JURISDICTION
H.K.L.R.D. 498 at 503 D–F; Chinachem Charitable Foundation Ltd v. Chan Chun Chuen (2011)
14 H.K.C.F.A.R. 798, 817–819, [40]–[44]. The Court of Final Appeal’s practice with regard
to allowing new points to be taken in an appeal was considered in Flywin Co. Ltd v. Strong &
Associates Ltd [2002] 2 H.K.L.R.D. 485. In Re Resource 1 [2000] 3 H.K.L.R.D. 49 the Court
of Final Appeal invoked its powers under s.17(2) of the Hong Kong Court of Final Appeal
Ordinance, Cap. 484, so as to use O.3, r.5 of the Rules of the High Court to extend time for
the filing of a defence. This meant that the time for disputing the jurisdiction under O.12,
r.8 was extended, and the court then entertained the jurisdiction challenge on its merits.
In HKSAR v. Hau Kin (unrep., FACC 16, 17 & 18/2004, [2005] H.K.E.C. 356), the Court of
Final Appeal held that the Court of Appeal erred in ordering “loss of time” in excess of the
period allowed under s.83W of the Criminal Procedure Ordinance, and exercised the power to
reduce the period instead of remitting the case to the Court of Appeal. In Ting James Henry
v. HKSAR (unrep., FACC 4/2007, [2007] H.K.E.C. 1949), the Court of Final Appeal held
that the effect of s.17(2) is that when the Court of Final Appeal decides to deal with the
question of a retrial, it has the same powers as the Court of Appeal (including the power to
order a retrial under s.83E of the Criminal Procedure Ordinance (Cap. 221)). There is no
express power provided in the Hong Kong Court of Final Appeal Ordinance or the Rules
made thereunder for receiving fresh evidence, but s.17(2) of the Hong Kong Court of Final
Appeal Ordinance encompasses such power. See Mohammad Mahabobur Rahman v. HKSAR
(2010) 13 H.K.C.F.A.R. 20, at [13]. The Court of Final Appeal’s powers under s.17(2)
also includes those exercisable by the Court of First Instance and the Court of Appeal
under s.69(5) Inland Revenue Ordinance to, inter alia, confirm, reduce, increase or annul
the assessment determined by the Board of Review. See Ngai Lik Electronics Company Ltd
v. Commissioner of Inland Revenue [2009] 5 H.K.L.R.D. 334, [131]. There is no express power
provided in the Hong Kong Court of Final Appeal Ordinance or the Rules made there-
under for receiving fresh evidence, but s.17(2) of the Hong Kong Court of Final Appeal
Ordinance encompasses such power. See Mohammad Mahabobur Rahman v. HKSAR (2010)
13 H.K.C.F.A.R. 20, [13]. The Court of Final Appeal’s powers under s.17(2) also includes
those exercisable by the Court of First Instance and the Court of Appeal under s.69(5)
Inland Revenue Ordinance to, inter alia, confirm, reduce, increase or annul the assessment
determined by the Board of Review. See Ngai Lik Electronics Co. Ltd v. Commissioner of Inland
Revenue [2009] 5 H.K.L.R.D. 334 at para.131.
In Hong Kong Electric Co. Ltd v. Commissioner of Rating and Valuation (No. 1) (2011) 14
H.K.C.F.A.R. 450, Bokhary PJ held that there would have to be exceptional circumstances for
a non-party to be permitted to intervene in an appeal on the ground that the appellate court
was expected to decide points that would affect the applicant’s position in other proceedings,
and the applicant wished to address the appellate court on those points. Such circumstances
would be likely to be rare.
In Brian Alfred Hall v. HKSAR (2014) 17 H.K.C.F.A.R. 17, the Court stated that it has a
discretionary power to re-open an appeal where a reasonable basis exists for alleging that its
judgment was obtained by fraud. Such discretionary power exists notwithstanding that there
is no express provision concerning the re-opening of appeals in the CFA Ordinance, but it is
clear that the Court has an implied power exceptionally to order an appeal to be re-opened
where justice so demands, such power being reasonably required for the effective exercise of
the judicial power granted by the Basic Law.
Appeal Committee
E2/18 18.—(1) There shall be an Appeal Committee consisting of—
(a) the Chief Justice and 2 permanent judges nominated by the Chief
Justice; or
(b) 3 permanent judges nominated by the Chief Justice.
(2) The power of the Court to hear and determine any application for
leave to appeal, including the power of the Court to certify under section
32(3), shall be exercised by the Appeal Committee.
(Amended 133 of 1997 s.2)
(2A) No judge shall sit as a member of the Appeal Committee on the
hearing and determination of any application in proceedings incidental or
preliminary to—
(a) an appeal from a judgment or order made by him or by a court in
which he was sitting as a member;
(b) an appeal against a conviction before him or a sentence passed by
him; or
(c) any appeal in respect of which an application for leave to appeal
or an application for a certificate under section 32(2) has been
244
168
90 Hong Kong Cases [2000] 2 HKC
RE SUPERYIELD HOLDINGS LTD A
COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 6440 OF 1998
RECORDER ROBERT KOTEWALL SC
10-11, 14-17, 18 FEBRUARY 2000
B
Companies and Corporations – Action for unfairly prejudicial conduct –
Allotment of new shares thereby causing a dilution of equity of deceased’s
estate – Whether allotment unfairly prejudicial to the company and estate of
the deceased – Companies Ordinance (Cap 32) s 168A(1), (5)
C
Equity – Ownership – Property registered in name of company – Purchase
money paid by son with mortgage loan – Father a joint and several
guarantor of mortgage – Whether resulting trust in favour of son – Whether
presumption of advancement between father and son – Burden on party
asserting equitable right to be inconsistent with legal title
D
–
– –
– 32 168A(1), (5)
E
– – –
– –
– –
: The deceased and the second respondent were father and son respectively. F
Both were directors of Superyield Holdings Ltd (the company) and Superyield
Construction Co Ltd (Superyield Construction). The deceased held one issued
share of HK$1 in the company and the son held the other share. The company
also held one share of HK$1 in Superyield Construction, which in turn owned a
property in Shatin (the property). Neither company carried on any business that
G
required infusion of new capital by way of an issue of shares. Both companies
were managed by the son.
After the death of the deceased, the son arranged 9,998 ordinary shares of
HK$1 each in the company and 19,998 ordinary shares of HK$1 each in
Superyield Construction to be issued and allotted to the third respondent, a
company controlled by him. As a result of these allotments, the deceased’s estate H
holding of the company’s issued share capital was diluted from 50% to 0.01%,
whereas the company holding of Superyield Construction’s issued share capital
was diluted from 50% to 0.005%. The wife and the other four children of the
deceased (the petitioners) took out a petition for relief under s 168A of the
Companies Ordinance (Cap 32) as persons beneficially interested in the
deceased’s half share of the company on intestacy. The petitioners claimed that I
by virtue of the company’s interest in Superyield Construction, the estate of the
deceased must also have an interest in the property. The son argued that the
169
[2000] 2 HKC Re Superyield Holdings Ltd (Recorder Robert Kotewall SC) 91
A petition should be dismissed, submitting that the deceased was only holding such
shares on his behalf as his nominee. Furthermore, the deceased did not purchase
the property, he was only a guarantor of the mortgage loan.
Held, dismissing the petition:

B (1) Although the documentary evidence adduced by the second respondent
did not identify that he had provided all the funds for the purchase of the
property, on the evidence as a whole, including the oral testimony of the second
respondent, the court was satisfied that the beneficial owner of those funds was
the second respondent, that the deceased had no interest in them, and, apart from
making himself jointly and severally liable on a guarantee to the bank, did not do
C anything else to arrange for the purchase of the property. Furthermore, the court
accepted that both the company and Superyield Construction belonged to the
second respondent, that the presence of the deceased as a shareholder and
director in the company and as a director in Superyield Construction was nothing
more than to satisfy the requirements of the Companies Ordinance. Accordingly,
the deceased had no interest in the company, nor directly or indirectly in
D Superyield Construction which the second respondent chose to hold the property
(at 102I-103H).
(2) The court would only resort to the presumption of resulting trust and
advancement where there was no acceptable evidence of the actual intention of
the providers of the purchase money as to the vesting and apportionment of the
E beneficial interest. Where there was evidence of actual intention and where the
intention proved was not consistent with the legal title, the court would not give
redress under a resulting trust, but under a common intention constructive trust or
an equitable proprietary estoppel. One example was where both parties were
legally liable under a mortgage arranged to purchase a property, in which case it
would be a determinative factor for the court to consider in deciding in whom or
F in what proportion the beneficial interest in the property vested. Calverley v
Green (1984) 155 CLR 242 considered (at 111E, 116A-B).
(3) The burden of proof of a resulting trust fell upon the party asserting that
the equitable right was not consistent with the legal title. The evidence showed
that the deceased was registered as a shareholder of the company, which in turn
was a registered shareholder in Superyield Construction. Prima facie, if no other
G evidence was available, it would be a very strong thing to hold that the beneficial
ownership did not go with the legal title. It would have been for the second
respondent to displace that prima facie position. Crisp v Mullings [1976] 2 EGLR
103 followed (at 108D/E, 110H).
(4) Where, as it was held, the evidence was that both the company and
H Superyield were companies belonging to the second respondent beneficially and
in which the deceased had no beneficial interest, and that the second respondent
arranged the purchase money for the purchase of the property, the presumption
was that he was entitled to the beneficial interest in the property by virtue of a
resulting trust in his favour where the property was not put into his own name,
unless the circumstances indicated, for instance, that a gift of the property was
I intended, either in whole or in part. There were no such circumstances in this
case. Calverley v Green (1984) 155 CLR 242 considered (at 110I-111B, 115B-
E).
170
(5) In the present case, there was no difference in principle between assuming A
liability as a mortgagor and as a joint and several guarantor. In both instances, the
key was the potential liability of the party under the obligation assumed. While
there was no evidence of the circumstances surrounding the guarantee, any
possible presumption of a resulting trust based on the deceased’s contribution to
the purchase by the provision of the guarantee was negatived and displaced by
the presumption of advancement given the very close relationship between the B
deceased and the second respondent (at 115E-H).
(6) It did not follow that one who was asked to stand surety on a loan to
effectuate the purchase of a property would necessarily become a beneficial
owner to the extent that he was a surety. Whether any beneficial ownership was
conferred by any given transaction depended on the intention of the parties at the C
time the transaction was undertaken. If there was evidence of the actual intention,
then there was little scope for the operation of the various presumption. The
circumstances in the present case did not lead to an inference of the deceased
having any beneficial entitlement to the property, to the company or to Superyield
Construction by virtue of the deceased having been allotted a subscriber share in
the company. It followed that the deceased was holding the one share in the D
company, registered in the name of the deceased, as the second respondent’s
nominee (at 116D-F).
Obiter
(7) If the court had found that the deceased had interests in the company, and
therefore indirectly in Superyield Construction, the allotments would have been E
unfairly prejudicial to the company and the estate of the deceased, since (i)
neither Superyield Construction nor the company carried on any business
requiring the infusion of new capital; (ii) the sums raised were nominal and
plainly insufficient for any genuine or bona fide commercial reasons; (iii) even if
these sums were genuinely required for the purposes of the business of F
Superyield Construction and the company, the deceased’s estate could have been
but were not invited to subscribe for any part of the new shares; and (iv) the price
at which the new shares were allotted to the third respondent fell far short of the
net asset value of Superyield Construction and that of the company (at 104E-H).
Cases referred to G
Allen v Snyder (1977) 2 NSWLR 685
Ammala v Sarimaa (1993) 17 Fam LR 529
Calverley v Green (1984) 155 CLR 242, (1984) 56 ALR 483, (1984) 59 ALJR
111, (1984) 9 Fam LR 940
Company, a (No 007623 of 1984), Re [1986] BCLC 362
H
Cowcher v Cowcher [1972] 1 All ER 943, [1972] 1 WLR 425, (1971) 116 SJ
142
Crisp v Mullings [1976] 2 EGLR 103, (1975) 239 EG 119
Gissing v Gissing [1971] AC 886, [1970] 2 All ER 780, [1970] 3 WLR 255
Jancso v Vuong (1988) 12 Fam LR 615
Pettitt v Pettitt [1970] AC 777, [1969] 2 All ER 385, [1969] 2 WLR 966 I
Piper v Knowles (Equity Division, Supreme Court of New South Wales, Ref
1784/1986, 31 January 1989, unreported)
171
A Stockbridge v Lupton (McLelland J, Supreme Court of New South Wales, Ref

4167/1985, 14 March 1989, unreported)
Tracy v Bifield (1998) 23 Fam LR 260
Trustee of the Property of Sandor, a Bankrupt v Ramirez (CA, Supreme Court
of New South Wales, Ref 40290/1997, September 1999, unreported)
Tseng Yueh Lee Irene v Metrobilt Enterprises Ltd [1994] 2 HKC 684
B
Watson v Smith [1998] 3 HKC 461
Legislation referred to
Companies Ordinance (Cap 32) ss 57B, 168A(1), (5)
Estate Duty Ordinance (Cap 111) ss 34, 35
C
Other sources referred to
Phipson Evidence (15th Ed) pp 56-58
Underhill & Hayton Law of Trusts and Trustees (15th Ed) pp 317, 321
D [Editorial note: for discussion of alternative remedy to winding up in cases of

unfair prejudice generally, see Halsbury’s Law of Hong Kong Vol 6, Companies
and Corporations [95.1513]-[95.1522]; see also Butterworths Hong Kong
Company Law Handbook (1999 Ed) pp 547-560.]
Petition
E This was a petition by the estate of a deceased member of Superyield
Holdings Ltd for relief under s 168A of the Companies Ordinance (Cap 32). The
facts appear sufficiently in the following judgment.
Lisa Wong (Chung & Kwan) for the petitioners.

F Nicholas Pirie (Hon & Co) for the second and third respondents (on 10-16
February 2000).
Jeremy Cheung (Hon & Co) for the second and third respondents (on 17-18
February 2000).
Recorder Robert Kotewall SC: The nature of these proceedings

G
This is the hearing of a petition under s 168A of the Companies
Ordinance (Cap 32) in respect of a company known as Superyield
Holdings Ltd (the company).
By an order made by Le Pichon J on 7 January 2000, this hearing is
H only concerned with the question of liability. The parties have agreed a
number of issues to be tried. I will refer to them after a brief recital of the
facts.
The provisions of s 168A of the Ordinance are well-known. For our
purposes, the material parts of sub-s (1) reads as follows:
I Any member of a company who complains that the affairs of the company are
being or have been conducted in a manner unfairly prejudicial to the interests
of the members generally or of some part of the members (including himself)
172
…, may make an application to the court by petition for an order under this A
section.
Subsection (5) of s 168A provides:
The personal representative of a person who, at the date of his death, was a
member of a company, or any trustee of, or person beneficially interested in,
B
the shares of a company by virtue of the will or intestacy of any such person,
may apply to the court under subsection (1) for an order under this section
and, accordingly, any reference in that subsection to a member of a company
shall be construed as including a reference to any such personal
representative, trustee or person beneficially interested.
At an earlier stage of these proceedings, there was some question as to the C
locus of the petitioners. This is no longer an issue before me.
The parties
The petitioners are the wife and four children of the late Albert Lam
D
Kwong Leung (the deceased). The first respondent is the company. The
second respondent is Mr Gordon Lam (the second respondent), also a son
of the deceased and the brother of four of the petitioners. The third
respondent is a company, associated with and controlled by the second
respondent.
E
The background
The company was incorporated in 1981 with a nominal capital of
$100,000, divided into 100,000 ordinary shares of HK$1 each.
Prior to 19 January 1998, the company’s capital issued and paid up or
credited as paid up was HK$2. F
Prior to 15 February 1996, the date of the death of the deceased, the
issued shares of the company were registered as to one share in the name
of the deceased and as to the other share in the name of the second
respondent. The directors of the company in 1981 were the deceased and
the second respondent. G
It is common ground that apart from the second respondent, none of
the petitioners had anything to do with the affairs of the company, nor do
the petitioners have much or any knowledge of the company’s affairs or
transactions. The company appeared not to have done very much by way
of business since incorporation and is basically a holding company. H
Other corporate entities
The company was and is the registered holder of one share of HK$1 in a
company known as Superyield Construction Co Ltd (Superyield
Construction). Lam Kwan Realty Ltd held the other subscriber share I
when Superyield Construction was incorporated on 28 September 1982,
and this was the position until 19 January 1998.
173
A Superyield Construction had a nominal share capital of HK$100,000

divided into 100,000 ordinary shares of HK$1 each. Superyield
Construction became, in late 1990, the registered owner of a property,
being the 2nd floor and the roof of Block A and carparking space No 3,
Ascot Villa, Nos 37-41 Shatin Heights Road, Shatin, New Territories,
B Hong Kong (the Ascot Villa Property).
Miss Wong for the petitioners has produced a number of very useful
schedules and charts describing the various companies and the businesses
and properties associated with the Lam family.
Apart from the company and Superyield Construction, I have already
C mentioned Lam Kwan Realty as holding initially one share, amounting to
50% of the then issued share capital of Superyield Construction.
Lam Kwan Realty is the main holding company of the shares in the
various corporate entities associated with the deceased and the second
respondent. It holds shares, directly or indirectly, in most if not all the
other corporate entities, the details are in the various schedules carefully
D prepared by Miss Wong. The current registered shareholders of Lam
Kwan Realty are the second respondent as to 66%, the deceased as to
33% and another company, Superyield Nominees Ltd (Superyield
Nominees), as to the remaining 1%.
E The plaintiff’s case

The case for the plaintiff is tolerably straightforward. In simple terms, and
at the risk of perhaps some inaccuracy, the petitioners say that on the face
of it the deceased had an equal shareholding with the second respondent
in the company. The estate of the deceased must therefore be entitled to a
F half share of the company.
Similarly, and again in simple terms, the company and Lam Kwan
Realty each held a 50% share in Superyield Construction. By virtue of the
deceased’s shareholding in the company and in Lam Kwan Realty, his
estate also has an interest in the Ascot Villa Property which, for our
G purposes, is the only substantial asset of Superyield Construction.
The petitioners bring these proceedings as persons beneficially
interested in the deceased’s one share in the company on the intestacy of
the deceased. They rely on sub-s (5) of s 168A of the Companies
Ordinance. As I said earlier, their locus to petition is no longer in issue.
H
The administration of the deceased’s estate
The second respondent initially took charge of the application for the
grant of letters of administration in respect of the deceased’s estate. The
fifth petitioner has since late 1999 taken over. There are clearly
I differences between the parties as to how the matter should have been
proceeded with, and there is no less clearly some ill-feeling amongst the
siblings over the administration of the deceased’s estate. The rights and
174
wrongs are not matters which are necessary of resolution by me in these A

proceedings.
The petitioners’ complaints

The second respondent has been running the company and Superyield
Construction. On 19 January 1998, he caused the company and B
Superyield Construction to: first, issue and allot 9,998 ordinary shares of
HK$1 each in the company to the third respondent, a company
incorporated with limited liability under the laws of the Territory of the
British Virgin Islands and secondly, to issue and allot 19,998 ordinary
shares of HK$1 each in Superyield Construction to the third respondent. C
As a result of these allotments, the issued shares in the company are as
follows: the deceased’s estate now holds one share, amounting to 0.01%
of the company’s share capital; the second respondent also holds one
share; the third respondent now holds 9,998 shares, amounting to 99.98%
of the company’s share capital. D
The issued shares in Superyield Construction have since the allotment
been as follows: the company now holds one share, which amounts to
0.005% of the company’s share capital; Lam Kwan Realty Ltd likewise
holds one share and the third respondent now holds 19,998 shares,
amounting to 99.99% of Superyield Construction’s share capital. E
Similar exercises in dilution, say the petitioners, also occurred at about
the same time in other family companies, namely Superyield Properties
Ltd (Superyield Properties) and Wong Ma Kok Development Ltd.
Another company, Kilmaron Ltd (Kilmaron) underwent a similar exercise
somewhat earlier on 4 April 1997.
F
The petitioners, in particular, Mr Andrew Lam, the fifth petitioner,
believed that apart from receiving and holding the one share in Superyield
Construction, the company never carried on any other business, nor did it
require the infusion of new capital by way of any issue of shares. This is
not really in dispute although there is evidence that the company also held
a subscriber’s share in Superyield Nominees. G
The petitioners’ case is, also, that apart from holding the Ascot Villa
Property, Superyield Construction did not carry on any other business,
nor did it require the infusion of new capital by way of an issue of shares.
This, too, is not in dispute.
H
The issues
A list of issues as agreed by the parties are as follows:
1. Whether the second respondent paid for the Ascot Villa Property.
2. If so, whether Superyield Construction holds the Ascot Villa Property I
on a ‘purchase-money’ resulting trust for the second respondent and
as his nominee.
175
A 3. Whether the first respondent holds the 1 (50%) share in Superyield

Construction registered in its name as the second respondent’s
nominee.
4. Whether the deceased and, after his death on 15 February 1996, his
estate, hold the 1 (50%) share in the first respondent registered in the
B name of the deceased as the second respondent’s nominee.
5. If the answers to the aforesaid are in the affirmative, whether the court
should make an order that upon a grant of administration to the
deceased’s estate, that the 1 share in the first respondent registered in
the name of the deceased be transferred to the nominee of the second
C
respondent and such transfer be entered upon the register of members
of the first respondent.
6. If the answer to questions 1 to 5 are in the negative, whether the
second respondent had conducted the affairs of the first respondent in
a manner unfairly prejudicial to the interest of the estate of the
deceased by allotting:
D (1) 19,998 shares in Superyield Construction to the third respondent;
(2) 9,998 shares in the first respondent to the third respondent on 19
January 1998;
7. If so, the appropriate remedy for the petitioners.
E
The petitioners’ position is that if the first issue is answered in the
affirmative, they make no further submissions on the second and third
issues. Miss Wong did emphasise that, as far as the third issue is
concerned, that is on the basis that the Ascot Villa Property is the only
asset of Superyield Construction. Clearly if there are other assets, the
position may have to be revisited.
F Similarly, if issue 4 is answered in the affirmative, the petitioners make
no submission on issue 5 and Miss Wong accepts that issues 6 and 7
would not then arise.
The petitioners’ evidence

G For the petitioners, only the fifth petitioner, Mr Andrew Lam, the younger
brother of the second respondent, gave oral evidence. He made four
affirmations which contained evidence of the family background, the
beneficiaries of the deceased’s estate, details of the companies with which
the deceased was associated, the properties and shareholdings of the
H various corporate entitles, the steps taken in the administration of the
deceased’s estate, the dilutions complained of, and generally casting
doubt on the assertions made by the second respondent in his
affirmations.
What seems clear, however, is that none of the petitioners had much
I personal knowledge of the affairs of these companies. This, it seems to
me, was part of the discontent they felt with the second respondent. So
that the petitioners’ case, as developed in Mr Andrew Lam’s evidence, is
176
by and large one based on the available documents and inferences which A
Miss Wong invites me to draw from them and from the other surrounding
circumstances.
There is no dispute that the second respondent started assisting the
deceased in the management of the deceased’s business and assets since
the early 1970s after the second respondent’s return from Australia. The B
dispute is as to which of the companies and the shares in them belong to
the deceased, as the petitioners’ claim, or to the second respondent, as he
asserts, with the deceased holding such shares on his behalf as his
nominee.
C
The defence
In broad terms, the second respondent’s response to the petition may be
summarised as follows:
(1) The company which was incorporated in January 1981 was dormant
until it subscribed for one share in Superyield Construction in D
September 1982. Other than this share, the company had no other
assets. Miss Wong has, however, pointed out correctly that the
company had earlier taken up a subscriber share in Superyield
Nominees.
(2) The second respondent paid up the company’s capital of HK$2 and E
paid for all its expenses, not apparently amounting to very much. This
I accept.
(3) Superyield Construction was dormant until it purchased the Ascot
Villa Property in November 1990. This property remains Superyield
Construction’s only asset. F
(4) The Ascot Villa Property was paid for entirely by the second
respondent.
(5) The company held the one share in Superyield Construction basically
as the second respondent’s nominee and the deceased was appointed
a director of Superyield Construction to comply with the G
requirements of the Companies Ordinance; in other words, the
deceased had no real function in Superyield Construction which,
similar to other Superyield companies or some of them at any rate, is
the second respondent’s company to hold properties.
(6) The deceased held the one share in the company as the second H
respondent’s nominee and the office of director also to comply with
the requirements of the Ordinance.
(7) The deceased did not have any beneficial interest in these two
companies.
Items (4) to (7) are in issue in these proceedings and I will deal with them I
later on. The second respondent also says that Kilmaron and Superyield
Properties are companies controlled by him.
177
A The defence evidence

In addition to the second respondent, whose evidence I will have to
consider in some detail, two other witnesses provided affirmations and
oral testimony.
The first, Mr Spencer Lam, is the eldest son of the deceased and the
B elder brother of both the second respondent and the fifth petitioner. His
evidence really went to peripheral matters and he had no personal
knowledge as to the source of funds with which the Ascot Villa Property,
which was put into Superyield Construction, was paid for.
The other witness, a Madam Lam Shui Lin, a sister of the deceased and
C an aunt of Mr Spencer Lam and the second respondent, sold units in
Ascot Villa to her two nephews. She knew that she was selling those units
to them at a discount, as she thought, although they disagreed, that they
were short of funds. She also mentioned somewhat confusingly about
benefitting the deceased by so doing.
D Her evidence was somewhat confused and I did not find it of assistance
in resolving the disputed contentions of the parties.
The second respondent’s evidence

The second respondent made two affirmations which were supplemented
E by oral testimony. The oral testimony, in particular, was carefully and
ably tested by Miss Wong in cross-examination. His evidence is to the
following effect.
While the deceased was alive, the second respondent assisted in the
deceased’s business and in the management of the deceased’s properties.
F The second respondent had his own separate business and investments.
He established ‘shelf companies’, although he might not use them
immediately after incorporation. He gave evidence about the various
companies mentioned in these proceedings.
After the death of the deceased, Lam Kwan Realty, his son Geoffrey
and daughter Sharon were also appointed as directors of the company
G which the second respondent says was always his own company. It was
natural, so he says, for him to appoint members of his family to be the
directors of it. Lam Kwan Realty was appointed as a director also for
convenience. Lam Kwan Realty’s Board of Directors consisted of
himself, another younger brother, his son, his daughter and his aunt,
H Madam Lam Shui Lin and a corporate director, Superyield Nominees,
which is also a company said to be controlled by the second respondent.
Similarly, Superyield Construction was incorporated by him. This was
on 28 September 1982 and the two subscribing members were the
company and Lam Kwan Realty. As at 28 September 1995, the deceased,
I the second respondent’s daughter Sharon and the second respondent were
the directors. After the death of the deceased, the second respondent’s son
Geoffrey and Lam Kwan Realty were also appointed as directors of
178
Superyield Construction, which was also his own company, in which the A
deceased had no beneficial interest.
The deceased took no part in the management of the company and had
no interest in its affairs, nor did he put in any capital or assets into the
company which had very little expenses, all of which the second
respondent paid for. B
Superyield Construction was also dormant until the second respondent
purchased the Ascot Villa Property in its name in November 1990. The
deceased, according to the second respondent, was not conferred any
benefit by having his name as a subscriber and a director in Superyield
Construction. He said that the deceased was never paid any dividend or C
director’s fee or salary by the companies and he did not contribute any
capital for the purchase of the Ascot Villa Property and have no beneficial
interest in or entitlement to it.
The purchase of the Ascot Villa Property

D
The actual details relating to the purchase of the Ascot Villa Property are,
in certain respects, not entirely clear.
The second respondent’s evidence is that he paid his aunt $1m because
she refused to take more even though it was valued at $1.38m. The aunt
seemed to think that he paid less than that. She mentioned a figure of E
$600,000 in evidence, but again her recollection was, as she
acknowledged, faulty. The figure in the assignment which was carried
through to Superyield Constructions audited accounts for successive
years was also $1.38m.
The second respondent’s explanation, taken with what he had said in
F
his first affirmation and what appears from contemporaneous bank
statements, is somewhat confusing.
The upshot, as I inferred from the evidence available, is that by using
the figure of $1.38m in the assignment, which was, as I have mentioned,
the valuation used by the bank, he was able to get a loan of $966,000 from
the bank which was prepared to lend at 70% of its valuation. G
The loan was credited on 11 December 1990 to Superyield
Construction’s bank account which also showed payments in of $400,000
in cash and withdrawals of $380,000 on 26 November 1990 — three days
after the assignment in which the vendor (the aunt) had acknowledged
receipt of $1.38m which of course she never received. And 23 November H
1990 was also the date the second respondent said that his aunt, the
vendor, had agreed to the discount. The $400,000 was, however, initially
said by the second respondent to be for his aunt. Why was this necessary?
By 26 November 1990, the aunt had already agreed to accept $1m three
days earlier. I
The second respondent’s further explanations about balancing the
books of accounts did not, unfortunately, clarify the confusion.
179
A In making these comments about his evidence, I do not say that the
second respondent was trying to be deliberately untruthful. It is more
likely that he simply made a mistake. Having said that, it does seem clear
that the purchase money was arranged by the second respondent alone
through a mortgage with the Hongkong and Shanghai Banking Corp Ltd
B (the bank) for a loan at HK$966,000. I also accept that the balance of the
purchase price, namely some $34,000, was paid by the second respondent
and that it was the second respondent who arranged to pay off the bank
loan largely from income from letting the Ascot Villa Property. The
balance of the monthly repayments of the mortgage loan, where there
C
were initial shortfalls from the rental receipt, was paid by him and treated
as loans to Superyield Construction. The mortgage loan was completely
repaid in April 1998. Apart from being party to a joint and several
guarantee in respect of the mortgage loan, to which I will have to return, I
find that the deceased had no participation in the purchase of the Ascot
Villa Property.
D
The deceased’s role as a joint and several guarantor in respect of this
mortgage loan for $966,000, was not something which surfaced in the
evidence until a few days before the commencement of the hearing and
the second respondent was unable to shed much light as to how the
deceased came to be a joint and several guarantor.
E
Miss Wong criticised the second respondent for his inability to clarify
the circumstances surrounding the guarantee. My view is that the second
respondent has simply forgotten what happened. The second respondent
also said that the various allotments in January 1998, of which complaints
are made in the petition, were all made for his own convenience. I will
F deal also with this aspect later on.
Miss Wong mounted an effective and sustained attack on the second
respondent’s evidence. In relation to the Ascot Villa Property, she
reminded me that there was no declaration of trust and pointed out the
incomplete and unsatisfactory discovery in relation, in particular, to the
G evidence of payment for the Ascot Villa Property.
Miss Wong made the point that the documents produced did not show:
(1) how much the aunt was paid;
(2) when she was paid; or
H (3) that she was paid with funds from the current account of Superyield
Construction.
While this is all strictly correct, clearly these questions have to be
considered in the light of all the evidence, including the oral testimony of
I the second respondent.
Further, says Miss Wong, while the bank statements show the
repayment of the mortgage loan with funds from the current account,
180
other than deposits which were obviously attributable to rent paid by the A
tenants of the Ascot Villa Property, the documents disclosed do not show:
(1) the source of the $400,000;
(2) the uses to which that sum was put by Superyield Construction; or
(3) the sources of those deposits in the statements of the current account
B
identified as the second respondent’s loans to Superyield
Construction.
I make the same comment about having to consider all the evidence. My
own view is that the $400,000 seems very much a side issue.
On Miss Wong analysis, there is thus no documentary evidence of the C
payments by the second respondent of:
(1) a downpayment;
(2) the cost and disbursements associated with the purchase;
(3) the difference between the rental and the monthly repayments of the
mortgage loan. D
I accept that the documents do not tell the whole story. Nor would I
expect them to. Clearly the different questions depend on, as well, the
testimony in this case of the second respondent. I find that no
downpayment was ever made. E
As for the respondents’ evidence on the trust of the deceased’s share in
the company, Miss Wong pointed out that there is also no declaration of
trust. Moreover, the share had been put down as an asset of the estate of
the deceased in the second respondent’s affidavit to the Commissioner of
Estate Duty dated 9 January 1997, although he had given it the nominal
F
value of $1. Clearly, says Miss Wong quite legitimately, if this share had
been held on trust by the deceased for anyone, it ought to have gone in the
appropriate schedule as property held on trust by the deceased. The
second respondent’s explanation, which I accept, is that he was not
experienced in such matters and left it to his solicitors, or perhaps to the
solicitor’s clerk, and it did not appear to matter to him very much since G
that share was only valued at $1.
Miss Wong made the further point that even if the second respondent’s
testimony of the trust of the Ascot Villa Property is accepted, it does not
follow that the deceased and, after his death, his estate, holds the share in
the company as the second respondent’s nominee. This is because, apart H
from the one share in Superyield Construction, the company had at least
another asset, namely, a 50% shareholding in Superyield Nominees which
in turn holds, amongst others, 1% of the shares in Lam Kwan Realty at
the top of the Lam family group of companies.
These are valid observations made of the documentary evidence I
adduced by and on behalf of the second respondent. I accept that the
documents themselves do not identify that the second respondent
181
A necessarily provided all the funds for the purchase of the Ascot Villa
Property. I also accept that the evidence in relation to the $400,000 is
confused and not entirely satisfactory, and that the bank statements and
the audited accounts show that there may have been at least four sums
paid into Superyield Construction’s bank account which did not come
B directly from the second respondent. The second respondent was able to
explain these four sums to my satisfaction in the cross-examination.
At the same time, as I have mentioned earlier, I do not think that the
second respondent was guilty of deliberate untruths in the course of his
evidence to which I have already recounted. In particular, I am unable to
C and do not reject his evidence that both the company and Superyield
Construction are his companies and that the presence of the deceased as a
shareholder and director in the company and as a director in Superyield
Construction is anything more than to satisfy the requirements of the
Companies Ordinance. On the contrary, his evidence to this effect is
convincing and I accept it. He and the deceased were clearly in a close
D
personal and business relationship. He was the son who assisted the
deceased and later the deceased siblings in their property affairs, except
those of one of the deceased’s brothers, even since the second respondent
returned from Australia in the early 1970s. They clearly trusted one
another.
E
As for the funds for the purchase of Ascot Villa, I have already
commented on the unsatisfactory nature of certain items of the evidence.
That does not mean that I am in doubt as to who arranged for the funds
and who purchased from Madam Lam, or the consideration that Madam
Lam was actually paid. I am satisfied that it was the second respondent
F who arranged for the funds, including the loan from the bank, and Madam
Lam was paid $1,000,000 by cheque drawn on Superyield Construction’s
bank account on 11 December 1990.
I am also satisfied that the beneficial owner of those funds is the second
respondent, that the deceased had no interest in them and, apart from
G making himself jointly and severally liable on a guarantee to the bank, did
not do anything else to arrange for the purchase which had nothing to do
with him. It was the second respondent’s purchase which was carried out
via the corporate vehicle of Superyield Construction. On the evidence, I
am satisfied the deceased had no interest in the company, nor directly or
H indirectly in Superyield Construction which the second respondent chose
to hold the Ascot Villa Property.
The second respondent was clearly not entirely sure of his ground in a
number of instances in the course of his evidence. One area in which he
had problems was in relation to questions put to him in connection with
I his affidavit to the Commissioner of Estate Duty, including the valuation
of certain of the shares in the various companies and how the deceased’s
share in the company was treated and described in the affidavit. I agree
182
with much of Miss Wong’s criticism of parts of what appear in the A

documents for the Estate Duty Office and in parts of the second
respondent’s evidence, and it may be that some of the information
supplied was less than complete.
On the whole, however, these difficulties, although ably deployed by
Miss Wong, do not have too much of an adverse impact on the second B
respondent’s credibility in connection with the matters directly germane
to the issues which I have to consider.
I am satisfied that despite some of these difficulties in the second
respondent’s evidence and despite, as I have said a searching and very
wide-ranging cross-examination by Miss Wong, that the second C
respondent emerged essentially unshaken on the areas of the beneficial
ownership of the company, of the beneficial ownership of Superyield
Construction, on the funds for the purchase of the Ascot Villa Property
and of his sole beneficial interest to these companies and that property.
Submissions were also made on a number of other points. For
D
completeness, I deal with them briefly.
The dilution complaint under s 168A

If I had not found in favour of the second respondent on the foregoing
matters, and if I had found that the deceased had interests in the company, E
and therefore indirectly in Superyield Construction, I would have found
that the allotments were unfairly prejudicial to the company and the estate
of the deceased for these reasons:
(1) Neither Superyield Construction nor the company carry on at any
time any business requiring the infusion of new capital. F
(2) The sums raised were nominal and plainly insufficient for any
genuine or bona fide commercial reasons.
(3) Even if Superyield Construction and the company genuinely required
these sums for the purposes of their businesses, the company and the
deceased’s estate could have been but were not invited to subscribe G
for any part of the new shares. It cannot be suggested that either
Superyield Construction or the deceased’s estate would not have been
financially able to take up their proportionate parts of the new shares
or that they would not have done so.
(4) The price at which the new shares were allotted to the third H
respondent, ie HK$1 per share, fell far short of the net asset value of
Superyield Construction and that of the company.
The second respondent’s initial explanation for the allotment in his
affirmation is that the disputed allotments were done for his convenience.
This was elaborated upon in oral testimony. Basically, they were I
supposed to have had the effect of minimising stamp duty and estate duty.
Despite Miss Wong’s very patient exploration with the second
183
A respondent, I have to say that his explanation and rationale are not
convincing to me.
Miss Wong referred to amongst others, ss 34 and 35 of the Estate Duty
Ordinance, s 57B of the Companies Ordinance and art 38 of the Articles
of the company which deals with the issue of allotment of shares
B following an increase in capital. In the light of my findings it is
unnecessary to refer to these provisions. Miss Wong also helpfully
referred to a number of authorities including Re a Company (No 007623
of 1984) [1986] BCLC 362, where at 367 Hoffmann J, as he then was,
made these observations:
C Nevertheless, I do not think that the bona fides of the decision or the fact that
the petitioner was offered shares on the same terms as other shareholders
necessarily means that the rights issue could not have been unfairly prejudicial
to his interests. If the majority know that the petitioner does not have the
money to take up his rights and the offer is made at par when the shares are
D plainly worth a great deal more than par as part of a majority holding (but very
little as a minority holding), it seems to me arguable that carrying through the
transaction in that form could, viewed objectively, constitute unfairly
prejudicial conduct …
This was followed by Godfrey J, as he then was, in the case of Tseng Yueh
E Lee Irene v Metrobilt Enterprises Ltd [1994] 2 HKC 684, 689-690. I need
not refer to the other authorities on this point.
Resulting trusts and the burden of proof

On the factual findings I have already made, it may be that the legal
F submissions on the issue of the burden of proof do not call for much
further discussion. The matter was, however, gone into in some detail and
as the point is not without interest, observations on those submissions
may not be out of place.
Miss Wong’s starting point is that the petitioners were not at any time
G involved in or privy to the formation or subsequent management of the
company or the group of companies of which it forms part, or their
businesses or assets. She refers to the well-known principles stated in
Phipson on Evidence (15th Ed) paras 4-03 to 4-05 at pp 56-58. I need
only read short extracts from what the learned editors say in those
H paragraphs:
4-03 So far as the persuasive burden is concerned, the burden of proof lies
upon the party who substantially asserts the affirmative of the issue.
…
This rule is adopted principally because it is but just that he who invokes
I the aid of the law should be the first to prove his case; and partly because, in
the nature of things, a negative is more difficult to establish than an
affirmative. …
184
4-04 In deciding which party asserts the affirmative, regard must be had to the A
substance of the issue and not merely to its grammatical form, which latter the
pleader can frequently vary at will. Moreover, a negative allegation must not
be confused with the mere traverse of an affirmative one. The true meaning of
the rule is that where a given allegation, whether affirmative or negative, forms
an essential part of a party’s case, the proof of such allegation rests on him. An
alternative test, in this connection, is to strike out of the record the particular B
allegation in question, the onus lying upon the party who would fail if such a
course were pursued.
On the basis of these and other passages, Miss Wong submitted that the
burden is upon the second and third respondents to establish, on the
C
balance of probabilities, the alleged trusts of:
(1) the Ascot Villa Property;
(2) the company’s share in Superyield Construction; and
(3) the deceased’s share in the company.
D
Miss Wong made very helpful and detailed submissions on the law of
resulting trust. The propositions I set out hereunder I have drawn heavily
on her written and oral submissions:
1. A useful starting point is art 31(1) of Underhill & Hayton, Law of
Trusts and Trustees (15th Ed) p 317 as follows: E
When real or personal property is conveyed to a purchaser jointly with

others, or to one or more persons other than the purchaser, a resulting
trust will be presumed in favour of the person who is proved … to have
paid the purchase-money in the character of purchaser (as opposed to that
of donor or lender). F
2. The better view is that this is a rebuttable presumption of law in that:

(a) it applies as soon as the fact of contribution to the purchase price
is proved; and
(b) in the absence of other evidence, it is conclusive for the party in G
whose favour it operates and for the purpose for which it
operates.
3. The fact being presumed is that of the intention of the parties (or
more precisely, the providers of the purchase-money) in the absence
of evidence of their actual intention. That being the case, the H
presumption can be rebutted by:
(a) the application and non-rebuttal of the presumption of
advancement;
(b) evidence of an actual intention on the part of the purchaser to
benefit the holder of the legal title. I
4. The principle is applicable to different combinations of factual
circumstances:
185
A (a) Where one person pays the whole of the purchase price and title is
taken in the name of another, it is presumed, unless the contrary is
shown, that it was intended that the property be held in trust for
him.
(b) Where two persons contribute to the purchase price in equal
B shares and title is taken in the name of one only, it is presumed,
unless the contrary is shown, that it was intended that the
registered owner holds the property in trust for the other person to
the extent of 50%.
(c) Where two persons contribute to the purchase price in unequal
C shares and title is taken in the name of both as joint tenants or
tenants-in-common in equal shares, it is presumed, unless the
contrary is shown, that it was intended that the property be held in
trust for both of them as tenants-in-common in proportion to their
respective contributions.
D 5. The material intention is that of the provider of the purchase money.
See Calverley v Green (1984) 155 CLR 242, per Gibbs CJ at 251 and
per Mason and Brennan JJ at 261.
6. The implied trust arises at the time of the purchase so that the
contributor acquires an equitable interest at the outset and such
E interest corresponds to the share he or she paid for at the time of
purchase. See Underhill & Hayton at 321.
7. The time to take stock of the respective interest taken by the parties is
the time of acquisition.
8. It follows that the time at which the respective contributions are to be
F calculated for the purpose of fixing the parties’ respective interest is
also the time of acquisition. See Crisp v Mullings [1976] 2 EGLR
103G-K and Calverley v Green at 252 and 262.
9. Where land is purchased to be built on, the extent of the parties’
interest would be fixed at the conclusion of the activities of purchase,
G building and improvement. See Tracy v Bifield (1998) 23 Fam LR
260, a decision of the Supreme Court of Western Australia.
10. Where some or all of the purchase price is borrowed, the acceptance
of a personal liability as against the lender to repay, for instance, by
the execution of a mortgage containing a personal covenant to repay,
H constitutes a contribution to the purchase. Where the covenants to
repay the lender is joint and several, each party to the covenant to
repay is taken to have contributed half of the sum raised for the
purchase. In addition to Crisp v Mullings and Calverley v Green, a
number of other Australian cases discussing this proposition were
I referred to. I need not go into the details of these cases. I touch on
some of them later on in another context. Most of them are, as to be
expected, decisions on their own facts.
186
11. The better view is that post-completion unequal contributions to A

mortgage repayments, whether by prior agreement or otherwise,
cannot affect the quantum of interest taken by the respective parties at
the date of acquisition under, I emphasise, a resulting trust. Such
contributions may, however, have a bearing on the remedies which
may be available under what is now usually referred to as a common B
intention constructive trust or under some form of proprietary
estoppel. See again, for instance, Crisp v Mullings; Calverley v Green
pp 252 and 257-258; Piper v Knowles (Equity Division, Supreme
Court of New South Wales, Ref 1784/1986, 31 January 1989,
unreported) and Ammala v Sarimaa (1993) 17 Fam LR 529, a C
decision of the Federal Court of Australia.
12. The fact that the mortgage debt was not repaid by the parties equally
may, however, be relevant to an equitable accounting between the
parties. See Calverley v Green, Piper v Knowles and Jancso v Vuong
(1988) 12 Fam LR 615, a judgment of Young J delivered on 4 October
1988. D
13. The burden falls upon the party asserting, in I believe Miss Wong’s
words, or perhaps not, that ‘the equitable right is not at home with the
legal title’. See the similar sentiments in Crisp v Mullings at 103F-G.
14. These principles are not restricted in their application to persons
within any particular category of relationships. E
Mr Pirie’s submission on this point for the second and third respondents
I have extracted from his written propositions to which I have added other
comments.
F
Firstly, Mr Pirie says equity is suspicious of gifts of land to persons
who do not provide the purchase price. It seems to me that this puts the
matter too high. In any given case in which there is an allegation of a gift
of land, the circumstances may be such that the court will feel obliged to
scrutinise the evidence, but that hardly elevates the court’s task in a
particular case into a general proposition of law, or that any category of G
transaction must be regarded with suspicion.
Secondly, Mr Pirie says that there is no evidence that the deceased
provided any money for the purchase of the one share in the company, nor
for any consideration in the purchase of the Ascot Villa Property. I note
that, while this is correct, it ignores the submission that the deceased H
contributed to the purchase of the Ascot Villa Property by his provision of
the joint and several guarantee in respect of the mortgage loan to
Superyield Construction.
Thirdly, Mr Pirie says that neither the company nor Superyield
Construction provided the whole purchase price for the Ascot Villa I
Property. This is correct. He goes on to say in those circumstances, the
onus probandi is upon the party seeking to upset the resulting trust in
187
A favour of the second respondent in the initial provision of the company’s

share capital, and in relation to the provision of the purchase money for
the Ascot Villa Property. In this connection, he refers to dicta of Bagnall J
in Cowcher v Cowcher [1972] 1 WLR 425 at 431 as follows:
A resulting trust arises where a person acquires a legal estate but has not
B provided consideration, or the whole of the consideration for its acquisition,
unless a contrary intention is proved.
Mr Pirie also refers to Watson v Smith [1998] 3 HKC 461 at 464, where
Godfrey JA (as he then was) said:
C When there is evidence available for the resolution of questions such as this,
which unfortunately arise all too frequently, the court has to consider that
evidence, and decide where the truth lies. There are factual presumptions
which can sometimes assist the court in resolving these questions, such as the
presumption of advancement (ie gift). However, since there is no equitable
obligation on a mother to advance a daughter, there is no presumption of
D advancement when a mother makes a purchase of property in the name of her
child … Rather, in the absence of other evidence, there would in such a case
be a presumption of a resulting trust, that is to say, that the property purchased
belonged to the mother, as to the person who paid for it, no matter in whose
name it was taken. And, where it is said that money was advanced for the
purchase of a property by way of gift to a donee, the donee has to prove that
E that was the case. The burden of proof that a transaction was intended to be by
way of gift rests on the donee: cp Seddon v Davidson [1968] 1 WLR 1083.
Fifthly, Mr Pirie says that the presumption of a resulting trust may still
arise even if only part of the consideration was provided presumably by
one of the parties. This is not in controversy.
F Sixthly, Mr Pirie says that the presumption of resulting trust arises if
mortgage payments are paid and he refers to Gissing v Gissing [1971] AC
886 at 907. The whole passage from the speech of Lord Diplock is as
follows:
Similarly when a matrimonial home is not purchased outright but partly out of
G
moneys advanced on mortgage repayable by instalments, and the land is
conveyed into the name of the husband alone, the fact that the wife made a
cash contribution to the deposit and legal charges not borrowed on mortgage
gives rise, in the absence of evidence which makes some other explanation
more probable, to the inference that their common intention was that she
H should share in the beneficial interest in the land conveyed. But it would not be
reasonable to infer a common intention as to what her share should be without
taking account also of the sources from which the mortgage instalments were
provided. If the wife also makes a substantial direct contribution to the
mortgage instalments out of her own earnings or unearned income this would
be prima facie inconsistent with a common intention that her share in the
I beneficial interest should be determined by the proportion which her original
cash contribution bore either to the total amount of the deposit and legal
charges or to the full purchase price. The more likely inference is that her
188
contributions to the mortgage instalments were intended by the spouses to A

have some effect upon her share.
Lord Diplock was there referring to the position as between husband and
wife and his Lordship was, it seems to me, discussing evidential matters
rather than laying down any rule of law.
Seventhly, Mr Pirie says that it does not matter to the operation of a B
resulting trust that the donor, here on his analysis the second respondent,
of the property did not have the specific intention to create a resulting
trust. I believe that this follows from the concept of a resulting trust. In
Allen v Snyder (1977) 2 NSWLR 685, Samuels JA had this to say at 698:
C
… I would, however, have thought it tolerably plain that there is a clear
distinction between a resulting trust and a constructive trust. …
After referring to authority, His Honour continued:
… From this it appears that a resulting trust depends upon the presumption, or
inference, that the settlor intended the legal owner to hold the beneficial title in D
trust for him: per Jordan C.J. (89), or that he did not intend the legal owner to
have the beneficial interest in the property, as Professor Scott puts it. Whether
affirmative or negative, it is still a matter of intention; and, whether the
presumption which raises the inference of intention is strictly one of fact or
law, the state of fact so arising is rebuttable by evidence to the contrary effect.
A constructive trust, however, does not depend upon intention. In Jacobs’, E
Law of Trusts in Australia, 4th ed., p.232 its character is described thus: ‘A
constructive trust differs from an express trust in that it is raised by operation
of law without reference to the intentions of the parties concerned and,
certainly, in the cases which come before the courts, contrary to the intentions
and desires of one of the parties; while it differs from a resulting trust in that, F
in the case of a resulting trust, although the resulting trust arises by operation
of law, the courts imply that a trust was actually intended and in the face of
evidence to the contrary will discard the implication. However, in the case of a
constructive trust the intention of the parties is irrelevant. Constructive trusts
arise where no trust has directly or indirectly been declared, but where,
according to the principles of equity, it would be a fraud for the person on G
whom the court imposes the trust to assert a beneficial ownership.
The evidence shows that the deceased was registered as a shareholder of
the company which in turn was a registered shareholder in Superyield
Construction. Prima facie, if no other evidence was available, it would be
a very strong thing to hold that the beneficial ownership did not go with H
the legal title. So, at the first step, it would have been for the second
respondent to displace that prima facie position.
Where, as I have held, the evidence is to the effect that both the
company and Superyield Construction are companies belonging to the
second respondent beneficially and in which the deceased had no I
beneficial interest, and that the second respondent arranged the purchase
money for the purchase of the Ascot Villa Property, the presumption — if
189
A it is still necessary to resort to one after that evidence — is that he is

entitled to the beneficial interest in the property by virtue of a resulting
trust in his favour where the property is not put into his own name, unless
the circumstances indicate, for instance, that a gift of the property was
intended, either in whole or in part. There are no such circumstances in
B this case. In this connection, it may be pertinent to refer to other dicta of
Lord Diplock’s in Pettitt v Pettitt [1970] AC 777 at 823G-H:
A similar technique is applied in imputing an intention to a person wherever
the intention with which an act is done affects its legal consequences and the
evidence does not disclose what was the actual intention with which he did it.
C This situation commonly occurs when the actor is deceased. When the act is of
a kind to which this technique has frequently to be applied by the courts the
imputed intention may acquire the description of a ‘presumption’ — but
presumptions of this type are not immutable. A presumption of fact is no more
than a consensus of judicial opinion disclosed by reported cases as to the most
likely inference of fact to be drawn in the absence of any evidence to the
D contrary …
In my judgment, the court resorts to the presumption of resulting trust and

advancement only where there is no acceptable evidence of the actual
intention of the provider or providers of the purchase money as to the
E vesting and apportionment of the beneficial interest. Where there is
evidence of actual intention upon which the court may act and where the
intention proved is not consistent with the legal title, the court gives
redress, no longer under a resulting trust, in my view, but under a
common intention constructive trust or an equitable proprietary estoppel.
F Which brings me to the final legal issue on which I ought to consider.
The effect of the joint and several guarantee provided by the deceased
Miss Wong relies heavily on the decision of the High Court of Australia in
Calverley v Green and on a number of other cases, mostly from Australia,
G some of which I have already mentioned, for the proposition that, by
providing such a joint and several guarantee, the deceased was a provider
of part of the purchase price and acquired a beneficial interest in the Ascot
Villa Property. I can take the facts of the case from the headnote:
H A man and woman lived together for about ten years as though they were
husband and wife. At first they lived in a house owned by the man. Later they
decided to move to another area if they could find a house that the man could
afford to buy. They found a house, but the man had difficulty obtaining
finance, and told the woman that the finance company required the purchase to
be in their joint names. Money was then raised on a mortgage under which the
I parties were jointly and severally liable to make repayments. It was agreed
between them that the man in fact would make the repayments, and he did so.
The house was purchased, the man paying the deposit out of his own funds
190
and the balance being raised on the mortgage. The parties were registered as A
joint tenants. Some years later they parted company.
Held: (1) by Gibbs C.J., Mason, Brennan and Deane JJ., that the fact that
the balance of the price was raised by a mortgage under which both parties
were liable to the mortgagee constituted a contribution by the woman to the
price and the arrangement between them that the man would make the
repayments did not establish that he alone provided the whole of the price. B
Miss Wong referred to a number of passages in the judgments and I think

I ought to refer to some of them. First, at p 252, in the judgment of the
Chief Justice:
The extent of the beneficial interests of the respective parties must be C
determined at the time when the property was purchased and the trust created.
The fact that the mortgage debt was repaid by the appellant is therefore not
relevant in determining the extent of the interests of the parties in the land,
although it may be relevant on an equitable accounting between the parties.
…
In taking accounts between the parties it will become necessary to consider D
that the appellant has been making the payments under the mortgage but that
on the other hand he has been for some time in sole occupation of the
property. Although the appellant may be entitled to credit for the amount of
the mortgage payments which exceeded her share of the amount payable the
respondent may, on the other hand, be entitled to receive an occupation rent in E
respect of the period during which the appellant had sole occupation of the
house.
Then at p 257 to the joint judgment of Mason and Brennan JJ (as they
then were):
The first question is whether the plaintiff was a contributor to the purchase F
price of the property, as the Court of Appeal found, or whether she was not, as
Rath J. found. The defendant’s payment of the instalments due under the
memorandum of mortgage, in accordance with the arrangement made between
the parties, may be thought to be, or to be the equivalent of, the provision pro
tanto of the purchase price of the property. After all, the only moneys which G
were actually paid out of what the parties had owned before settlement of the
contract for the purchase of the Baulkham Hills property or out of what they
had earned thereafter had come out of the defendant’s pocket. The property
was purchased on the basis that the purchasers should pay it off over twenty
years, a basis familiar to many home buyers. It is understandable but
erroneous to regard the payment of mortgage instalments as payment of the H
purchase price of a home. The purchase price is what is paid in order to
acquire the property; the mortgage instalments are paid to the lender from
whom the money to pay some or all of the purchase price is borrowed. In this
case, the price was $27,250, of which $18,000 was borrowed from the
mortgagee by the plaintiff and defendant jointly. The balance was paid by the
defendant out of his own funds, being part of the proceeds of the sale of the I
Mount Pritchard property. Thus the plaintiff and defendant both contributed to
the purchase price of the Baulkham Hills property. They mortgaged that
191
A property to secure the performance of their joint and several obligation to

repay principal and to pay interest. The payment of instalments under the
mortgage was not a payment of the purchase price but a payment towards
securing the release of the charge which the parties created over the property
purchased. We would agree with the view expressed by the English Court of
Appeal in Crisp v. Mullings, a case in which the material facts are not
B distinguishable from the present:
‘The situation, in our view, is that the defendant does not establish that he
alone provided the purchase price, any more that he would have, had the
whole price been provided by a joint mortgage; and the resulting trust of
the whole is therefore not established.’
C
As both parties contributed to the purchase price, there could not be a resulting
trust in favour of the defendant alone.
And then at p 267, the judgment of Deane J:
… Regardless of motivation however, the fact remains that the loan made
D pursuant to the mortgage was made to Miss Green jointly with Mr. Calverley
and that, in the absence of a contrary understanding to the effect that the
borrowed money should be Mr. Calverley’s alone (and none was shown), the
loan moneys applied in the purchase of the home were Miss Green’s as well as
Mr. Calverley’s. That being so, the Court of Appeal was correct in holding that
E the case could not properly be approached on the footing that the purchase
price had been provided by Mr. Calverley alone. Upon a proper analysis, one-
half of the moneys which were jointly borrowed and applied towards the
purchase were provided by Miss Green. The residue was provided by Mr.
Calverley.
Lastly, we go back to the judgment of Murphy J at p 264:
F
The general presumption of a resulting trust when the purchaser of property
causes it to be transferred to another should be discarded … The presumption
of advancement, supposed to be an exception to the presumption of resulting
trust, has always been a misuse of the term presumption, and is unnecessary.
Transfer of the title of property wholly or partially to another is commonly
G regarded as of great significance, especially by those in de facto relationships.
The notion that such a deliberate act raised a presumption of a trust in favour
of the transferor, would astonish an ordinary person.
In the absence of those presumptions, the legal title reflects the interests of
the parties, unless there are circumstances (not those false presumptions)
H which displace it in equity.
…
In this case, the fact that the title to the property is in the parties jointly, is
not displaced by anything in the circumstances. The circumstance that the
contributions to the purchase were unequal, and that by arrangement the
mortgage payments were made by Mr. Calverley during their living together,
I while Miss Green paid most of the household expenses, raises no equity. The
property is that of the parties jointly. The members of the Court of Appeal
were correct in taking the view that there was no presumption which detracted
192
from the legal title, which should prevail. Their decision in this respect should A
stand, and if that were all, the appeal should be dismissed.
The fact that since the parting, although the mortgage payments were a
joint obligation, they were made by Mr. Calverley, may raise questions of
contribution due to him, against which should be set-off the value of the
occupation of the property by Mr. Calverley.
B
I do not take issue with any of the utterances contained in the majority
judgments in Calverley v Green, or even with the sentiments expressed in
the judgment of Murphy J, although I would not have considered myself
at liberty to embrace His Honour’s views if the question of the continued
existence of the various presumptions had arisen. C
In Calverley v Green, one of the issues was whether the presumption of
advancement applied to what was referred to as a de facto relationship
between a man and a woman. The majority held that it had no application
to such a relationship. The parties were registered as joint tenants and the
decision turned on the equitable presumption that the parties held the
D
legal estate in trust for themselves in shares proportionate to their
contributions, which, on the facts, was not rebutted. The legal liability
under the mortgage was clearly a factor to be considered as part of the
circumstances. There are two other short passages in the judgment of the
Chief Justice to which I should refer. The first is at p 246:
E
Where a person purchases property in the name of another, or in the name of
himself and another jointly, the question whether the other person, who
provided none of the purchase money, acquires a beneficial interest in the
property depends on the intention of the purchaser. However, in such a case,
unless there is such a relationship between the purchaser and the other person
as gives rise to a presumption of advancement, i.e., a presumption that the F
purchaser intended to give the other a beneficial interest, it is presumed that
the purchaser did not intend the other person to take beneficially. In the
absence of evidence to rebut that presumption, there arises a resulting trust in
favour of the purchaser. Similarly, if the purchase money is provided by two or
more persons jointly, and the property is put into the name of one only, there
is, in the absence of any such relationship, presumed to be a resulting trust in G
favour of the other or others. For the presumption to apply the money must
have been provided by the purchaser in his character as such — not, e.g., as a
loan. Consistently with these principles it has been held that if two persons
have contributed the purchase money in unequal shares, and the property is
purchased in their joint names, there is, again in the absence of a relationship H
that gives rise to a presumption of advancement, a presumption that the
property is held by the purchasers in trust for themselves as tenants in
common in the proportions in which they contributed the purchase money.
And at p 251:
However, both the presumption of advancement, and the presumption of a I
resulting trust, may be rebutted by evidence of the actual intention of the
purchaser at the time of the purchase: see Charles Marshall Pty. Ltd. v.
193
A Grimsley. Where one person alone has provided the purchase money it is her
or his intention alone that has to be ascertained.
In the present case, the only evidence of intention, perforce, came from
the second respondent. Once his evidence is accepted as to the beneficial
ownership of the company and Superyield Construction, and the role of
B the deceased in those companies, and the role or lack of one of the
deceased in the purchase of the Ascot Villa Property, including the
intention behind the purchase as to who is to benefit therefrom, namely
the second respondent, there is no longer any question of any
presumption, equitable or otherwise, which has to be rebutted to establish
C beneficial ownership. The Ascot Villa Property was purchased and
registered in the name of Superyield Construction alone and the lack of
evidence surrounding the execution of the guarantee does not assist the
petitioners since the relationship between the deceased and the second
respondent is such that the presumption of advancement applies. I note
D Miss Wong’s submissions that there is other evidence which should rebut
the resumption of advancement, but I do not accept that the other
evidence referred to by Miss Wong has that effect.
Miss Wong also referred me to a number of Australian cases. I was
greatly assisted by them. Most of them clearly support the proposition for
E
which Calverley v Green was cited.
Miss Wong says, and I accept, that on the facts of this case, there is no
difference in principle between assuming liability as a mortgagor and as a
joint and several guarantor. In principle, that seems to me to be correct. In
both instances, the key is the potential liability of the party under the
obligation assumed.
F
I also accept that, as a matter of analysis that, it is appropriate to
consider the purchase of the Ascot Villa Property, if the evidence justifies
it, to be a joint purchase by two individuals in the name of a third party,
here a $2 company with no other asset and leading to the conclusion that
its covenant to repay would not be a meaningful one.
G This guarantee troubled me initially. In the end, however, while there
was no evidence of the circumstances surrounding the guarantee, any
possible presumption of a resulting trust based on the deceased’s
contribution to the purchase by the provision of the guarantee is negatived
and displaced, as I have indicated earlier, by the presumption of
H advancement. The consequence of applying the presumption of
advancement, as it happened, also seems to me to be far more likely in the
circumstances, because of the very close relationship between the
deceased and the second respondent.
The concept of a resulting trust depends on the intention of the party
I putting up the purchase money. In a number of husband and wife cases
and cases of cohabitation drawn to my attention, the courts were in the
main concerned to ascertain the intention of the parties, usually both
194
contributing in some shape or form, either for the purchase or to the A

household generally. So that where, on the face of it, both parties are
legally liable under a mortgage arranged to purchase the property, that is
quite likely to be a determinative factor which the courts consider in
deciding in whom or in what proportion the beneficial interest in the
property vests, even without the assistance of Calverley v Green. I note B
that there are a couple of instances where Calverley v Green was not, as it
were, applied unreservedly. I need not go into those cases, but for
completeness I will mention them. They are: Trustee of the Property of
Sandor, a Bankrupt v Ramirez (Court of Appeal, Supreme Court of New
South Wales, Ref 40290/1997, September 1999, unreported) and C
Stockbridge v Lupton, an unreported decision of McLelland J of the
Supreme Court of New South Wales, dated 14 March 1989. These are
both cases which may be, not unlike some of the others I have been
shown, better explained as examples of a common intention constructive
trust.
D
It certainly does not follow that one who is asked to stand surety on a
loan to effectuate the purchase of a property necessarily becomes a
beneficial owner to the extent that he is a surety. Miss Wong did not put it
so high. Whether any beneficial ownership is conferred by any given
transaction depends on the intention of the parties at the time the
transaction is undertaken. If there is evidence of the actual intention, then E
there is little scope for the operation of the various presumption. The
circumstances in this case do not lead to an inference of the deceased
having any beneficial entitlement to the Ascot Villa Property, to the
company or to Superyield Construction by virtue of the deceased having
been allotted a subscriber share in the company. F
My conclusion then is that both the first and fourth of the agreed issues
to be tried are to be answered in the affirmative.
I mention just one other matter.
This is an unfortunate and unhappy piece of litigation where family
members are polarised into opposite camps. The deceased clearly left a G
sizable estate and I am sure he would have been disappointed to learn that
his descendents and survivors are at loggerheads and engaged in a hostile
squabble over his financial achievements. It would be far better if the
brothers and sisters can try to work together and co-operate on the
administration of the deceased’s estate. H
I will now hear the parties on costs and any other matters which may
still be outstanding.
[Submissions from counsel]
Mr Cheung, for the second and third respondents, applied for costs
against the petitioners. He made the point that costs normally follow the I
event and on my findings and ruling, his clients have been successful. He
reminds me that, although I have a discretion, unless there are exceptional
195
A circumstances, my discretion ought to be exercised in favour of the

successful party or parties.
Miss Wong, on the other hand, pointed out a number of factors which
she says I ought to take into consideration. First of all, she says that the
publicly available documents all indicate that the deceased was a legal
B owner of 50% of the issued shares of the company. The beneficial
ownership normally goes with the legal title, and it was reasonable for the
petitioners to commence these proceedings, otherwise all that they were
left with is the say so of the second respondent as to the deceased’s
entitlement. She also pointed out that much of the evidence marshalled in
support of the second respondent’s case did not emerge until either
C shortly before trial, or during the trial. She reminded me that in the course
of the second respondent’s evidence, he was given the opportunity to
supplement the documents he had already produced on discovery on more
than one occasion and it was those documents which, as it turned out, had
a material bearing on my ruling in his favour. She also pointed out that
D those documents, including what had been shortly referred to as the
ledger and vouchers, produced during the course of the trial, were all
documents covered by previous orders for discovery made, as I
understand it, by Le Pichon J and had been the subject of requests from
the solicitors quite a while back. And that even the bank statements were
E not produced until 20 January of this year.
I also note that apart from what I have termed this drips and drabs
method of discovery, the affirmations filed in these proceedings by the
second respondent were clearly not as full and complete as his evidence
turned out to be after these other documents were produced and expanded
upon orally.
F In the circumstances, taking, I hope, everything into account, I believe
the correct order is that each party should pay its own costs. I make no
order as to costs.
Mr Cheung also asked for the petition to be dismissed. Miss Wong
accepted that dismissal followed from my judgment and I order that the
G petition be dismissed.
Reported by Victoria Lai and Richard Chan
196
58
[198S]
[HOUSE OF LORDS] A
BRITISH AIRWAYS BOARD RESPONDENTS

AND
LAKER AIRWAYS LTD. AND OTHERS . . . . APPELLANTS
BRITISH CALEDONIAN AIRWAYS LTD. . . RESPONDENTS B

AND
LAKER AIRWAYS LTD. AND OTHERS . . . . APPELLANTS
LAKER AIRWAYS LTD. AND ANOTHER APPELLANTS

AND „
SECRETARY OF STATE FOR TRADE RESPONDENT
AND INDUSTRY
[CONJOINED APPEALS]
1984 June 5, 6, 7, 11, 12, Lord Diplock, Lord Fraser of Tullybelton,

13, 14, 18, 19; Lord Scarman, Lord Roskill D
July 19 and Lord Brightman
Injunction—Jurisdiction to grant—Restraint of foreign proceedings—
United Kingdom airline's antitrust action in United States—No
alternative English forum—Whether action in United States
unconscionable
Aircraft—International agreements—Bermuda Agreement between E
U.K. and U.S. Governments—Antitrust action in United States
between United Kingdom designated airlines—Whether restrainable
in England—Protection of Trading Interests Act 1980 (c.ll),
s.l(l)(a)—Protection of Trading Interests (U.S. Antitrust Meas-
ures) Order 1983 (S.I. 1983 No. 900)
From 1977 the rights of British and American airlines to
operate transatlantic air services between the United Kingdom F
and the United States were regulated and controlled by a treaty
between the two governments known as "Bermuda 2" under
which each country had the right to designate airlines of its own
nationality to fly particular routes. British airlines were subject
to control by the United Kingdom Civil Aviation Authority
("C.A.A."), which regulated their fares. The corresponding
body for United States airlines was the United States Civil pu
Aviation Board ("C.A.B."). Article 12 of Bermuda 2 provided
for the fixing of the tariffs of designated airlines, which were to
be subject to the approval of the C.A.A. and the C.A.B., who
had to try to ensure that the designated airlines conformed to
the agreed tariffs. Both the plaintiffs, B.A. and B.C., and the
defendants, Laker, were United Kingdom designated airlines
licensed on terms that they charged fares approved by the
C.A.A. and were only authorised to fly into United States H
airspace if those fares were approved by the C.A.B. In 1977,
Laker obtained permission to operate "Skytrain," which was a
low-cost scheduled transatlantic service. Lakers later encountered
financial difficulties and went into liquidation.
197
59
1 A.C. British Airways v. Laker Airways (H.L.(E.»
^ In a civil action in the United States District Court for the
District of Columbia, Laker, by a complaint indorsed "jury trial
demanded," claimed against B.A. and B.C. and other defendant
airlines that its collapse in February 1982 had be.en caused by a
conspiracy between the defendants to restrain and monopolise
United States foreign trade and commerce in air transportation
between the United States and the United Kingdom and Europe
in violation of the United States Sherman Act with the object of
B eliminating Laker as an independent competitive force in trade
and commerce between the United States and foreign nations
(an "antitrust claim"), which had caused damage to Laker
exceeding U.S.$350,000,000. If the claim were to be established,
Laker would be entitled to triple damages under the United
States Clayton Act. A further count in respect of "intentional
tort" included a claim for punitive damages of $700,000,000.
P The complaint was accompanied by very extensive requests for
production of documents and answers to interrogatories of a
far-reaching nature.
B.A. and B.C. brought actions against Laker in the Queen's
Bench Division for a declaration that they were under no
liability to Laker and applied for injunctions to restrain Laker
from continuing the American action against them. Parker J.
dismissed the applications. An interim injunction restraining
D Laker from taking further steps in the American action was
extended pending an appeal. B.A. and B.C. appealed. Before
the appeals came on for hearing, the Secretary of State for
Trade and Industry made the Protection of Trading Interests
(U.S. Antitrust Measures) Order 19831 under section 1(1) of the
Protection of Trading Interests Act 19802 and gave two directions
under sections 1(3) and 2 respectively of the Act. At the
P hearing of their appeals, B.A. and B.C. relied on the Order
and directions by the Secretary of State under the Act of 1980.
Laker stated that they wished to challenge the validity of the
Order and directions and applied to Woolf J. for leave to apply
for judicial review. The refusal of such leave was followed by a
renewal of the application to the Court of Appeal, which was
heard concurrently with B.A.'s and B.C.'s appeals. The Court
of Appeal allowed B.A.'s and B.C.'s appeals and, having given
F them leave to apply, dismissed Laker's application for judicial
review.
On appeals by Laker:—
Held, (1) allowing Laker's appeals in B.A.'s and B.C.'s
actions, that, since the allegations in Laker's complaint against
B.A. and B.C. in the American action disclosed no cause of
action justiciable in an English court, the case was one where
Q there was a single forum only of competent jurisdiction to
determine the merits of Laker's claim, that forum being a
foreign court, and in such a case to enjoin Laker from having
access to that court would prevent their claim altogether from
being decided on the merits in their favour; that in those
circumstances it was necessary for B.A. and B.C. to show that
they were entitled under English law to a legal or equitable
-. right not to be sued in the American action and the question
" accordingly was whether it would be unconscionable, and thus
1
Protection of Trading Interests (U.S. Antitrust Measures) Order 1983; see post, p.
89F-G.
2
Protection of Trading Interests Act 1980, ss. 1, 2, 3, 5, 6; see post, pp. 87E—89E.
198
60
British Airways v. Laker Airways (H.L.(E.)) [1985]
unjust, on the part of Laker to sue them in that action; and »
that, on the facts, the plaintiffs, who had accepted when
becoming parties to Bermuda 2 that they were subject to the
private law of both countries, had failed to make out a case of
unconscionable conduct on Laker's part (post, pp. 79G, 80B,
81C-F, 82F, 84E-H, 95B-C, H—96A, D-E).
Siskina (Owners of cargo lately laden on board) v. Distos
Compania Naviera S.A. [1979] A.C. 210, H.L.(E.) and Castanho
v. Brown & Root (U.K.) Ltd. [1981] A.C. 557, H.L.(E.) B
applied.
Smith Kline & French Laboratories Ltd. v. Bloch [1983] 1
W.L.R. 730, C.A. explained.
(2) Dismissing Laker's appeal in their application for judicial
review, that "measures . . . taken . . . under the law" in section
l(l)(a) of the Protection of Trading Interests Act 1980 included
measures in the form of legislation; that where a minister's „
decision concerned international relations between the United ^
Kingdom and a foreign sovereign state a very strong case had to
be made out to justify a court of law in holding the decision to
be ultra vires on the ground that no reasonable minister could
have reached it; and that Laker had not established that the
decision of the Secretary of State to make the Order and
directions in question had been ultra vires or that his failure to
give fuller reasons for making them than he had done had fj
rendered them so (post, pp. 92B-G, 95B-C, 96D-E).
Decision of the Court of Appeal [1984] Q.B. 142; [1983] 3
W.L.R. 544; [1983] 3 All E.R. 375 reversed on the appeals and
affirmed in the refusal of judicial review.
The following cases are referred to in the opinions of Lord Diplock and
Lord Scarman:
Abidin Dover, The [1984] A.C. 398; [1984] 2 W.L.R. 196; [1984] 1 All E.R.
470, H.L.(E.)
Associated Provincial Picture Houses Ltd. v. Wednesbury Corporation [1948]
1 K.B. 223; [1947] 2 All E.R. 680, C.A.
Atlantic Star, The [1974] A.C. 436; [1973] 2 W.L.R. 795; [1973] 2 All E.R.
175, H.L.(E.)
Canon Iron Co. v. Maclaren (1855) 5 H.L.Cas. 416, H.L.(E.) p
Castanho v. Brown & Root (U.K.) Ltd. [1980] 1 W.L.R. 833; [1980] 3 All
E.R. 72, C.A.; [1981] A.C. 557; [1980] 3 W.L.R. 991; [1981] 1 All
E.R. 143, H.L.(E.)
Crofter Hand Woven Harris Tweed Co. Ltd. v. Veitch [1942] A.C. 435;
[1942] 1 All E.R. 142, H.L.(Sc)
MacShannon v. Rockware Glass Ltd. [1978] A.C. 795; [1978] 2 W.L.R. 362;
[1978] 1 All E.R. 625, H.L.(E.) G
Mogul Steamship Co. Ltd. v. McGregor, Gow & Co. [1892] A.C. 25,
H.L.(E.)
North London Railway Co. v. Great Northern Railway Co. (1883) 11
Q.B.D. 30, C.A.
Padfield v. Minister of Agriculture, Fisheries and Food [1968] A.C. 997;
[1968] 2 W.L.R. 924; [1968] 1 All E.R. 694, H.L.(E.)
Siskina (Owners of cargo lately laden on board) v. Distos Compania Naviera u
S.A. [1979] A.C. 210; [1977] 3 W.L.R. 818; [1977] 3 All E.R. 803,
H.L.(E.)
Smith Kline & French Laboratories Ltd. v. Bloch [1983] 1 W.L.R. 730;
[1983] 2 All E.R. 72, C.A.
199
61
1 A.C. British Airways v. Laker Airways (H.L.(E.))
A Westinghouse Electric Corporation Uranium Contract Litigation M.D.L.
Docket No. 235 (Nos. I and 2), In re [1978] A.C. 547; [1978] 2 W.L.R.
81; [1978] 1 All E.R. 434, H.L.(E.)
The following additional cases were cited in argument:

Bremer Vulkan Schiffbau und Maschinenfabrik v. South India Shipping
R Corporation Ltd. [1981] A.C. 909; [1981] 2 W.L.R. 141; [1981] 1 All
° E.R. 289, H.L.(E.)
Castrique v. Behrens (1861) 3 E. & E. 709
Chief Constable of Kent v. V. [1983] Q.B. 34; [1982] 3 W.L.R. 462; [1982] 3
All E.R. 36, C.A.
Cole v. Cunningham (1880) 133 U.S. 107
Ellerman Lines Ltd. v. Read [1928] 2 K.B. 144, C.A.
Gouriet v. Union of Post Office Workers [1978] A.C. 435; [1977] 3 W.L.R.
C
300; [1977] 3 All E.R. 70, H.L.(E.)
Lines Bros. Ltd., In re [1983] Ch. 1; [1982] 2 W.L.R. 1010; [1982] 2 All
E.R. 183, C.A.
Liverpool Marine Credit Co. v. Hunter (1868) L.R. 3 Ch.App. 479
Midland Bank Pic. v. Laker Airways Ltd., The Times, 8 February 1983,
Parker J.
North Carolina Estate Co. Ltd., In re (1889) 5 T.L.R. 328
D Oriental Inland Steam Co., In re, Ex parte Scinde Railway Co. (1874) L.R.
9 Ch.App. 557
Pan-American World Airways Inc. v. Department of Trade [1976] 1 Lloyd's
Rep. 257, C.A.
Portarlington (Lord) v. Soulby (1833) 6 Sim. 356; (1834) 3 Myl. & K. 104
Royal Exchange Assurance v. Compania Naviera Santi S.A. (No. 2) (The
Tropaioforos) [1962] 1 Lloyd's Rep. 410
E Salomon v. Customs and Excise Commissioners [1967] 2 Q.B. 116; [1966] 3
W.L.R. 1223; [1966] 3 All E.R. 871, C.A.
Secretary of State for Education and Science v. Tameside Metropolitan
Borough Council [1977] A.C. 1014; [1976] 3 W.L.R. 641; [1976] 3 All
E.R. 665, H.L.(E.)
Secretary of State for Employment v. ASLEF (No. 2) [1972] 2 Q.B. 455;
[1972] 2 W.L.R. 1370; [1972] I.C.R. 19; [1972] 2 All E.R. 949, C.A.
p Taylor v. Ford (1873) 29 L.T. 392, D.C.
Vocation (Foreign) Ltd., In re [1932] 2 Ch. 196
Walker v. Baird [1892] A.C. 491, P.C.
CONJOINED APPEALS from the Court of Appeal.

These were conjoined appeals by Laker Airways Ltd. and others
„ ("Laker") by leave of the House of Lords from the judgment of the
° Court of Appeal [1984] Q.B. 142 (Sir John Donaldson M.R., Oliver and
Watkins L.JJ.) allowing appeals by the British Airways Board and
British Caledonian Airways Ltd. from a judgment of Parker J. [1984]
Q.B. 142 in Laker's favour and dismissing Laker's application against
the Secretary of State for Trade and Industry for judicial review.
The Court of Appeal refused Laker leave to appeal from their
H decision, but on 10 November 1983 the Appeal Committee of the House
of Lords (Lord Diplock, Lord Fraser of Tullybelton and Lord Brandon
of Oakbrook) [1984] Q.B. 142, 203 gave them leave.
The facts are set out in the opinion of Lord Diplock.
200
62
David Johnson Q.C., Michael Crystal Q.C., Richard Hacker and A
Rosalyn Higgins for Laker were asked to address their Lordships first on
the judicial review point. The first issue is whether section 1(1) of the
Act of 1980 is applicable to sections 1 and 2 of the Sherman Act or
sections 4 and 4A of the Clayton Act ("the U.S. sections"), (a) The
U.S. sections do not constitute a "measure" within section 1(1) of the
Act of 1980. The Order of 1983 is invalid since the U.S. sections are
outside section 1(1) of the Act of 1980, being neither "measures . . . ^
taken by or under the law of any overseas country" nor "measures . . .
for regulating or controlling international trade." The former expression
does not apply to primary legislation such as the Sherman and Clayton
Acts as distinct, for example, from directions, regulations and orders
made by administrative, executive or other authorities. Further, the use
of "measures" in section 1(1) must be compared and contrasted with the Q
use of the words "any provision or rule of law" used in section 5(2) and
(4) of the Act of 1980.
The Protection of Trading Interests (U.S. Reexport Control) Order
1982 (S.I. 1982 No. 885) shows that the Act of 1980 was aimed at
specific problems, etc. [Reference was made to Secretary of State for
Employment v. ASLEF (No. 2) [1972] 2 Q.B. 455, 493 (Lord Denning
M.R.) and Secretary of State for Education and Science v. Tameside D
Metropolitan Borough Council [1977] A.C. 1014, 1047D (Lord Wilber-
force).] "Measures" means "acts" or "actions."
As to whether, if section 1(1) does apply to the U.S. sections, these
measures are within it, (b) the contrary view could not reasonably be
entertained (Laker does not need to say that it is impossible that it
could be). If, contrary to Laker's primary contention, the U.S. sections £
are "measures . . . taken by or under the law of" the United States,
nevertheless their object, as distinct from their effect, is not the
regulation or control of international trade. They are thus not measures
"for" regulating or controlling international trade. They are giving a
right of action, that is all. The Sherman Act and the Clayton Act must
be considered separately. [Reference was made to section 4B of the
Clayton Act.] An example of a valid exercise of the powers conferred F
on the Secretary of State by section 1(1) is to be found in the Order of
1982, in which section 1(1) was applied to regulations made by the
United States Secretary of Commerce under the powers conferred on
him by the United States Export Administration Act 1979. Those were
certainly "measures . . . taken by or under the law of any overseas
country for regulating or controlling international trade": see article 3 of Q
the Order of 1982. Thus, it could not reasonably have appeared to the
Secretary of State" . . . that the measures to which this Order relates
have been taken by or under the law of the United States of America
. . . for regulating or controlling international trade . . . " (first recital to
the Order of 1983). Accordingly the Order of 1983 is invalid.
In considering section 1(1), one should bear in mind the terms of
subsections (2) and (3). This reinforces that the Act is dealing with a "
particular requirement or prohibition pursuant to a measure. The
requirement of notice (subsection (2)) cannot be referring to an Act
passed 100 years ago. The whole section should be read together. A
201
63
A prohibition in a statute is something different from a prohibition imposed
pursuant to a statute. The purpose of section 1 is not changed from
section 1(1). Subsection (1) is only relevant in making an order under
subsection (2). That only requires notice to be given to the Secretary of
State. The real bite of subsection (1) is in subsection (3). No order was
made here under subsection (2).
The second issue is whether the making of an order under section
^ 1(2) of the Act of 1980 is a prerequisite to the making of a direction
under section 1(3). Section 1(3) provides that the Secretary of State may
give directions for prohibiting compliance with "any such requirement or
prohibition as aforesaid." The only previous reference to "requirement
or prohibition" appears in section 1(2). Section 1 follows a definite
scheme. Under section 1(1), the Secretary of State may apply the
Q section to appropriate measures and may, thereafter, and by a further
order under section 1(2), make provision for requiring or enabling him
to require notification of requirements or prohibitions imposed by such
measures. The Secretary of State may then (but only then) give a
direction under section 1(3) for prohibiting compliance with any
requirement or prohibition notified to him pursuant to the order made
under subsection (2). The explanatory note to the Order of 1983 (not
D part of that Order) expressly recognises this construction of section 1.
The effect of the Court of Appeal's decision, rejecting this construction
[1984] Q.B. 142, 196F-197C, is to deprive Parliament of a degree of
scrutiny and control over the acts of the executive provided for and
leave section 1(2) with no purpose to fulfil.
Parliament could, in subsection (2), have said "such a requirement,"
g but it did not: it said "by order." Under subsection (4), the order is
subject to annulment, etc. In subsection (3), "any such requirement or
prohibition" means one properly required under subsection (2). If the
Secretary of State follows (1), then (2), then (3), he is always subject to
the control of Parliament.
The third issue is whether the subsection (2) direction ought to have
specified the grounds on which it was made. Quite apart from the fact
F that no reasons are given, what does the direction mean? There is
difficulty in applying it. (This reinforces Laker's submission that the Act
of 1980 was never intended to apply to provisions such as the Clayton
Act and the Sherman Act.)
Three points: (i) the Secretary of State does not have power to give
directions under subsection (2) unless it appears that the circumstances
Q appear to fall within one of the four situations set out in section 2(2)
and (3). (ii) The direction is quite general. It appears to be saying that
both subsections (2) and (3) are invoked. It is for the court to see
whether that is right: see ASLEF, at p. 493F. On the material available,
it is difficult to see how any of these matters could be an infringement of
the sovereignty of the United Kingdom. It is, therefore, very difficult to
see how subsections (2) and (3) apply to this case, (iii) Those
" considerations also indicate that the power in subsection (2) is being
used for purposes other than those that Parliament intended. It is for
the Secretary of State, in the circumstances, to show why he says that
they do apply.
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64
The last issue is as to the terms of the Order and directions. As to \
whether the terms of the instruments exceed the sections under which
they purport to have been made, the language and purpose of the Act
of 1980, the requirements of comity, the wording of the recitals to the
instruments and general principles of construction all lead to the
conclusion that the instruments should, if applicable to the U.S. sections,
be limited to their application to "things done or to be done outside the
territorial jurisdiction o f the United States (cf. section l(l)(/>)). There ^
is no such limitation; therefore the instruments are invalid. The slightly
inexact wording of the first version of the direction reflects the sense of
section 2. The same limitation is implicit. The fact that no limitation is
explicit in section 2(l)(a) does not mean that it is intended to apply to
activities that took place wholly within the United States. The purpose
of the Act of 1980, its application under section 1(1) and comity all Q
point to limiting the direction to commercial information outside the
United States.
In rejecting Laker's submissions on judicial review the Court of
Appeal construed the Act of 1980 and the instruments too widely having
regard to both the language and the purpose of the Act. Its construction:
(i) enables the Secretary of State's powers to be exercised in circumstances
that involve offending against the principles of comity with regard to, D
first, the operation within its own boundaries of the laws of a friendly
foreign state, and, secondly, the prosecution within that state of an
action properly commenced there; (ii) deprives British interests of
accrued rights of action; and (iii) inhibits Laker in the conduct of the
United States action against nationals of the United States and other
foreign countries. g
Parker J.'s conclusion [1984] Q.B. 142, 161D, that "Sections 1, 2 and
4 thus give the Secretary of State the power where he sees fit effectively
to counter exorbitant assertions of jurisdiction" is an accurate summary
of the purpose of the provisions of sections 1 and 2 of the Act of 1980
and accurately identifies the mischief that those sections were designed
to cure. The mischief is that described by Lord Diplock in In re
Westinghouse Electric Corporation Uranium Contract Litigation M.D.L. F
Docket No. 235 (Nos. 1 and 2) [1978] A.C. 547, 639F.
The Secretary of State was not called on on the judicial review point.
Johnson Q.C. continuing. The basis of the Court of Appeal's decision
was apparently its conclusion that B.A. and B.C. were unable to give
discovery in the U.S. action. They considered that that action was
therefore "untriable" and should be stopped. This approach is both Q
novel and erroneous. Loss of, or inability to produce, documents will
not lead to a stay in English proceedings and a fortiori does not justify
injuncting the continuation of foreign proceedings. The U.S. action is
properly constituted and fully justified. At the end of the day, looking at
the Order, the direction and the Secretary of State's view, the situation
arrived at does not justify an injunction.
As to whether there is a legal right not to be harassed by the "
continuation of allegedly unjust litigation: 1. For a court to have
jurisdiction to declare any legal right it must be one which is claimed by
one of the parties as enforceable against an adverse party to the
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65
A litigation: per Lord Diplock in Gouriet v. Union of Post Office Workers
[1978] A.C. 435, 501E. Neither B.A. nor B.C. claim a right that is
within the Siskina principle (Siskina (Owners of cargo lately laden on
board) v. Distos Compania Naviera S.A. [1979] A.C. 210). The supposed
right that they assert is to be granted a declaration of non-liability on
the basis of English municipal law, but it is common ground: (i) that
none of the defendants in the English actions have ever alleged that
B.A. or B.C. were liable to them as a matter of English law, still less
threatened proceedings against them on that basis; (ii) that, in particular,
the anti-trust claim is not justiciable in the English courts; (iii) that B.A.
and B.C. have not pursued their claims for the declarations. It follows
that the court has no jurisdiction to grant these declarations, alternatively
should not do so, since they would be of no utility and inappropriate
C because.of (ii). Even if the claims for declarations were maintainable,
they have no relevance whatever to the subject matter of the United
States action, so that an injunction to restrain the continuation of that
action would not in any way be in "protection or assertion" of the
claims. 2. B.A. claims that "the right in support of which the present
injunctions were sought is the right not to be harassed by litigation
j-j which it would be unjust to B.A. to allow to continue." 3. To determine
whether a legal right exists, the court must ascertain whether in the
events that have happened the defendant is obliged to do or abstain
from some action. All the textbooks focus on the duty to act or refrain
from acting. The test, therefore, is whether there is a duty on the part
of the defendant that is enforceable by the court on the application of
the plaintiff. The existence of this duty is the jural correlative of the
E right asserted by the plaintiff. 4. In the present case, the duty could only
arise if it could be shown that by its conduct in prosecuting the United
States action Laker was acting tortiously. 5. The common law recognises
a tort of vexatious use of process. Repetition is an ingredient of this
tort. There is also a tort of abuse of civil process. Both torts are
restricted to the use of process within this jurisdiction. 6. There may
F also be a tort where malicious proceedings are taken in a foreign court:
Taylor v. Ford (1873) 29 L.T. 392; cf. Castrique v. Behrens (1861) 3 E.
& E. 709 (where the statement of Crompton J., at p. 721, was quite
general and not limited to actions in rem). The ingredients of the tort of
malicious prosecution must, however, be established. 7. "Harassment"
means vexation by repetition: outside the limits of the torts referred to
„ above the word has been used in judgments in the context of duplicated
proceedings. The right is a right not to be harassed by litigation (One
action could amount to harassment: see, e.g., the Protection from
Eviction Act 1977). 8. As the common law does not recognise a tort of
the kind alleged by B.A., viz. infringement of a right not to be harassed
by litigation which it would be unjust to B.A. to allow to continue, it
imposes no duty on Laker. As there is no duty, B.A. cannot assert a
H correlative right, i.e. B.A. cannot show the existence of an independent
legal right in aid of which the court could grant the injunctions sought in
the present case. There is no reported decision to the effect that there is
a duty in such a case as this. The point is whether the respondents have
1 A.C. 1985—3
204
66
a right not to be harassed by litigation that is recognised by the A
American courts but that would not be recognised in England.
The passage from the speech of Lord Scarman in Castanho v. Brown
& Root (U.K.) Ltd. [1981] A.C. 557., 573E on which the Court of
Appeal relied [1984] Q.B. 142, 188B should be viewed in the context of
that case, which was one of lis alibi pendens. In such a case, a party
may well be able to establish a legal or equitable right to have common
issues tried only in the natural and appropriate forum for the resolution "
of the dispute concerned. The approach of the English courts to such
problems is " . . . indistinguishable from the Scottish legal doctrine of
forum non conveniens": see The Abidin Daver [1984] A.C. 398, 411G,
per Lord Diplock. That doctrine applies only where the question is
which of two possible tribunals shall try particular issues. Although it
does not require two existing sets of proceedings (the ability to have a Q
trial in an alternative forum being sufficient), it has no relevance to an
application to prevent the proceedings from being tried at all, which is
the present case. Lord Scarman should not be taken by that passage to
have intended to overrule the judgment of Cotton L.J. in North London
Railway Co. v. Great Northern Railway Co. (1883) 11 Q.B.D. 30, 39-40,
applied by the House in Gouriet v. Union of Post Office Workers [1978]
A.C. 435 {per Lord Diplock, at p. 501, and Lord Edmund-Davies, at p. D
516) and confirmed expressly in the Siskina case [1979] A.C. 210.
Indeed, in Bremer Vulkan Schiffbau und Maschinenfabrik v. South India
Shipping Corporation Ltd. [1981] A.C. 909, Lord Scarman himself cited
the restatement of principle found in the Siskina case and in terms
approved of the North London case. All the speeches emphasised the
need for the party seeking an injunction to demonstrate that he had a £
right to be enforced. On the Court of Appeal's approach in the present
case, it would, in Bremer Vulkan, have been sufficient to consider
whether justice demanded the granting of an injunction. Further, in
Castanho itself, Lord Scarman went on, at p. 575A-E, to refer to and
apply as the relevant test for resolving the question whether or not to
grant an injunction the "distillation of principle" by Lord Diplock in
MacShannon v. Rockware Glass Ltd [1978] A.C. 795, 812. The first of F
the two conditions that that test requires to be satisfied before an
injunction can be granted is the existence of an alternative forum in
which the claim can be tried. Thus, whatever the intended effect of the
earlier passage, it cannot have been meant to state that an injunction
could be granted even if, as in this case, there was no alternative forum.
If, alternatively, that passage was intended, as a matter of ratio Q
decidendi, to decide that the court had jurisdiction to grant injunctions
restraining foreign proceedings either where there was no "right" in the
Siskina sense or where there was no alternative forum, the House is
asked to reconsider Castanho to that extent. [Reference was made to In
re North Carolina Estate Co. Ltd. (1889) 5 T.L.R. 328.] Alternatively,
that jurisdiction should be confined to, or only be exercised in, wholly
exceptional cases where the applicant can establish by positive and "■
cogent evidence: (i) that he is unable to obtain justice in the foreign
country because of defects in the foreign legal system or its administration;
or (ii) because the cause of action sued on in that country is repugnant
205
67
A to recognised notions of morality; and, in either event (iii) that the only
means of protecting him is by the grant of the injunction sought.
Bermuda 2 has not been embodied in any Act of Parliament. It is not
part of the municipal law of England; see Pan-American World Airways
Inc. v. Department of Trade [1976] 1 Lloyd's Rep. 257, per Lord
Denning M.R., at p. 260, and per Scarman L.J., at p. 261. Accordingly,
the existence of Bermuda 2 and its terms are irrelevant to any issue in
° the English Courts; see Salomon v. Customs and Excise Commissioners
[1967] 2 Q.B. 116, per Diplock L.J., at p. 143. The existence of
Bermuda 2 and its terms cannot add to or detract from the rights of
private litigants in the English courts, whether directly or indirectly.
Without seeking to challenge that doctrine head-on, the respondents are
trying to achieve the same result by the side-door (see per Parker J.
Q [1984] Q.B. 142, 159G-H). What is relied on is not policy in the sense of
a consistent approach by Her Majesty's Government but a "view" (see
the judgment of the Court of Appeal, at pp. 200-201). As to the factors
to be taken into account in exercising the discretion, in this case the
views of the government are not a legitimate consideration. It would be
wrong for the court not in terms to construe the treaty but nevertheless
to take determinative account of the government's views as to its
D meaning and effect. However, should the House otherwise be minded to
take that course, then (and only then) the following propositions are
submitted: I. It has long been recognised as perfectly appropriate to
construe a treaty when (i) it is not the foundation of the cause of action,
but (ii) an analysis of its terms is necessary for an evaluation of
argument made in the course of litigation: see, e.g., Walker v. Baird
E [1892] A.C. 491; Mann, Studies in International Law (1973), pp. 342,
348 (which is adopted). II. There is nothing arising out of the Crown's
prerogative rights that detracts from the competence of the courts to
interpret a treaty in the circumstances of I above. III. Certain "facts of
state" will be accepted as conclusive by the courts, but the Crown's view
as to the interpretation of a treaty is not such a "fact of state." IV. The
correct interpretation of a treaty to which the United Kingdom is party
F is a matter of international law; the government's views thereon cannot
be "public policy" that determines the issues before the House.
Interpretation of a treaty is not a prerogative power reserved to the
Crown. Nor is interpretation of a treaty by the Crown within the area
traditionally recognised by the courts as being matters of "public policy":
see per the Court of Appeal, at p. 201A. V. If there is any ambiguity in
Q the terms of a treaty, the court may resolve it by reference to the
preparatory work of the treaty and the circumstances of its conclusion.
The cases are concerned with the prerogative rather than with
treaties made in the exercise of sovereign power. [Reference was made
to In re Westinghouse Electric Corporation Uranium Contract Litigation
M.D.L. Docket No. 235 (Nos. 1 and 2) [1978] A.C. 547.]
As to the scope of public policy; I. The right of a state to prescribe
" and apply its laws (jurisdiction) is a matter of international law. It is not
a question of public policy. Jurisdiction is about the allocation of
competences between states recognised by the law of nations. There are
several generally accepted heads of jurisdiction, which include jurisdiction
206
68
over persons and events within a state's territory and jurisdiction over A
one's nationals (even when they are abroad). Where concurrent
jurisdiction occurs, national jurisdiction will usually give way to territorial
jurisdiction. II. There is no recognised head of public policy whereby a
British subject should be deprived of its right to bring a legal action in a
forum that has jurisdiction on the grounds that the United Kingdom
government believes that other state to be in breach of a treaty
obligation, nor does the fact that a British subject would normally look
to the diplomatic protection of its government convert this into a matter
of public policy. The finding by the Court of Appeal at p. 201 is a
wholly novel claim for public policy. The links of nationality (which
allow a British subject to look in certain circumstances to its government
for protection) have never been suggested to require the acceptance of
unilateral treaty interpretation by Her Majesty's Government or the C
deprivation of the right to pursue a legal remedy properly brought
within another jurisdiction. III. In concluding that in the field of "foreign
affairs" the courts and the executive should not speak with different
voices, the Court of Appeal, at p. 193B-D, applied generally a doctrine
that only operates within well-defined limits not extending to the present
facts. Thus: (1) Claims as to the proper reach of jurisdiction are a ^
matter of law and not of "foreign affairs." (2) The fact that foreign
policy is usually formulated by the Crown rather than Parliament does
not alter the constitutional requirement that the courts be wholly
independent of the executive. (3) The requirement that the courts and
the executive "speak with one voice" in foreign affairs is to be
understood in two ways: (i) that the courts must not interfere with the
Crown's prerogative powers in foreign relations; (ii) that there are E
certain "facts of state" that are binding on the courts. Even with regard
to these matters, while accepting the facts of state, the courts will draw
their own legal conclusions. (4) The Court of Appeal was wrong in
implying at p. 193D, that the House of Lords have found more generally
that the executive and the courts should speak with one voice. In
Westinghouse, at p. 617B-C, Lord Wilberforce invokes foreign policy not p
as a head of public policy but as a matter to be considered by the court.
IV. The views of the Attorney-General deserve the attention of the
courts but are not determinative.
The conclusion of the Court of Appeal was not justified. They gave
such weight to the views of the government as to the construction of a
treaty obligation that is not part of the civil law as to by-pass the well- _,
established rule that treaties that are not the subject of municipal law do
not affect private rights. The conclusion of Parker J. on this issue [1984]
Q.B. 142, 165 was correct. What he said at p. 167E was a correct
analysis of the situation. His conclusion should be supported.
As to comity, this is certainly a situation where the requirements of
comity, in the sense of that courteous and friendly reciprocal
understanding and forbearance by which each nation respects the laws, H
institutions and usages of every other, demand that the respondents, in
seeking an injunction, establish an overwhelming case by the most
cogent evidence.
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69
A To summarise: (1) there was no jurisdiction to grant this injunction.
(2) subject to that, and subject to the Order and directions, Parker J.,
who in the exercise of his discretion at a full hearing rejected the
respondents' application, was right. (3) The Court of Appeal did not
purport to find that Parker J. was wrong to reach that conclusion on the
material that he had, and the only difference that emerged at all was the
significance of the public policy element: see [1984] Q.B. 142, 201. (4)
B The Court of Appeal's decision was really based on the Order and
directions, which they thought made the case untriable: see p. 202B.
They do not at all, certainly not at this stage. The Court of Appeal's
interpretation of section 2(5) of the Act of 1980 was wrong.
Even if Laker are wrong as to jurisdiction, then as to discretion this
is not a case where even a stay would have been granted; a fortiori, an
Q injunction should be refused.
Peter Scott Q. C. and Timothy Walker for the Secretary of State and
the Attorney-General. As to the Government's policy, (1) there has
been no change since 1983. There have been discussions between the
two governments since then, but there has been no formal statement.
(2) The question of what weight should be given to the views of the
Secretary of State is best debated between the airline parties to the
D appeal. (3) As to whether the House should seek to construe Bermuda
2, especially article 4, Laker in their printed case accept that it would
not be appropriate for the House to decide that question. It would not
be: see per Scarman L.J. in Pan-American World Airways Inc. v.
Department of Trade [1976] 1 Lloyd's Rep. 257, 261, which is adopted.
The House should, however, take the existence of the dispute into
g account.
Leonard Hoffmann Q.C. and Jonathan Sumption for the British
Airways Board. The jurisdiction exists, and can be exercised, in the
words of Lord Scarman in Castanho v. Brown & Root (U.K.) Ltd.
[1981] A.C. 557, 573, whenever an injunction is necessary to prevent
injustice. Lord Scarman's statement was not confined to the alternative
forum cases.
F B.A. agree that an injunction is a remedy and not a cause of action.
However, it is the development of the remedy that has given rise to
substantive rights. The effect of the development of the remedy here
means that one has a right within the circumstances in which the
jurisdiction is exercised not to be sued in the foreign jurisdiction. That
right plainly exists in the alternative forum cases: there is an equitable
Q right not to be sued in the foreign jurisdiction. The defendant does not
assert any other right. He is saying that the plaintiff shall not exercise
the plaintiff's right in the foreign jurisdiction. When one is looking at
the defendant's right as opposed to the plaintiff's, one is asking what the
breadth of the defendant's right is: a right to be sued in one jurisdiction
or another or a right not to be sued at all? The existence of the
injunction in the alternative jurisdiction cases connotes a right on the
" part of the defendant. The question is as to the breadth of that right. As
to injunction and right, the one necessarily involves the other. [Reference
was made to Carron Iron Co. v. Maclaren (1855) 5 H.L.Cas. 416.] As to
what is contrary to equity here, "equitable right" is the same as "equity
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70
and conscience." There is an equitable right not to be sued. There can A
be such an equitable right even in the absence of alternative fora. The
question is whether it is contrary to equity and conscience according to
English principles. Lord Portarlington v. Soulby (1834) 3 Myl. & K. 104
is an example of the exercise of the jurisdiction to stop proceedings
being brought at all. The ratio of granting the injunction irrespective of
whether there were proceedings abroad is at p. 106. Supposing that the
Irish court would have applied the same principles, a good argument °
could have been made on the ground of comity that the English court
should not restrain the Irish proceedings because it should leave it to the
Irish courts to dispose of the litigation there. That, however, is a comity
ground: it goes to the discretion to grant an injunction.
To summarise: 1. In the Carron Iron case Lord Cranworth L.C.
divides the cases of jurisdiction to grant foreign injunctions into three Q
categories: First, the two types of "alternative forum" cases: (a) lis hie
pendens; (b) forum hie conveniens. 2. The existence of the "alternative
forum" cases shows that a defendant who is asserting no cause of action
or other right (e.g. a defendant in a tort action) may nevertheless have
an equitable right in the Siskina [1979] A.C. 210 sense not to be sued
abroad when that would be unjust compared with suing him in England.
3. The question is, therefore, not whether a right not to be sued abroad D
can exist but whether the grounds on which it may exist are confined to
procedural injustice, i.e. going to the choice of forum, or whether the
injustice can be substantive, i.e. going to the assertion of the cause of
action. 4. That the grounds are not so confined is shown by Lord
Cranworth's third category: (c) cases where the bringing of the action is
contrary to equity and good conscience. 5. In cases in this third category, £
the court examines the facts and decides whether on those facts it would
according to English principles be inequitable for the defendant to
enforce his right to a judgment in the foreign court. 6. An affirmative
answer to the last question gives the court jurisdiction to grant an
injunction but does not "make it the duty of the court so to act."
The doctrine is really an extension to foreign proceedings of the
jurisdiction with regard to common injunctions in this country. Common F
injunctions have gone, but the jurisdiction as to foreign countries
survives. It is an injunction with regard to being sued abroad without
going into the foreign law, provided, of course, the person is within the
jurisdiction. The question is whether it is confined to procedural injustice.
[Reference was made to Lord Portarlington v. Soulby (1833) 6 Sim.
356.] The jurisdiction cannot be exercised solely on the ground of Q
inequity in the foreign law. The person suing abroad is entitled to get
any remedy he can. The basis is a legal nexus between the plaintiff and
defendant that makes it unjust for the latter to invoke the foreign law
against the plaintiff. As to the equity between the parties, see Liverpool
Marine Credit Co. v. Hunter (1868) L.R. 3 Ch.App. 479. The ratio is at
p. 484, the bottom two paragraphs. Lord Chelmsford L.C. merely said
that, on the facts of that case, it was not unjust. He did not say that the "
doctrine was confined to alternative fora. Parker J. was right [1984]
Q.B. 142, 159 (his (3) reflects the Liverpool case). As to his (4), B.A.
would have difficulty in accepting that the equity between the parties
209
71
A under (3) would be affected by matters of governmental policy. The
House should apply Lord Scarman's statement in Castanho, at pp. 572-
573, in its terms. Parker J. was right so to interpret the decisions of the
House. The Court of Appeal were also right, at pp. 186F-G.
The simplest example of the nexus referred to above is the contract
not to sue, the best known example of which is in Ellerman Lines Ltd.
v. Read [1928] 2 K.B. 144, per.Atkin L.J., at p. 155; see also Royal
° Exchange Assurance v. Compania Naviera Sand S.A. (No. 2) (The
Tropaioforos) [1962] Lloyd's Rep. 410.
The bankruptcy cases are important, because the reasoning in them
is that Parliament has set up a statutory scheme for adjusting the
conflicting interests of the creditors. It is part of the scheme that all
creditors abandon their claims to bring actions without the leave of the
Q court. They are subject to the statutory regime. On that basis, the court
has assumed jurisdiction to restrain a creditor from commencing
proceedings in a foreign court inconsistently with the operation of the
scheme: to gain an advantage under the law of the foreign court that he
does not enjoy under the bankruptcy law of this country.
1. The Civil Aviation Act 1971, the Civil Aviation Authority
Regulations 1972 and the terms of the licences granted by the Civil
D Aviation Authority under statutory powers created a statutory scheme
that regulated in accordance with British public interest certain of the
terms (including tariffs) on which British airlines might carry on business
both in the United Kingdom and the United States. 2. The scheme
brought competing airlines into relations with each other by giving each
airline a statutory remedy if it was aggrieved by the tariffs proposed to
£ be charged by another airline. 3. The terms of the licences and the
practice of the Civil Aviation Authority in exercising its licensing powers
contemplated that tariffs might properly be based upon inter-carrier
discussions or agreements. 4. Laker was a British airline that applied for
a licence in accordance with the scheme and was bound by its terms. 5.
It is therefore inequitable for Laker to recover damages against another
British airline under a United States law, framed to advance the interests
F of United States consumers and inimical to British interests, that makes
it unlawful to charge tariffs based upon inter-carrier discussions or
agreements. It is not a question of Bermuda 2. By analogy with the
bankruptcy cases, it is inequitable for one airline to take proceedings in
a foreign jurisdiction asserting a cause of action that is inconsistent with
the English regime under which they operate and which Parliament
Q intended should regulate their competition. That has nothing to do with
Bermuda 2. (Bermuda 2 explains why the C.A.A. behaved as they did.)
Quite apart from Bermuda 2, English law purports to regulate
competition between airlines. The airlines are bound inter se by the
system under which they operate. [Reference was made to Canon Iron
Co. v. Maclaren, 5 H.L.Cas. 416; In re Oriental Inland Steam Co., Ex
parte Scinde Railway Co. (1874) L.R. 9 Ch.App. 557; Cole v.
H
Cunningham (1880) 133 U.S. 107 and In re Vocalion (Foreign) Ltd.
[1932] 2 Ch. 196.] Our statutory system embodies the public policy of
this country. So, as between persons in this country, they cannot
complain of English legislative policy. For the purposes of this appeal,
210
72
B.A. does not challenge the existence of a cause of action in the United \
States. That is a matter for the United States courts. Nor does B.A.
assert that it can derive any direct assistance from Bermuda 2. As to the
Act of 1971, for the purposes of this case it does not matter what
Bermuda 2 (art. 12) allowed the C.A.A. to do: the equities are governed
by the domestic law, and what matters is what they actually did.
Whenever there was a change of tariff, in 1977, etc., Laker had the
opportunity of objecting to it. They should have availed themselves of
the statutory scheme but chose not to. Is it equitable, in those
circumstances, that one British airline should be able to invoke the
American anti-trust law to sue B.A.? The English system purports to
deal with conduct at home and abroad. It is not right that a party should
be able to take advantage of the foreign law abroad when the foreign
law abroad has been taken into account by the scheme. C
Although B.A. have offered the bankruptcy analogy, the House is
interpreting a broad and equitable jurisdiction. The question is whether
it is unjust to B.A. for Laker to sue, and what that involves is whether
it is unjust that the conduct relied on, agreements as to fares, should
give rise to liability. It does not matter what the foreign action is called.
The point is that it is conduct not actionable in England. Is it just that it Q
should be relied on? It makes no difference to the equity between the
parties that the foreign conduct is a crime, though that may make some
difference so far as comity is concerned. The system (and the licence)
contemplates that we will do things that may be contrary to the law of
the United States.
The existence of an equity is not sufficient to justify the grant of an
injunction (see per Lord Cranworth L.C. in the Carron Iron case). The E
court may decline to grant it where the connection with the foreign
jurisdiction is sufficient to enable it to say that it is not unjust to allow
the party to exercise his rights in the foreign jurisdiction. Secondly,
there is comity to be considered. There is not sufficient here so far as
comity is concerned. The courts are not saying that there is anything
wrong with the foreign law; they are saying that it is unjust for their p
national to sue. If B.A. are right as to equity, it would be wrong to
defer to international relations where Parliament and the executive have
said that they should not do so. The point of these laws is to serve the
public policy of the United States. Where one has laws like these, the
courts are released from obligations of comity.
As to discovery, see the Federal Rules of Civil Procedure (1983), ~
rr.34(a) and 37(a)(4). It is not simply a request. It is similar to our
procedure for automatic discovery. It is, therefore, fairly and squarely
within paragraphs 2(1) and 2(5) of the direction.
To summarise B.A.'s submission on discretion, the general point is
that the Act of 1980 and the orders and directions made thereunder
embody the strongly expressed policy of Parliament that an airline in the
position of Laker is not to be given assistance. This shows a policy H
against anti-trust actions that removes any ordinary obligation of comity.
More specifically, the section 1 direction goes to public policy and
discretion because Laker are seeking an order with which it would be an
211
73
A offence for B.A. to comply (except with the consent of the Secretary of
State).
A mandatory injunction can properly be granted here. (The question
of declarations does not really arise: it is an injunction or nothing.)
There should be a prohibitive injunction as made by Parker J. on 7
March 1984, with the omission of the last proviso, which is now spent.
Colin Ross-Munro Q.C. and David Donaldson Q.C. for British
Caledonian Airways Ltd. 1. If, on the uncontradicted evidence before
the English court, it is apparent that there is no factual basis to support
any of the allegations made by Laker against B.C. in their complaint,
this is a powerful reason for the granting of injunction because it would
be contrary to equity and good conscience (and thus "unjust") that B.C.
should be harassed by expensive anti-trust proceedings that have no
C factual basis at all. 2. If, on the uncontradicted evidence before the
English court, it is apparent that Laker's case is so weak and insubstantial
that it compels the English court to wonder whether the real reason for
joining B.C. is to try to force a settlement out of them, this also is a
ground for granting the injunction, because again it would be contrary
to equity and good conscience (and thus "unjust") that B.C. should be
j-) harassed by expensive anti-trust proceedings which have been brought
against them simply for the purpose of obtaining an advantageous
settlement: see Smith Kline & French Laboratories Ltd. v. Bloch [1983]
1 W.L.R. 730, 737F, 742D, 748C, and per Parker J. in Midland Bank Pic.
v. Laker Airways Ltd., The Times, 8 February 1983. 3. Where the
English court is concerned as to whether and to what extent there is
jurisdictional contact with the United States forum, the absence of any
E significant evidence in support of such contact, and the existence of
cogent evidence in contradiction of such contact, is a matter of
fundamental importance in respect of granting or refusing an injunction.
There is no evidence to support any allegation by Laker against B.C.
On 3 above, the gravamen of Laker's case is located in England. The
only difference between Midland Bank Pic. v. Laker Airways Ltd. and
F the present case is that B.C. were not given notice. Had they been, they
would have made an application similar to that of Midland Bank. The
same argument, that discovery might alter the position, could have been
advanced before Parker J. The matters relevant to the balance of
convenience (see Midland Bank Pic. v. Laker Airways Ltd.) are also
relevant with regard to equity in the present case. There is no evidence
„ to tie B.C. into any predatory fare conspiracy.
If this was an entirely English action in 1982, it would be contrary to
the United Kingdom's notion of sovereignty for the United States courts
to claim jurisdiction when the parties are United Kingdom companies
based in the United Kingdom and the refinancing acts all, or substantially
all, took place in England. It would be contrary to public international
law, and contrary to the United Kingdom's notion of sovereignty, to
H apply the United States penal anti-trust legislation to activities carried
on outside the United States by British citizens within the United
Kingdom: see In re Westinghouse Electric Corporation Uranium Contract
Litigation M.D.L. Docket No. 235 (Nos. 1 and 2) [1978] A.C. 547, 591H
212
74
(the statement of the Attorney-General), 616c, F-G, 617B-C, 631H, 639F- ^
H, 640c, 650D-F.
As to discretion, see Castrique v. Behrens, 3 E. & E. 709: proceedings
against an insolvent should be stopped in limine if there is no reasonable
and probable cause for them. Castrique v. Behrens was not an insolvency
case.
Johnson Q.C. in reply. As to jurisdiction to grant an injunction, R
B.A. do not contend that they have a legal right, nor that they have an
equity. They have produced no authority to show that they have the
established equitable right that they rely on. All the cases where relief
was granted were alternative forum cases. [Reference was made to Lord
Portarlington v. Soulby, 6 Sim. 356; 3 Myl. & K. 104.] Laker's basic
submission is that there is no jurisdiction unless there is an alternative
forum. One has to have legal or equitable right before one can get an C
injunction. Alternatively, in what wholly exceptional circumstances
would an injunction be granted? [Reference was made to Canon Iron
Co. v. Maclaren, 5 H.L.Cas. 416 and Chief Constable of Kent v. V.
[1983] Q.B. 34.] "Unconscionable conduct" is really not so much a
question of morality as one of the natural and appropriate forum.
[Reference was made to In re Vocation (Foreign) Ltd. [1932] 2 Ch. 196, rj
207; Liverpool Marine Credit Co. v. Hunter, L.R. 3 Ch.App. 479;
Castanho v. Brown and Root (U.K.) Ltd. [1980] 1 W.L.R. 833, 867G-H
(Brandon L.J.); [1981] A.C. 557; North London Railway Co. v. Great
Northern Railway Co., 11 Q.B.D. 30; Gouriet v. Union of Post Office
Workers [1978] A.C. 435, 501 (Lord Diplock), 516 (Lord Edmund-
Davies); Siskina (Owners of cargo lately laden on board) v. Distos
E
Compania Naviera S.A. [1979] A.C. 210; The Abidin Daver [1984] A.C.
398, 411-412 (Lord Diplock) and Bremer Vulkan Schiffbau und
Maschinenfabrik v. South India Shipping Corporation Ltd. [1981] A.C.
909.] Laker agree that the distinction between the two-fora and the single-
forum types of cases is that in the single-forum type the court is effectively
deciding on the merits. In the two-fora type it is deciding where the claim
shall be tried. [Reference was made to Carron Iron Co. v. Maclaren, 5 p
H.L.Cas. 416, 436^37.]
To sum up, (i) all the cases in B.A.'s review were alternative fora
cases; (ii) Castanho was a dual fora case; (iii) the significance of the
approach in Bremer Vulkan is that it is inconsistent with the wide approach
to the grant of an injunction and only consistent with the Siskina approach.
Conclusions to be drawn are: A. As to jurisdiction, first, the cases show Q
that there is only power to grant an injunction to restrain foreign
proceedings if the grant is in protection or assertion of a right to have the
case tried in the natural and appropriate forum of two or more fora. That
was made clear by the acknowledgment in The Abidin Daver that the true
basis of the cases was forum non conveniens.
Secondly (alternatively), such an injunction may only be granted in
protection or assertion of a legal or equitable right in the Siskina sense and "
not (a) whenever the taking of foreign proceedings may be "contrary to
equity and good conscience" or (b) "where it is appropriate to avoid
injustice."
213
75
A The first of the above submissions applies to the dual-fora case, the
second to the single forum case, so perhaps the second is not really an
alternative but an addition.
Thirdly, if there is some residual category, it should be applied only
to the wholly exceptional situations already disclosed, which do not
occur here.
If, however, there is some jurisdiction in single forum cases, then: B.
B As to whether the present facts are within them, was there power to
grant an injunction in this case, in the sense that there on the facts there
was a legal nexus? The respondents are driven to a wholly artificial
analogy with the bankruptcy cases. [Reference was made to Ellerman
Lines Ltd. v. Read [1928] 2 K.B. 144 and In re Lines Bros. Ltd. [1983]
Ch. 1.] Nothing in the Act or the Regulations gives consent for that
Q conspiracy to be carried out.
As to the exercise of discretion, and whether it was right to interfere
with Parker J.'s order, see The Abidin Daver, per Lord Brandon, at
p. 420.
Laker relies on para. 1102 of the United States Federal Aviation
Act, but it is not essential to its argument.
Turning to B.C.'s additional arguments, three matters of principle: 1.
D While the respondents are claiming an injunction, in substance they are
trying to get a declaration on non-liability under United States law.
They dropped their claim for a declaration in fact. It would be
inappropriate for the claim for a declaration to go ahead. 2. The points
that B.C. seek to make on alleged lack of evidence in Laker's U.S.
action only arise if they show (i) that the court has jurisdiction; (ii) that
c there is sufficient nexus between Laker and B.C. arising from the
international aviation framework to give rise to an equity; and (iii) that
Parker J. exercised his discretion on wrong principles. 3. If B.C.
overcame all these difficulties, it would be quite inappropriate for the
House to assess the chance of their success in the United States
proceedings. It is not suggested by B.C. that the United States procedure
is inadequate to afford them protection.
F Midland Bank Pic. v. Laker Airways Ltd., The Times, 8 February
1983, does not assist the respondents, nor does Smith Kline & French
Laboratories Ltd. v. Bloch [1983] 1 W.L.R. 730, which was an alternative
forum case (see per O'Connor L.J., at p. 747G).
Crystal Q.C. followed on the facts with regard to British Caledonian
Airways Ltd.
G
Their Lordships took time for consideration.
19 July. LORD DIPLOCK. My Lords, of these conjoined appeals,
two are brought in civil actions in which the British Airways Board
(B.A.) and British Caledonian Airways Ltd. (B.C.) respectively are
plaintiffs. With these I propose to deal first; the third appeal is brought
in an application for judicial review. All three appeals form part of the
aftermath of the relatively brief incursion into the ranks of airlines
operating scheduled services between the United Kingdom and the
United States of America, that was made by Sir Freddie Laker operating
214
76
Lord Diplock British Airways v. Laker Airways (H.L.(E.)) [1985]
through a company, Laker Airways Ltd., incorporated in Jersey but A
with its principal office in London and transacting business there and
elsewhere in the United Kingdom and in the United States. To this
company, and the other companies through which Sir Freddie operated
scheduled air services across the North Atlantic and the liquidators of
those companies, I shall refer, collectively and individually, as "Laker."
D
The civil actions in the High Court
Laker's attempts to break into the market for the provision of
scheduled air services between places in the United Kingdom and places
in the United States of America (which, under the Chicago Convention
of c 1944, required the consent of the governments of both countries)
achieved success in 1977 when it became an airline designated by the
United Kingdom to operate a scheduled service on the New York- C
London route. This was done under the bipartite treaty between the
United Kingdom and the United States known as "Bermuda 2"
(Agreement between the Government of the United Kingdom of Great
Britain and Northern Ireland and the Government of the United States
of America concerning Air Services (1977) (Cmnd. 7016)), which entitled
each country to designate two of its airlines to operate on that route. ^
The other designated British airline was B.A. Its status as sole designated
British airline for the New York-London route was of long standing.
Progressively, at intervals between 1977 and its subsequent financial
collapse in February 1982, Laker also became a designated British
airline for the New York-Manchester, Los Angeles-London, Los
Angeles-Manchester, Los Angeles-Prestwick, Miami-London, Miami-
Manchester, Miami-Prestwick and Tampa-London routes. E
The other airlines operating scheduled services (as distinct from
charter flights) across the North Atlantic between the United States and
the United Kingdom and other destinations in Western Europe, including
B.A. and B.C., were members of the International Air Transport
Association ("I.A.T.A."). Between airlines that are members of I.A.T.A.
("I.A.T.A. airlines") there exist elaborate arrangements for co- F
operation, involving through-bookings for carriage by different airlines,
interchangeability of tickets, co-ordination of time tables, uniform fares
for various classes of travel providing differing standards of amenity and
the like, with which air travellers are familiar. They are made possible
by I.A.T.A.'s operating a clearing house for the adjustment of accounts
between member airlines resulting from the carrying out of such
collaborative agreements. G
Laker, upon becoming a designated British airline for the New
York-London route, did not become a member of I.A.T.A. It did not
conform to the I.A.T.A. fare structure or participate in any of its
arrangements for collaboration between I.A.T.A. airlines. Instead, it
challenged the whole I.A.T.A. system by instituting a low-cost, no frills
"skytrain" service in each direction at one-way fares which covered
carriage only and, at the beginning, were little more than one-third of
the price of the one-way fare then being charged for travel by I.A.T.A.
airlines in the class that offered the lowest standard of amenities. This
policy, which I will refer to for convenience as "the Skytrain policy,"
215
77
1 A.C. British Airways v. Laker Airways (H.L.(E.)) Lord Diplock
A was extended by Laker to each of the new routes between the United
Kingdom and the United States for which Laker progressively became a
designated British airline. It was so successful in attracting passengers
that by the time of its collapse, in February 1982, Laker was carrying
one-seventh of all passengers by air across the Atlantic between the
United Kingdom and the United States.
It may well be that the low fares charged under the Skytrain policy
" created a demand for air passages from persons who would not otherwise
have contemplated transatlantic travel at all; but it appeared to the
I.A.T.A. airlines operating transatlantic routes that fares so much less
than the uniform standard fares charged by them under current I.A.T.A.
agreements were calculated to attract, and to divert to Laker, passengers
who would otherwise have travelled by I.A.T.A. airlines not only to
C destinations in the United Kingdom itself but to ultimate destinations in
other Western European countries to which easy and frequent on-
carriage was available to and from London. One of the most important
factors in the profitability of operating a passenger airline is the payload,
viz. the proportion of the total available seats which on an average it is
able to fill. To meet what they regarded as the threat to the maintenance
of payloads to which they were exposed by the lower fares charged by
D Laker under the Skytrain policy, the I.A.T.A. airlines introduced fares
substantially lower than their uniform standard fares for the lowest class
of travel, and approximately matching those charged by Laker. These
new cheap fares were available on "stand-by" terms, depending on the
availability of a seat, or were subject to compliance with requirements as
to advanced booking; but, it is alleged by Laker, they were inclusive of
£ "in-flight" amenities, for which extra charges were made under Laker's
Skytrain policy, and entitled the passenger to other advantages resulting
from the availability of collaborative arrangements with other I.A.T.A.
airlines in consequence of their being parties to the various I.A.T.A.
agreements.
By the beginning of 1982, Laker's finances had become overstretched,
and disaster struck. The causes for this are not, in my view, a matter for
F your Lordships. Attempts at a rescue operation for re-financing Laker
were made, but to no avail. The causes for their failure are also not a
matter for your Lordships. On 5 February 1982 Laker ceased trading
and on 17 February it went into liquidation in Jersey.
The American legal proceedings by Laker

G My Lords, this brief account of the rise and fall of Laker is sufficient
to explain the nature of the American litigation started by Laker (acting
by its liquidator) in the Federal District Court of the District of
Columbia ("the American action"). The object of the English civil
actions in the High Court in which the appeal to your Lordships' House
from the judgment of the Court of Appeal, reversing that of Parker J.,
is brought is to prevent Laker from continuing with the American
action. The American action was started by a complaint, dated 24
November 1982, against a number of I.A.T.A. airlines: two of them,
T.W.A. and Pan-Am, being U.S. airlines; two of them, B.A. and B.C.,
being British and the respective plaintiffs in the two English civil actions.
216
78
Other airline defendants in the American action were airlines of other A
western European countries which operated North Atlantic routes; and
there were two non-airline defendants, McDonnell Douglas Corporation
("McD.D."), the aircraft manufacturers, and an associated company of
McD.D. concerned with providing finance for the purchase of aircraft
from McD.D.
The complaint is reproduced in full as an appendix to the judgment
B
of the Court of Appeal [1984] Q.B. 142, 203-209 in the instant case. In
order to dispose of the instant appeal, however, it is, I think, sufficient
to point out that it alleges two causes of action ("counts"). The first is
brought under section 4 of a United States Act of Congress, the Clayton
Act (15 U.S.C. 12), and claims threefold damages for injury caused to
Laker by unlawful combination and conspiracy between the defendants
in restraint of and to monopolise trade or commerce contrary to sections Q
1 and 2 of the U.S. Act of Congress, the Sherman Act; the second
count, based on the same facts, is described as "intentional tort." The
claim under the antitrust count is quantified at $l,050m., being three
times the compensatory damage alleged to amount to $350m.; the claim
for intentional tort count is for the same total figure arrived at by adding
to the compensatory damage punitive damage amounting to $700m.
My Lords, one of the characteristics of the rules of civil procedure in D
the federal courts of the United States (as well as in most state courts),
which seems to any English lawyer strange and, indeed, oppressive upon
defendants, is that a "complaint," the document by which an action is
begun, while it alleges that the complainant has a cause of action against
the defendant or defendants, does not disclose, or discloses only in a
most exiguous form, the facts which the plaintiff will eventually rely £
upon at the trial as giving rise to that cause of action. Instead, the
complaint is accompanied, or immediately followed, by a request to the
defendants for pre-trial discovery which bears little resemblance to the
kind of discovery that is available in English civil actions. Its breadth,
the variety of methods, oral and written, that it makes available for a
wide-roving search for any information that might be helpful to the case
of the party seeking discovery, the enormous expense, irrecoverable in F
any award of costs to a successful defendant, in which it may involve
parties from whom discovery is sought, and its potentiality for oppressive
use by plaintiffs, particularly in antitrust actions, receive sufficient
mention in the various speeches in this House in In re Westinghouse
Electric Corporation Uranium Contract Litigation M.D.L. Docket No.
235 (Nos. 1 and 2) [1978] A.C. 547. What for present purposes is Q
important particularly as respects the civil action by B.C. is that if the
American action ever reaches the stage of trial, what evidence in
support of its complaint Laker will by that time have unearthed by the
process of pre-trial discovery it is as yet impossible to foretell; but,
again, for the purpose of disposing of the instant appeal it is, I think,
enough to say that the aim of the antitrust combination and conspiracy
(and intentional tort) alleged in the complaint was to drive Laker out of "
the scheduled airline business as a competitor of the I.A.T.A. airline
defendants; and that the principal means by which this was to be
accomplished were first to attract potential passengers away from Laker's
217
79
A airline by offering to carry them at what in antitrust jargon are described
as "predatory fares," i.e. loss-making fares which while they matched
Laker's fares (which in conformity with its Skytrain policy covered
carriage alone) included, as well as actual carriage but free of any extra
charge, those in-flight services and other advantages available to
passengers by I.A.T.A. airlines to which reference has been made above
and to provide which involved those airlines in substantial expense
B which could not be met out of the fares they charged. The second
means, to which B.C., Lufthansa and Swissair, among the I.A.T.A.
airlines, and McD.D. are alleged to have played an active part after
Laker had been reduced to the financial straits in which it found itself at
the beginning of 1982 in consequence of the above-mentioned predatory
fares, was to put pressure upon potential participants in the financial
Q rescue scheme for Laker at the beginning of 1982 to withdraw their
support and so to prevent Laker's survival as a competitor of the
I.A.T.A. airline defendants in the provision of scheduled services across
the North Atlantic.
My Lords, there are two propositions, one of American law and thus
of fact, the other of English law, which, if correct, are in my view
decisive of the appeals in both the civil actions without its being
D necessary for your Lordships to make detailed reference to the
multitudinous documents which this litigation has already generated.
Upon the first proposition, that of American law, not only is the
expert evidence all one way but it is also common ground between the
parties, that if the allegations made against B.A. and B.C. in the
complaint in the American action can be proved at the trial they disclose
£ a cause of action by Laker against B.A. and B.C. under the antitrust
law of the United States (viz. the Sherman Act and the Clayton Act)
which falls within the jurisdiction of the Federal District Court for the
District of Columbia within whose territorial area both B.A. and B.C.
have premises at which they carry on business. Indeed, Judge Greene,
the judge of the District Court who has been in charge of the pre-trial
proceedings in the American action, regards the complaint as being of a
F kind so commonplace that he describes it as an antitrust action of "the
garden variety," a description which embraces the alternative way of
pleading the antitrust cause of action as a count for "intentional tort."
The second proposition, that of English law, was understood by your
Lordships to have been common ground between the parties, at any rate
throughout the lengthy hearing of the appeal; no argument casting any
Q doubt upon it was advanced. The proposition is that, even if the
allegations against B.A. and B.C. in the complaint in the American
action can be proved, they disclose no cause of action on the part of
Laker against B.A. or B.C. that is justiciable in an English court. The
Clayton Act which creates the civil remedy with threefold damages for
criminal offences under the Sherman Act is, under English rules of
conflict of laws, purely territorial in its application, while because the
" predominant purpose of acts of B.A. and B.C. that are complained of
was the defence of their own business interests as providers of scheduled
airline services on routes on which Laker was seeking to attract
customers from them by operating its Skytrain policy, any English cause
218
80
Lord Diplock British Airways v. Laker Airways (H.L.(E.» [1985]
of action for conspiracy would be ruled out under the now well- A
established principle of English (as well as Scots) law laid down in a
series of cases in this House spanning 50 years of which it suffices to
refer only to Mogul Steamship Co. Ltd. v. McGregor, Gow & Co.
[1892] A.C. 25 and Crofter Hand Woven Harris Tweed Co. Ltd. v.
Veitch [1942] A.C. 435.
In the result your Lordships are confronted in the civil actions with a
case in which there is a single forum only that is of competent °
jurisdiction to determine the merits of the claim; and the single forum is
a foreign court. For an English court to enjoin the claimant from having
access to that foreign court is, in effect, to take upon itself a one-sided
jurisdiction to determine the claim upon the merits against the claimant
but also to prevent its being decided upon the merits in his favour. This
poses a novel problem, different in kind from that involved where there Q
are alternative fora in which a particular civil claim can be pursued: an
English court and a court of some foreign country both of which are
recognised under English rules of conflict of laws as having jurisdiction
to entertain proceedings against a defendant for a remedy for acts or
omissions which constitute an actionable wrong under the substantive
law of both England and that foreign country.
Cases which have these characteristics can now conveniently be D
labelled as forum conveniens cases. In them the High Court has
jurisdiction to control how the choice of forum shall be exercised. It
does so by the use, as circumstances may require, either of its
discretionary power to grant or refuse a stay of the action in the English
court by the party who is a plaintiff there, or of its discretionary-power
to enjoin a party who is, or is threatening to become, a plaintiff in the £
foreign court from continuing or commencing proceedings in that court.
Leaving aside claims that can immediately be identified as frivolous and
vexatious, the High Court, at the stage at which it exercises this
jurisdiction, is making no determination on the merits of the claim; it is
deciding by which court, English or foreign, the merits of the claim
ought to be tried. The principles to be applied by the High Court in
making this decision in forum conveniens cases have been developed F
over the last 10 years in a number of decisions of this House starting
with The Atlantic Star [1974] A.C. 436, continuing with MacShannon v.
Rockware Glass Ltd. [1978] A.C. 795 and Castanho v. Brown & Root
(U.K.) Ltd. [1981] A.C. 557, and ending with The Abidin Dover [1984]
A.C. 398; but the principles expounded in the speeches that were
delivered in all these cases start from the premiss that the claim by one Q
party against an adverse party is a claim to a right that is justiciable in
England. Except for a short passage in the opinion of my noble and
learned friend, Lord Scarman, in Castanho's case [1981] A.C. 557 (with
which all four other members of the Appellate Committee, including
myself, agreed), I do not find the speeches in the forum conveniens
cases of assistance in solving the novel problem which your Lordships
have to face in the civil actions that are subjects of the instant appeals. "
The answer to these appeals, in my opinion, clearly emerges from
the application to the allegations that are crucial in Laker's case against
B.A. and B.C. in the American action of what since the merger of the
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81
A courts of common law and Chancery has been a fundamental principle
of English legal procedure. That principle, originally laid down in North
London Railway Co. v. Great Northern Railway Co. (1883) 11 Q.B.D.
30, was re-stated by me (albeit in terms that I recognise were in one
respect too narrow) in Siskina (Owners of cargo lately laden on board)
v. Distos Compania Naviera S.A. [1979] A.C. 210, 256:
g "A right to obtain an . . . injunction is not a cause of action. . . . It
is dependent upon there being a pre-existing cause of action against
the defendant arising out of an invasion, actual or threatened by
him, of a legal or equitable right of the plaintiff for the enforcement
of which the defendant is amenable to the jurisdiction of the court."
This, being said in the context of an application for a Mareva injunction,
C omitted to mention the type of case that is of comparatively rare
occurrence in the English courts in which the plaintiff seeks against a
person amenable to the jurisdiction of the English High Court an
injunction to restrain the defendant from bringing suit against him in a
foreign court upon the ground that the plaintiff is entitled under English
law to a legal or equitable right not to be sued in that foreign court by
that person upon the cause of action that is the subject of such
^ proceedings. A right not to be sued upon a particular cause of action in
a particular foreign court by the person against whom the injunction is
sought may be contractual in origin. A common example of this is an
exclusive jurisdiction clause in a contract. Furthermore, if under English
law a defence would be available to the injunction-seeker, that defence
may be given anticipatory effect as a right not to be sued that is
E enforceable by injunction in an action for a declaration of non-liability.
Of such defences it is not difficult to point to a number of examples
most of them equitable in historical origin, such as estoppel in pais
(which was also a defence at common law), promissory estoppel,
election, waiver, standing by, laches, blowing hot and cold—to all of
which the generic description of conduct that is "unconscionable" in the
eye of English law may be given. I would accordingly agree, as I did in
F Castanho's case [1981] A.C. 557, with the qualification to the statement
of principle in the stark terms in which I expressed it in the Siskina case
[1979] A.C. 210, 256, that was added by Lord Scarman in Castanho's
case, at p. 573:
"But the width and flexibility of equity are not to be undermined by
categorisation. Caution in the exercise of the jurisdiction is certainly
G needed: but the way in which the judges have expressed themselves
from 1821 onwards amply supports the view for which the defendants
contend that the injunction can be granted against a party properly
before the court, where it is appropriate to avoid injustice."
The grounds on which it was claimed by B.A. and B.C. that it
amounted to unconscionable conduct on the part of Laker to sue them
" in the American action for charging predatory fares, or, more accurately,
for entering into a combination or conspiracy with other airlines that
was unlawful under U.S. antitrust laws to charge fares- to which the
description "predatory" was applicable, appear to have undergone
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82
considerable modification in the course of the passage of the civil actions A
through three courts. In the final analysis, by the time the matter
reached your Lordships' House the ground relied on can, I think, be
stated thus. (1) The only fares that British airlines operating transatlantic
routes between the United Kingdom and the United States were
authorised to charge to passengers on such routes were restricted to
those fares that were specified in the terms of a current air transport
licence, granted to that British airline by the Civil Aviation Authority °
(C.A.A.) under sections 21 to 24 of the Civil Aviation Act 1971, and
regulations made thereunder, on which that airline's right lawfully to
operate on that particular route depended. (2) In order to entitle the
British airlines to operate on that particular route within the territorial
airspace of the United States, those fares had likewise to be authorised
by a permit granted to the airline by the U.S. Civil Aeronautics Board Q
(C.A.B.) under the Federal Aviation Act 1958 of the United States. (3)
Laker by applying successfully to the C.A.A. for an air transport licence
to operate a scheduled service alongside that of B.A. on the New York-
London route as a British airline designated by the United Kingdom
under Bermuda 2, and when it subsequently applied for air transport
licences to operate scheduled services as a designated British airline on
other transatlantic routes, took advantage of this system in order to D
obtain the right to operate such scheduled services. (4) Thereby it
submitted the regulation of the fares that it was authorised currently to
charge on its Skytrain services to the same statutory regime as that to
which the fares authorised to be charged by B.A. and B.C. were
subject, viz. approval by the C.A.A. under a procedure which made
provision whereby any British airline which felt itself aggrieved by any £
proposal to the C.A.A. for any changes in fares authorised to be
charged on a particular route by some other airline which it regarded as
a competitor in the passenger market in which the aggrieved airline's
scheduled service operated could submit its objections to such proposal
for consideration by the C.A.A. (5) It would be unconscionable conduct
on the part of Laker to sue B.A. or B.C. for doing something that was
permitted by the regime for regulation of fares to which Laker had of its F
own volition become a party.
This ground is capable of being summarised in one sentence: Laker
having had the benefit of being admitted to the scheduled airlines' club
could not in good conscience complain of conduct by fellow members
that was permitted by the club's rules.
My Lords, I do not find it necessary to consider whether an argument Q
on these lines could be advanced with any degree of plausibility if the
grant to a British airline by C.A.A. of an air transport licence to
operate a scheduled passenger service on a route between the United
Kingdom and the United States at fares specified in such licence,
coupled with "designation" for that route by the United Kingdom
Government to the United States Government under the Bermuda 2
treaty, was all that was required to make lawful under the law of the "
United States all flights within the territorial airspace of that country
that were in conformity with the terms of the air transport licence. Such
is, however, very far from being the case.
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83
A Everything that a British airline does in the United States or in its
territorial airspace is subject to the domestic law of the United States
both criminal and civil. Section 21(1) and (2) of the Civil Aviation Act
1971 make it unlawful under English law for a British aircraft (i.e. one
registered in the United Kingdom) to be used for the carriage of
passengers for reward anywhere in the world except in accordance with
the terms (including terms as to the fares that are authorised to be
° charged) of an air transport licence granted to the operator of the
aircraft by the C.A.A. The legal effect in English law of an air transport
licence so far as flights within the territorial jurisdiction of a foreign
state are concerned is limited to imposing upon the operator to whom
the licence is granted obligations (enforceable in English courts by
criminal sanctions) that may be identical with or additional to those
Q obligations that are imposed upon that operator by the domestic law of
the foreign state within whose territorial jurisdiction the flight is being
undertaken. An air transport licence granted under the Civil Aviation
Act 1971 is incapable in English law of relieving the operator to whom it
is granted from any obligation that is imposed upon him by the domestic
law of that foreign state; nor does the Act purport to give any such
effect to it.
D Broadly speaking, the aim of bipartite treaties such as Bermuda 2
which are entered into by the United Kingdom with foreign states is to
secure that the obligations imposed by the domestic law of one state
upon operators of scheduled services upon routes between the two states
that are parties to the treaty shall be the same as, or, at any rate, shall
not conflict with, the obligations imposed upon those operators by the
£ domestic law of the other party to the treaty; but whether the treaty has
achieved this aim so far as it applies to the operations of designated
British airlines within the territorial jurisdiction of the United States is
not a question that an English court has jurisdiction to determine, since
Bermuda 2 forms no part of English law. What is relevant for present
purposes is that the domestic law of the United States includes the U.S.
antitrust laws embodied in the Sherman and Clayton Acts as those Acts
F of Congress have been so expansively interpreted by the U.S. courts, as
well as including the Federal Aviation Act 1958 and the Bermuda 2
treaty itself which, in contrast to the position under United Kingdom
law, is under the Constitution of the United States of direct application
as part of the American domestic law.
As already mentioned, a British airline, as a "foreign airline" within
Q the meaning of the Federal Aviation Act, is required to obtain a permit
from the C.A.B. to engage in air transportation in the United States or
between the United States and other countries. Fares which a foreign
airline proposes to charge for such transportation must be filed with
C.A.B. which has power under the Federal Aviation Act to approve or
disapprove fares so filed. The disapproval by C.A.B. of a fare so filed is
subject to overruling by the President of the United States.
" Any agreements between airlines relating inter alia to fares to be
charged by them on particular routes, which in relation to routes
between the United States and other countries means in effect agreements
between I.A.T.A. airlines, are also required to be filed with C.A.B.
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84
which is empowered to approve or disapprove them. C.A.B.'s disapproval A
of the agreement between I.A.T.A. airlines providing for the fares that
are to be charged, unlike its disapproval of individual fares specified in
such agreement, is not liable to be overruled by the President. Neither
approval nor disapproval by C.A.B. is, of itself, decisive either way as
to the lawfulness or unlawfulness of the agreement under the U.S.
antitrust laws; but C.A.B. may upon approving an agreement of this
kind make an exclusion order exempting the agreement and acts done in °
performance of it from the antitrust laws.
In the instant case the agreement between I.A.T.A. airlines as to the
fares that they would charge on transatlantic routes upon which
agreement Laker relies in the American action as constituting a
combination and conspiracy made unlawful by the Sherman Act and so
giving to Laker a cause of action for three times the damages caused to Q
it by the carrying out of the agreement was filed with C.A.B. but did
not receive its approval. So no question of its being exempted under the
Federal Aviation Act from American antitrust laws can arise. Certain
fares for which the agreement provided, in particular "stand-by" fares,
were approved by C.A.B.; others were disapproved initially but the
board's disapproval was overridden by the President of the United
States; Laker's cause of action in the American action, however, is not D
based upon the actual charging by individual airlines such as B.A. of
fares that were so approved, but upon the antecedent agreement to
charge those fares entered into between those I.A.T.A. airlines alleged
to be parties to it, which agreement Laker claims is a combination and
conspiracy prohibited under American antitrust laws.
My Lords, by obtaining an air transport licence from C.A.A. to g
operate scheduled services on routes between the United Kingdom and
the United States as British airlines designated by the United Kingdom
government under Bermuda 2, B.A., B.C. and Laker alike voluntarily
submitted themselves to a regulatory regime which, so far as their
operations within the territorial jurisdiction of the United States were
concerned, required that each of them should become subject to
American domestic law including American antitrust laws. In the F
circumstances as I have outlined them, it seems to me to be impossible
to argue plausibly either that Laker by submitting itself to such a regime
precluded itself from relying upon any cause of. action against B.A. or
B.C. that might accrue to it under American antitrust laws as a result of
what these airlines subsequently did within the territorial jurisdiction of
the United States; or that there was anything so unconscionable or Q
unjust in Laker's conduct in pursuing such cause of action in a U.S.
court that an English judge, in the proper exercise of a judicial
discretion, would be entitled to grant an injunction to prevent Laker
from doing so. The argument founded upon "admission to the scheduled
airlines club" which, for the reasons I have given, must be rejected as
fallacious does not appear to have been advanced at the hearing of the
civil actions at first instance by Parker J. The argument at that stage "
appears to have been largely focused upon the public policy of the
United Kingdom in relation to the enforcement of American antitrust
laws against United Kingdom nationals, as the principal ground on
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85
A which Laker should be restrained from proceeding with the American
action against the two British defendants B.A. and B.C. Before it turns
to public policy, however, Parker J.'s judgment contains an admirable
summary of the general principles upon which the discretion to restrain
a party from suing in a foreign court ought to be exercised. My only,
and minor, criticism of this summary is that it does not lay sufficient
stress upon the crucial distinction to which I have drawn attention
° between what the English court is doing when it grants an injunction in
a forum conveniens case and what it is doing when it grants an
injunction in a single forum case. Even as he stated them, however,
those principles led him to the conclusion that his discretion should be
exercised in favour of the refusing of the permanent injunctions sought
by B.A. and B.C., but he granted temporary injunctions pending appeal
Q to the Court of Appeal.
Parker J., and subsequently the Court of Appeal and this House,
had the advantage of statements by counsel instructed by the Attorney-
General as to the attitude of Her Majesty's Government, i.e. the
executive, towards Laker's American action. For my part, I regard this
as a dubious advantage, for the litigation between Laker, B.A. and B.C.
both in the United States and in England falls within the field of private
D law, where the sources of the public policy to which courts of justice
give effect in litigation between subject and subject are to be found in
judicial decisions and in legislation and not in the views of the executive
government except in the relatively narrow field of international relations
between sovereign states which is still reserved to the prerogative.
The public policy relevant to Laker's American action of which it is
g legitimate for an English court to take account includes the Protection of
Trading Interests Act 1980. It was the subject of close analysis by Parker
J. who held that it did not assist B.A. or B.C. in their claims to
injunctions. I agree with his analysis and his conclusions; but it is more
convenient to defer consideration of that Act until 1 come to deal with
the application for judicial review of the orders made and directions
given under it by the Secretary of State in the interval between the
F decision of Parker J. at first instance and the hearing of the appeal in
the Court of Appeal.
The statement of the attitude taken by the executive government
towards the American action by Laker was that in failing to see to it
that steps were taken (presumably by C.A.B. under the Federal Aviation
Act) in relation to B.A. and B.C.'s operations in the United States that
Q would make those British airlines immune from suit under the Clayton
Act and from prosecution under the Sherman Act (which is concurrently
the subject of investigation by a grand jury) the U.S. Government was
in breach of its treaty obligations under Bermuda 2. This is disputed by
the U.S. Government; and that treaty itself contains provision, to which
neither government has so far had recourse, for the resolution of this
dispute by arbitration between the two states. Nevertheless, Parker J.
" was beguiled into construing Bermuda 2 for himself as a result of which
he reached the conclusion that the U.S. Government had committed no
such breach. The interpretation of treaties to which the United Kingdom
is a party but the terms of which have not either expressly or by
224
86
reference been incorporated in English domestic law by legislation is not A
a matter that falls within the interpretative jurisdiction of an English
court of law. In this House the contrary has not been contended and no
arguments have been addressed to your Lordships directed to the
construction of the language of Bermuda 2. In the United States, where
Bermuda 2 is part of the domestic law, it may be that B.A. and B.C.
will be able to rely upon its provisions as providing one or both of them
with a defence in the American action; but that is not a matter upon "
which your Lordships can relevantly indulge in speculation.
Before passing from the proceedings before Parker J. it is necessary
to refer briefly to an argument advanced by B.C. that was additional to
the ground relied upon by B.A. as well, with which I have up to now
been dealing.
It is not alleged in the complaint in the American action that B.C., Q
although a party to the combination and conspiracy to drive Laker out
of the scheduled airline business as a competitor, had itself charged
predatory fares; the part that it allegedly played was to put pressure on
the potential participants in the scheme for trie financial rescue of Laker
to withdraw their support of it. B.C. contends that the evidence adduced
by it and Laker in its civil action in the High Court make it manifest
that Laker's inclusion of B.C. among the defendants in the American D
action is frivolous and vexatious. I do not doubt that if this could be
established the High Court would not only have jurisdiction to enjoin
Laker from proceeding with the American action against B.C. but also
ought to exercise its discretion by doing so because of what an English
court would be entitled to regard as the oppressive consequences that
the American system of pre-trial discovery and non-recovery of costs by £
successful defendants will have upon a defendant to an action which is
bound to fail. The decision of the Court of Appeal in Smith Kline &
French Laboratories Ltd. v. Bloch [1983] 1 W.L.R. 730, restraining the
defendant, Bloch, from proceeding in an action that he had started in an
American court against an English company and its American parent
company, may be accounted for on that ground in so far as it restrained
Bloch from proceeding with his action in America against the American F
parent company. So far as the proceedings in America against the
English company were concerned, Smith Kline & French was a plain
case of forum conveniens; but as against the American parent company
it may well have been a single forum case. If so, the decision was
justifiable on the ground that the vexatious character of the proceedings
against the American company was that its inclusion as defendants in Q
the American proceedings was made mala fide for the sole purpose of
laying an ostensible foundation for American jurisdiction for the claim
against the English company.
My Lords, the answer to the B.C. contention that, on the evidence
that was before Parker J. and is now before your Lordships, B.C. has
no case to answer in the American action is that until pre-trial discovery
in the form for which the Federal Rules of Procedure provide has been "
completed no one knows what evidence in support of its claim will have
become available to Laker to put before the jury in the trial of the
action in the District Court. To search for and obtain such evidence
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87
A (which may be totally unknown to it at the time when, encouraged only
by hopes entertained by its contingency-fee'd lawyer, Laker's action was
launched) is what, in American proceedings, pre-trial discovery is for.
The point as to the prematureness of any consideration of absence of
evidence against B.C. was taken in an affidavit of a lawyer that was filed
on Laker's behalf in the civil action. It would, in my view, have sufficed
to answer B.C.'s contention that they had established that the American
" action, so far as it included B.C. as a defendant, was frivolous or
vexatious. However, Laker's advisers succumbed to the temptation to
answer some of the evidence filed by B.C. in support of its contention;
and in doing so Laker exhibited documentary material that had already
been disclosed on pre-trial discovery by a fellow defendant to the action.
If the facts stated in that material can be proved by admissible evidence
Q at the trial, they would make out a prima facie case that what B.C. did
in connection with the financial rescue scheme for Laker was done with
the aim alleged in the complaint of driving Laker out of the scheduled
airline business as a competitor. But whether this will turn out to be the
case or not is not an issue to be decided in B.C.'s civil action against
Laker in the High Court. It suffices to say, in agreement with Parker J.
and the Court of Appeal, that this additional contention that is special
D to B.C. also fails.
My Lords, I can now turn to the steps taken by the Secretary of
State under the Protection of Trading Interests Act 1980, in the interval
between the judgment of Parker J. and the hearing of the appeal in the
Court of Appeal. These steps in the view of Sir John Donaldson M.R.
[1984] Q.B. 142, 184, who delivered the judgment of that court,
g produced "a wholly different situation."
The relevant provisions of the Act of 1980 are to be found in
sections 1 to 6. The attack made in the application for judicial review of
an order and two directions of the Secretary of State will make it
necessary to set out the actual words of sections 1 and 2:
"1(1) If it appears to the Secretary of State—(a) that measures have
F been or are proposed to be taken by or under the law of any
overseas country for regulating or controlling international trade;
and (b) that those measures, in so far as they apply or would apply
to things done or to be done outside the territorial jurisdiction of
that country by persons carrying on business in the United Kingdom,
are damaging or threaten to damage the trading interests of the
United Kingdom, the Secretary of State may by order direct that
G this section shall apply to those measures either generally or in their
application to such cases as may be specified in the order. (2) The
Secretary of State may by order make provision for requiring, or
enabling the Secretary of State to require, a person in the United
Kingdom who carries on business there to give notice to the
Secretary of State of any requirement or prohibition imposed or
threatened to be imposed on that person pursuant to any measures
in so far as this section applies to them by virtue of an order under
subsection (1) above. (3) The Secretary of State may give to any
person in the United Kingdom who carries on business there such
directions for prohibiting compliance with any such requirement or
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88
prohibition as aforesaid as he considers appropriate for avoiding A
damage to the trading interests of the United Kingdom. (4) The
power of the Secretary of State to make orders under subsection (1)
and (2) above shall be exercisable by statutory instrument subject to
annulment in pursuance of a resolution of either House of
Parliament. (5) Directions under subsection (3) above may be either
general or special and may prohibit compliance with any requirement
or prohibition either absolutely or in such cases or subject to such °
conditions as to consent or otherwise as may be specified in the
directions; and general directions under that subsection shall be
published in such manner as appears to the Secretary of State to be
appropriate. (6) In this section 'trade' includes any activity carried
on in the course of a business of any description and 'trading
interests' shall be construed accordingly. Q
"2(1) If it appears to the Secretary of State—(a) that a
requirement has been or may be imposed on a person or persons in
the United Kingdom to produce to any court, tribunal or authority
of an overseas country any commercial document which is not
within the territorial jurisdiction of that country or to furnish any
commercial information to any such court, tribunal or authority; or
(b) that any such authority has imposed or may impose a requirement D
on a person or persons in the United Kingdom to publish any such
document or information, the Secretary of State may, if it appears
to him that the requirement is inadmissible by virtue of subsection
(2) or (3) below, give directions for prohibiting compliance with the
requirement. (2) A requirement such as is mentioned in subsection
(l)(a) or (b) above is inadmissible—(a) if it infringes the jurisdiction g
of the United Kingdom or is otherwise prejudicial to the sovereignty
of the United Kingdom; or (b) if compliance with the requirement
would be prejudicial to the security of the United Kingdom or to
the relations of the government of the United Kingdom with the
government of any other country. (3) A requirement such as is
mentioned in subsection (l)(a) above is also inadmissible—(a) if it
is made otherwise than for the purposes of civil or criminal F
proceedings which have been instituted in the overseas country; or
(b) if it requires a person to state what documents relevant to any
such proceedings are or have been in his possession, custody or
power or to produce for the purposes of any such proceedings any
documents other than particular documents specified in the
requirement. (4) Directions under subsection (1) above may be Q
either general or special and may prohibit compliance with any
requirement either absolutely or in such cases or subject to such
conditions as to consent or otherwise as may be specified in the
directions; and general directions under that subsection shall be
published in such manner as appears to the Secretary of State to be
appropriate. (5) For the purposes of this section the making of a
request or demand shall be treated as the imposition of a "
requirement if it is made in circumstances in which a requirement to
the same effect could be or could have been imposed; and (a) any
request or demand for the supply of a document or information
227
89
A which, pursuant to the requirement of any court, tribunal or
authority of an overseas country, is addressed to a person in the
United Kingdom; or (b) any requirement imposed by such a court,
tribunal or authority to produce or furnish any document or
information to a person specified in the requirement, shall be
treated as a requirement to produce or furnish that document or
information to that court, tribunal or authority. (6) In this
° section 'commercial document' and 'commercial information' mean
respectively a document or information relating to a business of any
description and 'document' includes any record or device by means
of which material is recorded or stored."
Section 3 makes it an offence to fail without reasonable excuse to
/-, comply with any requirement imposed under section 1(2) or knowingly
contravene a direction given under section 1(3) or section 2(1). Section 5
prohibits the enforcement in the United Kingdom of judgments of
foreign courts for multiple damages or claims for contribution to damages
awarded against another person in a multiple damage suit. This provision,
as is well known, is specifically directed against antitrust actions brought
in the United States of America under the Clayton Act; while section 6
D gives to U.K. business enterprises (viz. United Kingdom citizens,
companies incorporated in the United Kingdom and persons carrying on
business there) who have paid multiple damages in a foreign suit a right
of action justiciable in a court of the United Kingdom to recover against
a person to whom such multiple damages were paid (whether he is
within the jurisdiction of the High Court or not) such part of the
F multiple damages as exceeds the part attributable to compensation. This
right of recovery of the non-compensatory element in the multiple
damages does not apply where the person against whom multiple
damages were awarded carried on business in the foreign country in
which the proceedings against him were brought and these proceedings
related exclusively to activities carried on in that country. The adverb
"exclusively" prevents Laker's American action from falling within the
F exception.
In the instant cases, the Secretary of State made an order under
section 1(1) of the Act of 1980 entitled the Protection of Trading
Interests (U.S. Antitrust Measures) Order 1983 that came into operation
on 27 June 1983 and was in the following terms:
"Whereas it appears to the Secretary of State that the measures to
Q which this Order relates have been taken by or under the law of the
United States of America ('the United States') for regulating or
controlling international trade and that those measures, in so far as
they apply to things done or to be done outside the territorial
jurisdiction of the United States by persons carrying on business in
the United Kingdom, are damaging or threaten to damage the
trading interests of the United Kingdom:
" "Now therefore the Secretary of State, in exercise of his powers
under section 1(1) of the Protection of Trading Interests Act 1980
('the 1980 Act') and of all other powers enabling him in that behalf,
hereby makes the following Order—
228
90
"1(1) This Order may be cited as the Protection of Trading A
Interests (U.S. Antitrust Measures) Order 1983 and shall come into
operation on 27 June 1983. (2) In this Order—'the Bermuda 2
Agreement' means the Agreement between the Government of the
United Kingdom of Great Britain and Northern Ireland and the
Government of the United States signed at Bermuda on 23 July
1977, concerning air services; 'air service' and 'tariff shall be
construed in accordance with the Bermuda 2 Agreement; 'United ^
Kingdom designated airline' means a British airline (within the
meaning of section 4(2) of the Civil Aviation Act 1982) designated
by the Government of the United Kingdom under the Bermuda 2
Agreement.
"2(1) The Secretary of State hereby directs that section 1 of the
1980 Act shall apply to sections 1 and 2 of the United States' Q
Sherman Act and sections 4 and 4A of the United States' Clayton
Act in their application to the cases described in the following
paragraph. (2) The cases mentioned in paragraph (1) of this article
are: (i) an agreement or arrangement (whether legally enforceable
or not) to which a U.K. designated airline is a party, (ii) a
discussion or communication to which a U.K. designated airline is a
party, (iii) any act done by a U.K. designated airline, which, in D
respect of each case, concerns the tariffs charged or to be charged
by any such airline or otherwise relates to the operation by it of an
air service authorised pursuant to the Bermuda 2 Agreement."
He also gave general directions under section 1(5) and section 2(1) of
the Act to come into operation on the same date as the Order. The two F
directions were in the following terms respectively:
"General Direction by the Secretary of State (under section 1)
"Whereas the Secretary of State: (1) has directed that section 1
of the Protection of Trading Interests Act 1980 ('the 1980 Act')
shall apply, in the circumstances specified by him, to sections 1 and
2 of the United States' Sherman Act and sections 4 and 4A of the
United States' Clayton Act ('the U.S. antitrust measures'); (2) has *
considered the effect of the U.S. antitrust measures on United
Kingdom designated airlines and in particular on their ability freely
to participate in discussions or agreements relating to tariffs or
other matters relating to the operation of air services authorised
pursuant to the Bermuda 2 Agreement; (3) has considered the
effect of the U.S. measures on the trading interests of the United Q
Kingdom; (4) considers that the following direction is appropriate
for avoiding damage to the trading interests of the United Kingdom:
"Now, therefore, the Secretary of State, in exercise of his
powers under section 1(3) of the 1980 Act, hereby gives the
following direction—
"1. Except with the consent of the Secretary of State no person
in the United Kingdom who carries on business there shall comply, "
or cause or permit compliance, with any requirement or prohibition
imposed on that person pursuant to the U.S. antitrust measures in
so far as such requirement or prohibition relates to or arises out of
229
91
A any of the cases described in article 2(2) of the Protection of
Trading Interests (U.S. Antitrust Measures) Order 1983.
"2. Expressions used in this direction shall have the meanings
assigned to them by the Protection of Trading Interests (U.S.
Antitrust Measures) Order 1983 for the purposes of that Order.
"3. This direction shall come into operation on 27 June 1983."
g "General Direction by the Secretary of State (under section 2)
"Whereas it appears to the Secretary of State: (a) that the
United States' Department of Justice has begun an investigation
into alleged price fixing and other allegations relating to the air
transport of passengers over the North Atlantic for possible
violations of sections 1 and 2 of the 'Sherman' Act; and that for this
purpose a grand jury ('the grand jury') has been empanelled in the
C District of Columbia in the United States of America; (b) that a
requirement may be imposed on a person or persons in the United
Kingdom to produce or furnish to the United States' Department of
Justice or the grand jury commercial documents or commercial
information which are not within the territorial jurisdiction of the
United States; (c) that civil antitrust proceedings of a penal nature
j-j are now pending in the United States' District Court for the District
of Columbia ('the District Court') relating to similar matters to
those which are the subject of the United States' Department of
Justice investigation and that commercial documents and commercial
information which are produced in the civil antitrust proceedings
may be utilised in the Department of Justice investigation or before
the grand jury; (d) that a requirement may be imposed on a person
E or persons in the United Kingdom to produce or furnish to the
District Court documents or commercial information which are not
within the territorial jurisdiction of the United States; (e) that any
such requirements would be inadmissible within the meaning of
section 2(2) and (3) of the Protection of Trading Interests Act 1980
(the '1980 Act'):
P "Now, therefore, the Secretary of State, in exercise of his
powers under section 2 of the 1980 Act, gives the following
directions:
"1. Except with the consent of the Secretary of State no person
or persons in the United Kingdom shall comply, or cause or permit
compliance, whether by themselves, their officers, servants or
agents, with any requirement to produce or furnish to the United
G States' Department of Justice, the grand jury or the District Court
any document in the United Kingdom or any commercial information
which relates to the said Department of Justice investigation or the
grand jury or District Court proceedings.
"2. For the purpose of this direction and in relation to any
requirement of the United States' Department of Justice, the grand
jury or the District Court, the making of a request or demand or
requirement to produce or furnish any document or information to
a person specified in the requirement shall be treated as subsection
(5) of section 2 of the 1980 Act treats such matters for the purposes
of that section.
230
92
"3. Expressions used in this direction shall have the meanings A
assigned to them by the 1980 Act for the purposes of that Act.
"4. This direction shall come into operation on 27 June 1983."
The judicial review application

Since Laker alleged that the Order and both directions were ultra
vires and its application for judicial review of them was disposed of by "
the Court of Appeal at the same time as the appeals in the civil actions,
an excursus on the validity of the Order and directions seems appropriate
at this point though it need only be short.
The first submission made on behalf of Laker was that the expression
"measures . . . taken by or under the law of any overseas country" (Act
of 1980, section l(l)(a)) is not wide enough to include measures which Q
take the form of legislation. This seems to me to be so plainly wrong as
not to merit reasoned refutation. I content myself with expressing my
agreement with what was said in the judgment of the Court of Appeal
[1984] Q.B. 142, 196 in answer to this argument.
It was next submitted that the Secretary of State ought to have given
reasons for making the order and each of the directions that were more
explicit than those contained in the actual recitals to them, which do no D
more than state the conclusions that the Secretary of State has reached.
This submission on behalf of Laker was based upon the minatory dictum
of Lord Upjohn in Padfield v. Minister of Agriculture, Fisheries and
Food [1968] A.C. 997, 1061-1062 that:
"if [a minister] does not give any reason for his decision it may
be, if circumstances warrant it, that a court may be at liberty to E
come to the conclusion that he had no good reason for reaching
that conclusion . . . "
The qualification made in the words that I have italicised in Lord
Upjohn's dictum have the effect of equating it with, and adding nothing
to, a recognition of the Wednesbury principle {Associated Provincial
Picture Houses Ltd. v. Wednesbury Corporation [1948] 1 K.B. 223) that F
a decision reached by a person upon whom a statute confers a discretion
to exercise coercive powers over individuals may be held by a court of
law to be ultra vires if it be established to the satisfaction of the court
upon an application for judicial review that the decision is one that no
reasonable person holding the office of minister upon whom the
discretion is conferred could have reached. Where the decision is one _,
which concerns international relations between the United Kingdom and
a foreign sovereign state a very strong case needs to be made out to
justify a court of law in holding the decision to be ultra vires under the
Wednesbury principle. In the instant case, I agree with the Court of
Appeal that Laker does not come anywhere near doing so.
The civil actions in the Court of Appeal H

I return to the civil actions in the Court of Appeal. That court was
much influenced by the metaphor "the critical equation" which had been
used by Lord Wilberforce in The Atlantic Star [1974] A.C. 436, 468 and
231
93
A adopted by Lord Scarman in Castanho v. Brown & Root (U.K.) Ltd.
[1981] A.C. 557, 574. As a metaphor drawn from mathematics its
appropriateness to questions involved in forum conveniens cases in the
context of which it was used is flawed by the fact that the essential
characteristic of an equation is that there are two sides to it and each
side is equal to the other; it is neither more nor less. In cases where
there are alternative fora available one nevertheless understands the
" idea that it is meant to convey, whereas in a single forum case there are
not even two sides for comparison with one another.
Under the cross-heading "The critical equation" [1984] Q.B. 142,
199, the Court of Appeal in its judgment dealt first with the disadvantages
to Laker of being forced to abandon the American action as against
B.A. and B.C. These cannot be other than all one way, as the Court of
Q Appeal appears to recognise. The judgment then went on to refer to the
burden that the U.S. system for the administration of justice, in antitrust
civil actions in particular, imposed upon defendants: three-fold damages,
burdensome and ruinously expensive pre-trial discovery, the contingency
basis on which such actions were undertaken by plaintiffs' attorneys, a
costs system under which a successful defendant was entitled to recover
a sum for costs that represented no more than an infinitesimal part of
D those that he had actually incurred. While expressly disclaiming any
criticism of the American system of procedure in civil actions, the court
considered that the existence of such burdens was a factor in B.A.'s and
B.C.'s favour that ought to be taken into account on its side of the
critical equation.
Likewise, the Court of Appeal appear to have considered that the
g fact that Laker, as a British airline designated under Bermuda 2, would
be entitled to look to the United Kingdom Government for protection if
it considered itself to be treated in the United States in an unfair way
inconsistent with that treaty "cast some doubt on the legitimacy of the
juridical advantage which [Laker] seek to preserve in the United States"
(p. 201). For my part, I fail to follow this reasoning unless it amounts to
a variant of the "admission to membership of scheduled airlines' club"
F argument which I have rejected for reasons given earlier in this speech.
The Court of Appeal, however, do not state how they would have
solved "the critical equation" if there had not been present in that
equation by the time that the appeal reached them what they described
as the "decisive factor" in favour of B.A. and B.C., viz. the effect of the
Order and directions.
Q Two reasons are relied on by the court for treating the Order and
the two directions as the decisive factor. With respect, I think that both
these reasons are fallacious.
The first reason is that the direction under section 1(3) of the Act
would prohibit B.A. and B.C. from satisfying any judgment given
against them in the American action and thus render their aircraft liable
to seizure in execution in the United States. This is based upon what, in
" my opinion, is a misconstruction of the Act which draws a clear
distinction between "requirements" and "prohibitions" on the one hand
and "judgments" on the other. The distinction between the former
which are referred to as being "imposed" and the latter which are
232
94
referred to as being "given" first appears in the long title of the Act A
itself. Sections 1 and 3 deal with requirements and prohibitions, which
so far as is relevant to the instant appeal in the civil actions would be
limited to pre-trial, i.e. interlocutory, orders made in the American
action by the U.S. District Court. Judgments are dealt with not in
sections 1 to 3 but in sections 5 and 6; section 6 is drafted upon the
assumption that a person carrying on business in the United Kingdom
and a United Kingdom company or citizen commits no breach of
English law by paying a foreign judgment for multiple damages in the
country in which the judgment was given. It gives such person a remedy
in the United Kingdom for recovering such sum included in the foreign
judgment that he has paid as was not purely compensatory. The
direction given under section 1(3) would not prohibit B.A. or B.C.
paying in the United States any judgment for threefold damages given C
against them in the American action.
The second reason relied upon by the Court of Appeal is that the
d[ ection given under section 2 disables B.A. and B.C. from giving
discovery of information and documents that would assist their defence
in the American action. To this the short and realistic answer is that if
the two companies think, as is claimed in an affidavit filed on behalf of ^
B.A. in its civil action, that disclosure of particular documents or
information would help their own defence rather than hinder Laker's
ability to establish its complaint in the American action when it comes
to trial, the direction enables them to apply to the Secretary of State for
his consent to such disclosure, and since, to put it colloquially, the
Secretary of State is "on their side," such consent would appear more
likely than not to be forthcoming. So the Order and directions, if they E
make any difference, operate to the disadvantage of Laker in the
American action rather than that of B.A. and B.C. who, to the extent
that they do not seek or are refused the Secretary of State's consent to
disclosure of particular information or documents, will be saved the
irrecoverable costs of pre-trial discovery on the American pattern of
documents in their possession or control in the United Kingdom and of p
information known to their officers and employees in the United
Kingdom who do not pay regular visits to the United States.
It was no doubt for these reasons that at the hearing before your
Lordships counsel for B.A. expressly disclaimed any reliance on the
Court of Appeal's decision that the Order and directions fundamentally
changed the legal situation as it had been at the time of the trial when _
Parker J. exercised his discretion in favour of refusing the injunctions
sought by B.A. and B.C. In the final analysis the case for B.A.
presented before your Lordships stood or fell on the "admission to
membership of the scheduled airlines' club" argument; and for reasons I
have given I think that it fails. At the hearing in this House, I did not
understand counsel for B.C. to dissociate himself from the disclaimer of
reliance upon what the Court of Appeal considered to be the "decisive H
factor" justifying their overruling the discretion exercised by Parker J.
that was made by counsel for B.A. I understand that, since the close of
the hearing, some postscriptial reservations have occurred to B.C.'s legal
233
95
A advisers, either English or American, but I have already given reasons
why I think that such disclaimer was inevitable.
For my part I should allow Laker's appeals in both civil actions and
discharge the injunctions granted by the Court of Appeal. I should
dismiss Laker's appeal in the application for judicial review against the
Secretary of State.
LORD FRASER OF TULLYBELTON. My Lords, I have had the advantage

of reading in draft the speeches of my noble and learned friends, Lord
Diplock and Lord Scarman, and I agree with them. I would dispose of
the appeals in the way that Lord Diplock has proposed.
LORD SCARMAN. My Lords, I agree with the analysis of fact and law,
C the reasoning and the conclusions in the speech of my noble and learned
friend, Lord Diplock. I add a few observations only because I was the
author of the dictum in Castanho v. Brown & Root (U.K.) Ltd. [1981]
A.C. 557, 573, which may have to some extent misled the Court of
Appeal.
The dictum has been quoted by my noble and learned friend and
j-v needs, therefore, no repetition. It enjoyed the unanimous approval of
the House when delivered: and it is clear from my noble and learned
friend's speech that it still enjoys his support and approval.
I would emphasise that it states an approach and a principle which
are of general application. The approach has to be cautious because an
injunction restraining a person within the jurisdiction of the English
court from pursuing a remedy in a foreign court where, if he proves the
E necessary facts, he has a cause of action is, however disguised and
indirect, an interference with the process of justice in that foreign court.
Caution is needed even in a "forum conveniens" case, i.e., a case in
which a remedy is available in the English as well as in the foreign
court. Caution is clearly very necessary where there is no remedy in the
English court in respect of the cause of action which, if the facts be
F proved, is recognised and enforceable by the foreign court.
Nevertheless, even in the latter case, the power of the English court
to grant the injunction exists, if the bringing of the suit in the foreign
court is in the circumstances so unconscionable that in accordance with
our principles of a "wide and flexible" equity it can be seen to be an
infringement of an equitable right of the applicant. The right is an
entitlement to be protected from a foreign suit the bringing of which by
G the defendant to the application is in the circumstances unconscionable
and so unjust. This equitable right not to be sued abroad arises only if
the inequity is such that the English court must intervene to prevent
injustice. Cases will, therefore, be few: but the jurisdiction exists and
must be sustained. To the authorities which I quoted in Castanho's case
as supporting the existence of the jurisdiction I would add the decision
of your Lordships' House in Carron Iron Co. v. Maclaren (1855) 5
H
H.L.Cas. 416.
My Lords, Laker's American antitrust suit against the British
companies B.A. and B.C. is not unconscionable for the simple reason,
which is exposed plainly by my noble and learned friend's analysis of the
234
96
Lord Scarman British Airways v. Laker Airways (H.L.(E.)) [1985]
facts and relevant law, that the British companies, who became parties A
to the arrangement for fixing transatlantic fares made by the United
Kingdom pursuant to the international agreement "Bermuda 2," accepted
that they were subject, when operating and doing business within the
territorial jurisdictions of the United States and United Kingdom, to the
private law of the two states. The appropriate United States authority,
the C.A.B., could lawfully have exempted the allegedly "predatory
fares" agreement from the provisions of the U.S. antitrust laws, but did ^
not do so. If this omission constituted a breach of Bermuda 2 (which
itself is no part of our law) the remedy is by arbitration between the two
states or by diplomatic action. English courts have no role to play in the
resolution of any such dispute, important though it may be to the
economic interests of the United Kingdom.
In my view B.A. and B.C. have failed to make a case of Q
unconscionability. Having failed to establish the infringement of an
equitable right, they are not entitled to relief by way of injunction from
an English court. I would, therefore, allow the civil action appeals. I
add, for the sake of completeness, that I would, of course, dismiss
Laker's appeal in the judicial review proceedings.
<
LORD ROSKILL. My Lords, I have had the advantage of reading in D
draft the speech delivered by my noble and learned friend, Lord
Diplock. I agree with it, and for the reasons he gives I would dispose of
these three appeals in the manner which he proposes. I also agree with
the speech of my noble and learned friend, Lord Scarman.
LORD BRIGHTMAN. My Lords, I respectfully agree that these three
appeals should be disposed of in the manner proposed by my noble and E
learned friend, Lord Diplock, for the reasons contained in his speech
and in the speech of my noble and learned friend, Lord Scarman.
Appeals in civil actions allowed with
costs in House of Lords and below.
Orders of Court of Appeal of 27
July 1983 set aside and injunctions F
discharged save in so far as those
orders set aside Parker J. 's tempor-
ary injunction pending appeal. Stay
imposed by Parker J. 's order of 20
May 1983 restored.
Appeal in judicial review proceedings Q
dismissed with costs.
Solicitors: Durrani Piesse; Richards Butler & Co.; Herbert Smith
& Co.; Treasury Solicitor.
M. G.
H
235
TRESPASS TO LAND AND DISPOSSESSION
The typical lodger with non-exclusive possession has to be distinguished from the
typical modern occupational licensee, since nowadays “a person who has no more
than a licence may yet have possession of the land”,117 and the terms of the licence
may confer a sufficient right of possession. In Manchester Airport Plc v Dutton,118
the Court of Appeal held, by a majority, that the court had jurisdiction to grant a
licensee an order for possession against trespassers even before the licensee was in
de facto possession, if such an order was necessary to give effect to the licensee’s
right to occupy under the contract with the licensor.
18-24 Servants In the absence of an intention on the part of the owner to treat the oc-
cupier as a tenant, mere occupation of premises by those such as servants does not
amount to possession even if their occupation is exclusive.119 This presumption
against exclusive possession by a servant may be compared with a bailee at will or
a servant using his employer’s movable property.120 But it is only a presumption:
an expression of contrary intention or the circumstances of the case may displace
it.
18-25 Public bodies Whether public bodies authorised by commission or statute to

construct and, from time to time, repair public works, or to control and regulate the
repair of public highways, thereby acquire an interest in the soil of such works or
highways, so as to entitle them to sue a trespasser causing physical damage thereto,
is simply a question of intention to be deduced from the language of the commis-
sion or statute, as the case may be.121
18-26 Reversioner Although, in general, the only person who can sue for a trespass is
the person who was in actual or constructive possession at the time the trespass was
committed, an exception exists where the trespass has caused a permanent injury
to the land affecting the reversionary interest. The reversioner may sue at once
without waiting until his future estate falls into possession.122 He may sue for any
act involving a partial destruction of the freehold. But for an ordinary continuing
trespass, even though committed under a claim of a right of way, the reversioner
cannot sue.123 He cannot sue for the erection of a temporary structure on his land,
such as a hoarding erected to obstruct a window on his property for a year.124 He
can, however, sue for acts of trespass which, if acquiesced in, would result in the
loss or gain of an easement.125
18-27 Co-owners One co-owner of land can only bring an action in trespass against the
other if the latter has actually been ousted or dispossessed.126 Each co-owner is
117 Hounslow LBC v Twickenham Garden Developments Ltd [1971] Ch. 233 at 257, per Megarry J.
118 [2000] Q.B. 133.
119 White v Bayley (1861) 10 C. & B. (N.S.) 227; Goudge v Broughton [1929] 1 K.B. 103. See also
para.18-92.
120 See para.16-56 onwards.
121 cf. Duke of Newcastle v Clark (1818) 8 Taunt. 602; with Coverdale v Charlton (1878) 4 Q.B.D. 104;
and Rolls v St George, Southwark (1880) 14 Ch. D. 785.
122 Jones v Llanrwst Urban DC [1911] 1 Ch. 393; Mayfair Property Co v Johnston [1894] 1 Ch. 508.
123 Baxter v Taylor (1832) 4 B. & Ad. 72.
124 Cooper v Crabtree (1828) 20 Ch. D. 589.
125 See para.19-85.
126 Though trespass depends on ouster by a co-owner, other illegitimate uses short of ouster may give
rise to other liabilities, e.g. accounting for net profits received from a stranger.
[1390]
236
TRESPASS BY RELATION
entitled to possession of the whole land, so that if one turns the other off the land
or part of it, it is a trespass.127 If the common property or part of it is destroyed, there
is an ouster. So, trespass lies by one co-owner against another who digs and car-
ries away the soil.128 It is not trespass, however, if one co-owner uses the land in
the ordinary and natural way, as by cutting grass and making it into hay,129 or work-
ing a coal mine.130 In such a case the owner making the hay or working the mine
must account for the profits. When there are co-owners of a wall, such as a party
wall,131 one owner can maintain trespass against the other if there is a simple
destruction of the wall.132 But if the wall has been destroyed with the intention of
rebuilding it,133 or the foundations have been temporarily removed with the object
of replacing them,134 there is no trespass. Trespass will only lie if one owner is
ousted from possession of the wall, for example, if the wall is heightened and a
building is placed so as to occupy the whole width of the top.135 Special statutory
procedures exist to facilitate the repair of party structures and the swift resolution
of disputes relating to them.136
3. TRESPASS BY RELATION
Trespass by relation Historically, actual possession was for many purposes more 18-28
highly favoured than property or the legal right to possession. Where, at the time
of the commission of any trespass upon land, the owner happened to be out of pos-
session, either by reason of his having been wrongfully ousted or by reason of his
having neglected to enter into possession upon the accrual of his title, he was
without remedy for such trespass. Over time, the injustice of not extending to the
right to possession the remedies granted to those with bare possession were
recognised, and a legal fiction was introduced whereby the party having the right
to possession was, upon entry, deemed to have been in possession from the date
when his right of entry accrued. This doctrine of possession by relation gradually
achieved general application.137 The courts, however, did not completely treat the
right of possession as per se equivalent to possession; they still required that a
claimant who sought to recover damages for a trespass committed while he was out
of possession should, before the action was brought, go through the form of entry,
or, of making a formal claim.138 A claim for mesne profits—i.e. damages for wrong-
ful occupancy of the land (usually assessed in terms of the reasonable rental value
of the land)—being based on trespass by relation, also required an entry by the
127 Murray v Hall (1849) 7 C.B. 441; Jacobs v Seward (1872) L.R. 5 H.L. 464: putting a lock on a gate
(not kept locked) is not enough.
128 Wilkinson v Haygarth (1846) 12 Q.B. 837.
129 Jacobs v Seward (1872) L.R. 5 H.L. 464; Bull v Bull [1955] 1 Q.B. 234 at 237.
130 Job v Potton (1875) L.R. 20 Eq. 84.
131 See Law of Property Act 1925 s.38 Sch.1 Pt V.
132 Jones v Read (1876) I.R. 10 C.L. 315.
133 Cubitt v Porter (1828) 8 B. & C. 257.
134 Standard Bank of British South America v Stokes (1878) 9 Ch. D. 68.
135 Stedman v Smith (1857) 8 E. & B. 1.
136 See the Party Wall etc. Act 1996 ss.3–5 and 10. The legislation does not apply to disputes about
ownership.
137 Bl. Comm. 3 at 210; Barnett v Earl of Guildford (1855) 11 Exch. 19.
138 See Dunlop v Macedo (1891) 8 T.L.R. 43; Southport Tramways v Gandy [1897] 2 Q.B. 66.
[1391]
237
PROHIBITORY INJUNCTIONS
an injunction is fairly readily granted.24 The grant of a mandatory injunction, which

is an injunction in positive terms25 requiring the defendant to take some specific ac-
tion involving, typically, the carrying out of certain works, on the other hand, can
never be “as of course”26 and depends upon a number of factors in addition to those
which may affect the grant of prohibitory injunctions.27
2. PROHIBITORY INJUNCTIONS
The mere proof of a legal wrong done in the past is insufficient to entitle the 28-06
claimant to an injunction. The court must be satisfied that the interference with the
claimant’s right28 is continuing, as in many cases of nuisance and some of trespass,
or that it is likely to be repeated unless restrained.29 Furthermore, even if this is
done, the decision whether to grant an injunction remains essentially discretionary.30
Thus while in the case of substantial interference with the claimant’s rights there
should be a presumption in favour of injunctive relief, with the defendant having
to advance a case why it should not be available,31 it is no longer the case, if it ever
was,32 that an injunction can be had save in exceptional circumstances or on any
24 Coventry v Lawrence [2014] UKSC 13; [2014] A.C. 822 at [100] and [121] (Lord Neuberger, with
the apparent agreement of Lords Carnwath and Mance). At one time it was regularly said in the case
of a prohibitory order that the claimant got his injunction “as of course” unless there were exceptional
circumstances (Morris v Redland Bricks Ltd [1970] A.C. 652 at 664, per Lord Upjohn; Pride of
Derby etc Ltd v British Celanese Ltd [1953] 1 Ch. 149 at 181, per Lord Evershed MR; [1953] 1 Ch.
149 at 194, per Romer LJ). But today this is too favourable to the claimant, since it lays insuf-
ficient stress on the essentially discretionary nature of the whole exercise of deciding whether to grant
an injunction. It should be noted that even if an injunction is granted, its operation may be suspended
for a time where appropriate (see e.g. Morris v Redland Bricks Ltd [1970] A.C. 652 at 664, per Lord
Upjohn; Woollerton & Wilson Ltd v Richard Costain Ltd [1970] 1 W.L.R. 411; Coventry v Lawrence
(No 2) [2014] UKSC 46; [2015] A.C. 106 in which the injunction prohibiting the defendant’s use
of a race track was suspended until such time as the claimants’ home was fit for habitation after it
had been damaged by fire). This was particularly true where the defendant was a public utility: see,
e.g. Price’s Patent Candle Co v London CC [1908] 2 Ch. 526; Pride of Derby etc Ltd v British
Celanese Ltd [1953] Ch. 149; and also A. Ogus & G. Richardson, “Economics and the Environment:
A Study of Private Nuisance” [1977] C.L.J. 284, 311–314.
25 Jackson v Normandy Brick Co [1899] 1 Ch. 438.
26 Morris v Redland Bricks Ltd [1970] A.C. 652 at 665, per Lord Upjohn.
27 See paras 28-14 to 28-19.
28 Actual damage is not necessary so long as an actionable interference with proprietary rights is shown:
Jones v Llanrwst Urban DC [1911] 1 Ch. 393; Sevenoaks DC v Pattullo & Vinson Ltd [1984] Ch.
211.
29 Proctor v Bayley (1889) 42 Ch. D. 390. In Weller v Associated Newspapers Ltd [2015] EWCA Civ
1176; [2016] 1 W.L.R. 1541 a prohibitory injunction preventing the publication of photographs was
ordered in a situation where the defendant had said that they would not publish the photographs again
but refused to give an undertaking to the court to that effect.
30 “The court’s power to award damages in lieu of an injunction involves a classic exercise of discre-
tion, which should not, as a matter of principle, be fettered”: Lord Neuberger in Coventry v Lawrence
[2014] UKSC 13; [2014] A.C. 822 at [120]: see too at [170] (Lord Clarke).
31 See Coventry v Lawrence [2014] UKSC 13; [2014] A.C. 822 at [100] and [121] (Lord Neuberger,
with whom Lords Carnwath and Mance seemingly agreed). See too the earlier Regan v Paul Proper-
ties DPF (No.1) Ltd [2006] EWCA Civ 1391; [2007] Ch. 135, which to that extent at least seems
to remain good law.
32 As had been suggested by a line of authority prior to the Supreme Court’s decision in Coventry: e.g.
Shelfer v City of London Electric Lighting Co [1895] 1 Ch 287, 323 (A.L. Smith LJ); and Regan v
Paul Properties DPF (No.1) Ltd [2006] EWCA Civ 1391; [2007] Ch. 135 at [70]–[73] (Mummery
LJ).
[2157]
238
INJUNCTIONS
similar basis.33 Nor can the matter be reduced to simple rules.34 As Millett LJ put
it in Jaggard v Sawyer35:
“Reported cases are merely illustrations of circumstances in which particular judges have
exercised their discretion, in some cases by granting an injunction, and in others by award-
ing damages instead. Since they are all cases on the exercise of a discretion, none of them
is a binding authority on how the discretion should be exercised. The most that any of
them can demonstrate is that in similar circumstances it would not be wrong to exercise
the discretion in the same way. But it does not follow that it would be wrong to exercise
it differently.”
28-07 Claimant’s conduct The grant of an injunction being discretionary, no complete

or exhaustive list of relevant factors can be drawn up. However, the claimant’s own
conduct is clearly a relevant factor, so that condonation of the acts complained of,
at least until withdrawn, will deprive him of this remedy.36 Thus, where the defend-
ants had given notice to the claimants—a canal company—of their intention to lay
pipes for the purposes of drawing water from the canal and the claimants’ agents
had superintended the laying of the pipes and were aware of the expense incurred
by the defendants, it was held that no injunction to restrain the defendants from
continuing to draw water would be granted, even though the defendants were un-
able to make out a defence of leave and licence to an action at law on the same
facts.37 In Armstrong v Sheppard & Short Ltd,38 the defendants had entered upon a
small strip of land owned by the claimant and had laid a sewer under its surface.
The claimant subsequently claimed damages for trespass and an injunction to
restrain the further discharge of effluent through or under his land, and in evidence
he denied that he had ever given the defendants permission to construct the sewer.
On this he was disbelieved, but it was accepted that when he gave his assent to the
work he was unaware of his own proprietary interest in the land in question. It was
held that the defendants had no defence to an action for damages for trespass,39 but
that no injunction would issue, partly at least because the claimant had misled the
defendants and had attempted to mislead the court.
33 “[A]n approach which involves damages being awarded only in ‘very exceptional circumstances’
[is] simply wrong in principle”: Coventry v Lawrence [2014] UKSC 13; [2014] A.C. 822 at [119]
(Lord Neuberger). See too Lord Clarke at [171]; also the discussions in the earlier nuisance cases
of Colls v Home & Colonial Stores Ltd [1904] A.C. 179, 193, 212–213 (Lords M’Naghten and
Lindley); and Fishenden v Higgs & Hill Ltd (1935) 153 L.T. 128, 139 (Lord Hanworth MR), largely
approved of in Coventry’s case.
34 Compare A.L. Smith LJ’s nineteenth-century suggestion, now discountenanced, that to avoid an
injunction it generally had to be shown, cumulatively, that (1) the injury to the claimant’s rights was
small; (2) that any injury could be estimated in money; (3) that any injury could be made good by a
small money payment; and (4) that it would be oppressive to grant specific relief (Shelfer v City of
London Electric Lighting Co [1895] 1 Ch. 287, 322–323). At best this is now a working rule or
starting-point.
35 [1995] 1 W.L.R. 269, 288, approved by Lord Neuberger in Coventry v Lawrence [2014] UKSC 13;
[2014] A.C. 822 at [120].
36 Monson v Tussauds Ltd [1894] 1 Q.B. 671. There can be no consent or acquiescence if the claim-
ant is unaware of the defendant’s activities or even if he expressly purports to give his consent but
does so in ignorance of his own proprietary rights: Armstrong v Sheppard and Short Ltd [1959] 2
Q.B. 384 at 396, per Lord Evershed MR.
37 Rochdale Canal Co v King (1851) 2 Sim. (N.S.) 78; Wood v Sutcliffe (1851) 2 Sim. (N.S.) 163.
38 [1959] 2 Q.B. 384.
39 Nominal damages only were awarded.
[2158]
239
240
241
242
Page 1
Status: Positive or Neutral Judicial Treatment
FU WAN SANG & OTHERS v FU MAN KWONG & OTHERS
31 March 2003
Court of First Instance
CFI
High Court Action No. 16108 of 1999
HCA 16108/1999
Citations: [2003] HKEC 399
Judge name: Deputy Judge Lam
Phrases: Tort and personal injury - Tort - trespass to land - damages -

whether aggravated damages should be awarded
Trusts - constructive trust - matrimonial home - beneficial interest
Counsel In The Case: Mr Kam Cheung, instructed by Messrs David Ravenscroft & Co.,
for the 1st to 4th Plaintiffs
Mr Derry Wong, instructed by Messrs Clarke & Kong, for the 1st,
3rd to 6th Defendants
2nd Defendant in person, absent
Details of Judgment:
Parties
1. The 1st to 3rd Plaintiffs are brothers. They are the sons of Fu Kei Cheuk ("Chinese text"). The 4th Plaintiff is
the daughter to the 1st Plaintiff. They have another brother called Fu Lee Sang ("Chinese text"). Fu Lee Sang
died in 1978. He had six sons. They are the Defendants in this action. The Fus are indigenous villagers of Hoi
Pa Village ("Chinese text") at Tsuen Wan.
Lot 924 DD 449 and relocation of Hoi Pa Village
2. Prior to 1982, the Fus lived in two village-type houses erected on Lot 924, Demarcation District 449, Hoi Pa
Village. Since 1951, that piece of land had been held under the names of the four brothers (viz. the three
Plaintiffs and Fu Lee Sang), each holding 1/4 of the legal title. Although neither the Rent Roll certified by the
District Officer in 1951 (at p. 7 of the Bundle of Documents) nor the Memorial for Division of Property at p. 8
explicitly spelt out each brother's share, their respective interest as 1/4 owner is evidenced by a number of
documents. In a letter dated 14 January 1982 from the District Officer to the Fus at p. 79 of the Bundle of
Documents, the respective interest of the brothers and nephews was set out. Likewise, in the Memorial for the
Succession to Property dated 8 June 1981 (p. 14), the six Defendants were recorded as succeeding to the 1/4
interest of Fu Lee Sang in the land. To the same effect is the memorial for the appointment of the 1st Defendant
as trustee for the 5th and 6th Defendants in June 1981 (at p. 16-17). Although Mr Wong contended that the
collective beneficial interest of the Defendants in Lot 924 was more than 1/4, this is not a matter raised by the
Defendants in their Defence and it is also contrary to the evidence of his clients. The 1st Defendant confirmed in
his evidence that his father and uncles each had 1/4 interest in that piece of land. I am not impressed by the
submission of Mr Wong that by the mere fact that Fu Lee Sang's family occupied more than 1/4 this court must
conclude that Fu Lee Sang's beneficial interest was more than 1/4. Counsel did not explore how and why Fu Lee
Sang occupied more than 1/4 at the trial and there could be many explanations consistent with Fu Lee Sang
having only 1/4 beneficial interest. On the evidence, I do not find any reason to hold that Fu Lee Sang's
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beneficial interest was not the same as stated in the documents, viz. 1/4. I also reject the suggestion of the 5th
Defendant in Paragraph 9 of his witness statement that his father had a larger share by village custom in the
absence of expert evidence proving such alleged custom. I therefore proceed on the basis that the four brothers
each held 1/4 beneficial interest in Lot 924.
3. After the death of Fu Lee Sang, the six Defendants succeeded to his interest in the land. This is evidenced by
an instrument called Succession to Property registered by memorial No. 220780. That instrument was dated 8
June 1981. At that time, the 5th and 6th Defendants were still minors and the 1st Defendant was appointed as
trustee for them under Section 18 of the New Territories Ordinance.
4. Hence, the 1st to 3rd Plaintiffs and the six Defendants became co-owners of Lot 924. Each of the three uncles
held 1/4 interest whilst the six Defendants each held 1/6 of the remaining 1/4 interest.
5. The Government was planning for the relocation of Hoi Pa Village in the late 1970's and early 1980's. By a
letter dated 11 June 1981, the District Officer proposed that basing on the New Territories village removal
policy, two 3-storeyed resite houses each of 700 square feet ground area would be reprovisioned to the Fus upon
surrender of Lot 924.
6. Due to the size of their families, the Fus felt that two houses were not sufficient to satisfy their residential
needs. They asked for four houses. After some correspondence, the District Officer replied by a letter dated 14
January 1982 informing them as far as removal policy was concerned the Government could only offer two
resite houses. However, taking into account of the predicament of the Fus, the Government could sell to them
two additional small house sites, one at a place called Yau Ma Hom, the other at West Cheung Pei Shan. That
proposal was accepted and the Fus surrendered Lot 924 on 3 March 1982.
7. As a result, in exchange for Lot 924, the Fus got the following,
(a) two resite houses at Lots 1525 & 1526 Demarcation District 451 known as No. 21 and 20 respectively of
Hoi Pa Resite Village ["the 1st and 2nd Properties"] --- they needed not pay anything for these two houses;
(b) a site at Lot 1514 Demarcation District 451 known as No. 9 Hoi Pa Resite Village ["the 3rd Property"] ---
this is one of the additional house site. The Fus had to pay a concessionary premium for its acquisition and
constructed a 3-storeyed house thereon at their own costs;
(c) a site at Lot 1230 Demarcation District 450 known as No. 168 Yau Ma Hom Road ["the 4th Property"] ---
this is the other additional house site. Again the Fus had to pay a concessionary premium to acquire it and
constructed a 3-storeyed house thereon at their costs.
Distribution of the four properties
8. The legal owners of these four properties, as set out in the Government Grants of the respective property were
as follows,
(a) 1st Property (New Grant No. 6253 dated 22 October 1984) --- 3rd Plaintiff (6/12 share) and the six
Defendants (1/12 share each);
(b) 2nd Property (New Grant No. 6254 dated 22 October 1984) --- 1st and 2nd Plaintiffs, 1/2 share each;
(c) 3rd Property (New Grant No. 6209 dated 20 August 1984) --- 1st Plaintiff and 2nd to 6th Defendant, 1/6
share each;
(d) 4th Property (New Grant No. 6040 dated 25 March 1983) --- 2nd and 3rd Plaintiffs and 1st Defendant, 1/3
share each.
These four properties are the subject matter of this action.
9. By a Vesting Deed dated 12 December 1986, the legal title in respect of the 1/6 share in the 3rd Property was
vested to the 6th Defendant after the latter attained majority. Similar vesting deeds were executed in favour of
the 5th and 6th Defendants with regard to the latter's interest in the 1st and 3rd Properties.
10. The concessionary premium and the construction costs of the 3rd and 4th Properties were paid partly by an
ancestral fund kept by the Fus and partly by the sale proceeds obtained from the sale of one unit at the Ground
Floor of the 1st Property to outsider. Before the sale was completed, the legal owners of the 1st Property entered
into a Deed of Mutual Covenants dated 22 January 1987 ["the 1st DMC"] (memorial No. 424031). The 1st
DMC converted the original 12 shares into 36 shares so that the 3rd Plaintiff held 18/36 shares instead of 6/12
shares, each of the six Defendants held 3/36 shares instead of 1/12 share. These shares were allocated in respect
of each floor of the 1st Property. The net result was that each floor represented 1/3 share of the 1st Property.
The 1/3 share for the ground floor was made up of 6/36 share from the 3rd Plaintiff and 1/36 share from each of
the Defendants. The 3rd Plaintiff, as owner of the remaining 12/36 shares was given the exclusive use,
occupation and enjoyment of the 1st Floor whilst the six Defendants, as owners of their respective remaining
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2/36 shares (in total again 12/36 shares), was given the exclusive use, occupation and enjoyment of the 2nd
Floor.
11. The sale to the outsider was completed by an Assignment dated 22 January 1987 and the 1/3 share together
with the exclusive use, occupation and enjoyment of the ground floor unit was assigned to the purchasers.
12. The 1st and 2nd Plaintiffs also entered into a Deed of Mutual Covenants in respect of the 2nd Property on 22
January 1987. However, no Deed of Mutual Covenants has been executed in respect of the 3rd and 4th
Properties.
13. In terms of actual occupation or use of the units, up to August 1999, the distribution was as follows,
(a) 1st Property:
i. Ground Floor --- sold to others;
ii. First Floor --- 3rd Plaintiff;
iii. Second Floor --- the Defendants.
(b) 2nd Property:
i. Ground Floor --- 1st Plaintiff;
ii. First Floor --- 1st Plaintiff;
iii. Second Floor --- 2nd Plaintiff.
(c) 3rd Property:
ii. First Floor --- the Defendants;
(d) 4th Property:
i. Ground Floor --- 3rd Plaintiff;
ii. First Floor --- 2nd Plaintiff;
14. I do not need to describe in details how the Defendants actually occupied and used their units because in this
action, the contest is basically between the Defendants on the one side and the Plaintiffs on the other. I should
mention that the 2nd Defendant did not appear at the trial and I was told by counsel for the other Defendants
that he was willing to abide by the decision of this court. Hence, when I refer to the Defendants, this rider has to
be taken into account.
15. The 1st Plaintiff had allowed his daughter, the 4th Plaintiff, and her family to occupy and use Ground Floor
of the 3rd Property. The 2nd Plaintiff had emigrated to Canada in 1992. Even before his emigration, he had let
out the First Floor of the 4th Property to a tenant. His daughter Fu Sau Chun collected rent for him after his
emigration. The 3rd Plaintiff had also leased out the Ground Floor of the 4th Property.
16. Hence, discounting the unit which had been sold for the construction costs of the 3rd and 4th Properties, the
legal ownership of the 1st to 4th Properties were distributed amongst the uncles and nephews in a manner which
the Defendants held 1/3 regarding 1st Property plus 5/6 regarding the 3rd Property plus 1/3 regarding the 4th
Property. Attributing 6 shares to each house, the proportions of distribution of legal interest after the sale of
Ground Floor of the 1st Property as between the Defendants and their three uncles and the purchaser of Ground
Floor of the 1st Property can be worked out as follows,
Defendants: 9 (2 for 1st Property, 5 for 3rd Property and 2 for 4th Property)
1st Plaintiff: 4 (3 for 2nd Property, 1 for 3rd Property)
2nd Plaintiff: 5 (3 for 2nd Property, 2 for 4th Property)
3rd Plaintiff: 4 (2 for 1st Property, 2 for 4th Property)
purchaser: 2 (for Ground Floor 1st Property).
Amongst the uncles and nephews, the Defendants held 9/22 of the overall legal interest which is much more
than 1/4 (the equivalent of which should be 5.5/22).
17. There was also an assignment by way of gift from the 2nd Plaintiff to the 1st Plaintiff in January 1987
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Page 4
regarding the former's legal interest in the 2nd Property. The 2nd Floor of the 2nd Property was assigned to Fu
Man Leung (the son of the 2nd Plaintiff) at the same time. In 1993, Fu Man Leung sold the unit to people
unconnected with the Fu family after the 2nd Plaintiff had emigrated. Since there is no dispute between the
Plaintiffs, I do not need to work out the proportion of shareholdings as between them.
18. Of course, I appreciate that the aforesaid calculation does not take into account of the difference in terms of
the valuations of the four properties. Valuation reports in respect of some of the units have been placed before
me. However, I do not have the valuation in respect of the Ground Floor of the 1st and the 2nd Floor of the 2nd
Property. The valuations of the 3rd and 4th Properties were given by the surveyor by way of one figure for the
whole property instead of different figures given for each floor. Hence, I am unable to compare the values of
these four houses. Mr Wong did not address me on the case of the defence as pleaded in Paragraph 6(f) of the
Re-re-re-Amended Defence and Counterclaim. On the material available, I am not satisfied that the total of the
market values of the 1st and 2nd Properties is higher than that of the 3rd and 4th Properties as alleged by the
Defendants. Regarding the legal and other costs pertaining to the preparation of the deeds of mutual covenants,
the only evidence I have are the receipts of Messrs.Wong, Hui & Co. issued to the 1st Plaintiff.
19. However, I have evidence from the surveyor as to the premium for the discharge of the restriction on
alienation in the Government Grants for the 3rd and 4th Properties. By reason of such premium, the net value of
the 3rd Property was $1,240,000 out of a market value of $3,000,000 and that of the 4th Property was
$1,269,000 out of a market value of $2,820,000. On the other hand, the Government Grants for the 1st and 2nd
Properties do not contain any restriction against alienation. If this factor is taken into account, and one were to
consider the 1st and 2nd Properties separately from the 3rd and 4th Properties, the Defendants held 1/5 of the
overall interest of the uncles and nephews in the 1st and 2nd Properties (disregarding the Ground Floor of the
1st Property), 7/12 of the 3rd and 4th Properties. Hence, in respect of the 1st and 2nd Properties, the Defendants
held 1/20 share less than 1/4 whilst in respect of the 3rd and 4th Properties, they held 4/12 more than 1/4. Even
taking into account of the premium factor, it is still likely that the 4/12 excess is more than adequate to cover the
1/20 shortfall. Further, the surveyors' evidence indicates that the higher the floor levels, the more valuable the
properties would be and the Defendants got the 2nd Floor units for the 1st, 3rd and 4th Properties in the
distribution. Therefore, one can safely proceed on the basis that the Defendants got more than 1/4 out of the
overall legal interests in the four properties held by the uncles and nephews. As I said, Mr Wong did not
advance any arguments to suggest otherwise.
20. In terms of occupation and use, under the arrangements set out in Paragraph 13 above, out of the 11 storeys
held by the uncles and nephews, the Defendants got 4 storeys, hence more than 1/4.
21. The Defendants claimed that they had been mistreated by their uncles. Mr Wong said his clients' case was
that the beneficial interests in the 4 properties were not accurately mirrored in the legal ownership. The
Defendants' beneficial interest, according to Mr Wong, were greater than their legal ownership. When I
enquired with Mr Wong about the defence case as to the extent of beneficial ownership, at first he was unable to
tell this court the quantification of the beneficial interest of the Defendants. It was only in the afternoon of the
first day of trial that Mr Wong informed this court that his clients' case was that the Defendants' beneficial
interest in the properties should be 6/9 of the total interest of the uncles and nephews on the basis that out of the
nine co-owners holding Lot 924, the Defendants accounted for six of them. This seems to be flying in the face
of the fact that prior to the relocation, each of the 1st to 3rd Plaintiffs held 1/4 interest in Lot 924 and the six
Defendants collectively held the remaining 1/4. But Mr Wong has tried to argue that 6/9 is equitable in the
circumstances and I would deal with his submissions later.
Changes in 1999
22. I now need to recite an unhappy incident in 1999. As mentioned, the 4th Plaintiff resided at Ground Floor of
the 3rd Property. In 1999, the 4th Plaintiff lived there with her husband, their son of 12 years old and daughter
of 7 years old. Since 26 June 1999, the husband of the 4th Plaintiff had been hospitalized and he sadly passed
away on 29 September 1999. The 1st Plaintiff and his wife were living at the 2nd Property and the 4th Plaintiff
and her family used to have dinners at the home of the 1st Plaintiff.
23. The following account is based on the evidence of the 4th Plaintiff and the conviction of the 4th to 6th
Defendants for criminal damage in Tsuen Wan Magistracy Case No. TWC 3117 of 1999 as well as the
admissions of the 4th and 5th Defendants in their evidence. I find the 4th Plaintiff to be a credible witness and in
fact her account of the event was not subject to much challenge by Mr Wong. On 8 August 1999, when the 4th
Plaintiff was having dinner at her father's place at the 2nd Property, the 1st and 4th Defendants went there and
demanded fiercely for the key to her home. She asked them why they needed the key to her unit. They did not
give any reason but kept on demanding. She did not give the key to them and they left. The 4th Plaintiff asked
her brother to check if there were any mishaps to her flat and when he returned, she was told that her unit was
being pried open and some people were going into her flat. Her sister advised her to make a report to the police
and she did accordingly.
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24. When the police arrived, she went back to her home accompanied by the police and found that her
properties including electric appliances were thrown all over the place outside her door. The locks at the door
and iron grille of her flat were pried and damaged. Some of her properties like television, computer, video
recorder and some furniture were damaged. Her bed was overturned. Some of the damage to her flat and her
properties were shown in a series of photographs taken on 8 August 1999 produced as exhibit "P-2". It can be
seen from those photographs that the damages were quite extensive. Obviously, the persons responsible for such
actions meant to oust the 4th Plaintiff from the flat and the damages done to the properties were caused
maliciously.
25. The three persons who had entered into the flat to cause the damages, the 4th to 6th Defendants, were
arrested by police. They were subsequently charged with and convicted of criminal damage and each was
sentenced to four months' imprisonment, suspended for 12 months and fined $5,000.
26. Although the 5th Defendant said in Paragraph 30 of his witness statement that the Defendants regretted
about this incident, I am sad to say that I cannot discern any remorse on his part about his conducts in the
incident. The 4th Plaintiff testified that the Defendants did not say sorry to her nor did they offer any
compensation. They pleaded not guilty and were convicted after trial. When the 4th and 5th Defendant gave
evidence before me about the incident, they made it plain to me that they felt justified in their actions and the
5th Defendant was even critical of the 4th Plaintiff making a report to the police.
27. The conducts of the Defendants after the incident also indicated their lack of remorse in respect of the
incident. They locked up the Ground Floor of the 3rd Property and refused to allow the 4th Plaintiff to have
access to the same. The 4th Plaintiff had to seek the assistance of police officer to accompany her back to the
unit to collect some of her belongings. Understandably, in view of the fact that some of the Defendants were
living in the upper floors of the 3rd Property, the 4th Plaintiff did not feel able to continue to live there and she
had to move to live elsewhere. Later on, the 4th Defendant moved into the flat and has lived there ever since.
28. Regarding the 4th Property, Fu Sau Chun gave evidence before me as to how the Defendants effectively
ousted the others from the property. I accept her evidence in this regard which were not seriously challenged by
Mr Wong at the trial. In August 1999, the tenant of the First Floor was told by someone claiming to be a cousin
of her to move out because there was dispute over the ownership of the property. The tenant moved out at the
end of August 1999 and handed back the keys to her. She went to the flat to inspect and eventually found that
the locks had been changed without the knowledge of the tenant or herself. A report was made to the police.
Prior to the tenant leaving the flat, he was paying a rent of $4,000 per month. The 6th Defendant moved into the
unit later.
29. Based on the evidence of the 5th and 6th Defendants, it is quite clear to me that the Defendants had procured
the moving out of the tenants at the Ground Floor and 1st Floor of the 4th Property. The 5th Defendant said in
his cross-examination that the Defendants recovered possession of the Ground Floor and 1st Floor after the
tenants left. He maintained that the Defendants did not occupy those flats prior to 2000 although they had the
right to possession. The 6th Defendant lived on the Ground Floor and he also had keys to the 1st Floor. He said
under oath he occasionally lived at the 1st Floor. Although the 5th Defendant tried to impress this court that the
Defendants only moved in after they found the flats vacant, I do not believe him. Bearing in mind what they did
on 8th August 1999, and the Defendants' evidence that they were quite frustrated about the lack of living space
for their families at the material time, it is plain to me that the Defendants were responsible for causing the
tenants to vacate from the 1st Floor and Ground Floor. I also accept the evidence of Fu Sau Chun that the lock
to the First Floor of the 4th Property was changed as soon as the tenant had moved out. Hence, when she visited
the flat in September 1999, she could not open the door. I have no doubt whatsoever that it was the Defendants
who changed the lock and they did so in September 1999, hence the 6th Defendant got the keys to those two
units.
30. I have no doubt that they caused the lock to be changed in order to oust the Plaintiffs or their agents from the
premises just as what they did to the 4th Plaintiff regarding the Ground Floor of the 3rd Property. I do not
accept the evidence of the Defence witnesses who professed that if the 1st to 3rd Plaintiffs asked for keys to the
premises which they were co-owners or asked for re-possession of the units, the matter could be discussed. On
their own evidence, the Defendants had been demanding for more units and the uncles had stalled their
demands. They thought they had been treated unfairly and I find as a fact that they decided to resort to forcible
re-entry and self-help in August 1999. In those circumstances, it is most unlikely that the Defendants would
agree to surrender possession of units they had obtained through questionable means even if the Plaintiffs were
to raise the issue with them. Moreover, there is no suggestion that the Defendants had proposed the surrender of
possession of any units to the Plaintiffs after the commencement of this action. To the contrary, the 5th
Defendant said in his evidence that there could not be any discussion since the Plaintiffs had made reports to the
police and issued proceedings against them. I find as a fact that the actions of the Defendants in 1999 were
calculated to oust the Plaintiffs from the Ground Floor of the 3rd Property and the Ground Floor and First Floor
of the 4th Property. Upon the successful eviction or in the case of the 4th Property the procurement of vacation
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by those originally in occupation, the Defendants intended to and did actually occupy the three units as their
owns to the exclusion of the Plaintiffs.
31. After the present action had been commenced, the 3rd Plaintiff sold the First Floor of the 1st Property at
$1,380,000 and the proceeds were paid into court pursuant to his undertaking to the court.
32. Hence, the current position regarding the possession of the units is as follows,
(a) 1st Property:
i. Ground Floor --- sold;
ii. First Floor --- sold;
(b) 2nd Property:
ii. First Floor --- 1st Plaintiff;
iii. Second Floor --- sold.
(c) 3rd Property:
i. Ground Floor --- the Defendants;
(d) 4th Property:
i. Ground Floor --- the Defendants;
The positions of the parties
33. The final stances of the parties in this trial are as follows. On behalf of the Plaintiffs, Mr Cheung submitted
that the distribution of ownership as set out in the Government Grants should not be disturbed. The use and
occupation of the 1st and 2nd Properties should continue to be governed by their respective Deed of Mutual
Covenants. The 3rd and 4th Properties should be sold and their sale proceeds should be distributed in
accordance with the shares of the parties under the Government Grants.
34. On behalf of the Defendants (other than the 2nd Defendant), Mr Wong asked for all the properties held
under the names of the Plaintiffs and the Defendants to be sold and the proceeds be distributed as to 6/9 to the
Defendants and 1/9 to each of the 1st to 3rd Plaintiffs. He did not address me specifically as to how I should
deal with the three units which had already been sold. I do not think he suggested this court should do anything
to disturb those sales. The purchasers had not been joined as parties to this action. This is one of the reasons
why it is simply not possible for this court to grant any relief by way of partition in respect of the 1st and 2nd
Properties. The parties have been well advised to abandon their applications for such relief. In respect of the
First Floor of the 1st Property, I take it that the Defendants asked for the proceeds that had been paid into court
be distributed in the same manner.
35. Counsel agreed that this court should first decide on the question of beneficial ownership of the properties.
After the handing down of my decision, the parties would, if necessary, come back to address the court as to the
appropriate order to be made regarding the sale of the properties in view of this decision.
Beneficial ownership of the four properties
The respective case and evidence of the parties
36. As I have said, initially it was not clear to me what was the extent of the beneficial interest claimed by the
Defendants. It was not satisfactorily pleaded in the Re-re-re-amended Defence and Counterclaim. In Paragraph
6(b), it was pleaded that there was an understanding amongst the uncles and nephews that "in due course rights
of ownership and occupation of the flats within the 4 Properties would be divided and allocated according to
need and at the end of the day the 6 Defendants would be entitled to own and occupy no fewer than 6 flats
between them". That is not a plea of 6/9 of the overall beneficial ownership of the Properties. Mr Wong
submitted that beneficial ownership of the Defendants could stem from two alternative bases,
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(a) alleged promises by the uncles;

(b) contribution in terms of exhaustion of concessionary rights on the part of the Defendants.
He relied on cases on constructive trust like Bannister v Bannister [1948] 2 All ER 133.
37. Although in Paragraph 6(b), the pleader averred that there was an understanding that in the interim, the 1st,
2nd and 3rd Plaintiffs and the Defendants and each of them would have collective beneficial ownership of all
the flats in the four Properties, the evidence of the Defendants is to the contrary. Their evidence was that the
question of ownership was not discussed (see Paragraph 6 of the witness statement of the 1st Defendant,
Paragraph 4 of the witness statement of the 3rd Defendant, both adopted as their evidence).
38. Even in their oral testimonies, the Defendants focused on the question of occupation and said they had been
complaining to their uncles about insufficient living space. They alleged their uncles promised them they would
be given 6 units. According to the 1st Defendant (the eldest of the six Defendants), the promise was made after
they had moved into the properties. This piece of evidence, even if accepted by the court, cannot assist the
Defendants. The alleged promise was made after the division amongst the uncles and nephews and it was
unsupported by any consideration. It was not evidenced in writing. Even if that alleged promise were to be
understood as a promise regarding the beneficial ownership of six flats, it is not enforceable.
39. The evidence regarding the alleged promise is also problematic. None of the Defendants who gave evidence
before me was able to testify specifically that a promise as to one unit being given to each of the Defendants
having been made by the uncles prior to the Government Grants being issued. As I said, the 1st Defendant only
adverted to promises made after they had moved into the new houses. The 3rd Defendant was quite vague in his
evidence and he said he did not take much part in the family matter since he was rarely in Hong Kong. I do not
find his evidence to be of any assistance. The 4th Defendant testified that it was mainly the 2nd Plaintiff who
told the Defendants that they would get one unit each although the 3rd Plaintiff also mentioned the same. When
pressed by counsel for more specific information as to circumstances under which the promise was made, he
said he could not remember. The 5th Defendant only became involved after 1994. He had discussions with the
Plaintiffs including long-distance telephone conversation with the 2nd and 3rd Plaintiffs. The specific grievance
he mentioned was about the occupation of the Ground Floor by the 4th Plaintiff and insufficient living space for
the Defendants. He considered it was unfair that as the owners of 5/6 of the legal interest in the 3rd Property,
some of the Defendants were only given the actual occupation of 2 out of 3 flats. He said the 3rd Plaintiff told
him that he would solve that problem for them. In his oral testimony, he did not mention any alleged promise
from the Plaintiffs to give each of the Defendants one unit in the Properties. Although he referred to that in
Paragraph 21 of his witness statement, it was quite obvious from his oral testimony that he did not take part in
the matter prior to 1994 and what he said in that paragraph about the alleged agreement could only be hearsay.
Given the evidence of his elder brothers, I attach no weight to it.
40. The 1st Plaintiff also gave evidence as to the agreement between the uncles and nephews. According to him,
there had been a number of meetings amongst the uncles and nephews concerning the distribution of the flats.
Although the 5th and 6th Defendants did not take part (as they were then minors), the 1st to 4th Defendants (or
at least three of them) took part. Those discussions culminated in a consensus reached on 7 August 1983 at the
home of the 2nd Plaintiff. They had to reach a consensus as they were about to sign a contract for the
construction of one of the houses. The consensus was subsequently recorded in a Chinese document written by
the 2nd Plaintiff. A copy of that document was produced as exhibit P-1 which, according to the 1st Plaintiff,
was handed to him by the 2nd Plaintiff about two weeks after 7 August 1983. It was not signed by anybody.
41. P-1 recorded that ancestral fund would be used to construct the house at the 4th Property (which was granted
to the 2nd and 3rd Plaintiffs and 1st Defendant on 25 March 1983). If the fund was insufficient, the 1st Plaintiff
would be responsible for 1/4 and the Defendants would be responsible for the 3/4 of the balance. As it turned
out, according to the evidence of the 1st Plaintiff, neither he nor the Defendants needed to pay anything for the
construction costs. According to P-1, the construction cost of the house at 3rd Property would be paid by sale
proceeds from one of the Ground Floor units in the two resite houses built by the Government.
42. As to distribution, P-1 recorded that both 2nd and 3rd Plaintiffs would each get one unit at the Government
resite houses (viz. the 1st and 2nd Properties) and one unit at the 4th Property. The 1st Plaintiff would get two
units at the Government resite houses and one unit at the 3rd Property. The Defendants would get one unit at the
Government resite house and two units at the 3rd Property. As to the remaining unit at the 4th Property, initially
the 1st Plaintiff was to hold 1/4 interest whilst the Defendants were to hold 3/4. Presumably, this was to mirror
the financial arrangement concerning the construction costs of the 4th Property. Upon completion of the
construction of the house at the 4th Property, the 1st Plaintiff would transfer his 1/4 interest back to the
Defendants. Hence, ultimately, the Defendants would have the remaining unit at the 4th Property.
43. There was no specific allocation of units by reference to a particular floor level in P-1. That was only done
when construction of the houses were completed and keys were distributed. However, the arrangement recorded
in P-1 was consistent with the subsequent distribution of occupation of the units as stated in Paragraph 13
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above.
44. The 1st Plaintiff said he was anxious to have the agreement recorded in writing as he might have to pay for
the construction of the 4th Property on which he had no legal title. Hence, P-1 was prepared by the 2nd Plaintiff
at his request. The 1st Plaintiff said some minor details recorded in P-1 had not been discussed at the meeting of
7 August 1983, but the distribution of the flats amongst the four fongs ("Chinese text", viz. the four branches of
the family) had been discussed.
45. After the construction of the houses was completed, the 2nd Plaintiff being the eldest in the Fu family
distributed the keys. For the 3rd Property, the keys were given to the 1st Plaintiff around the end of 1985. The
1st Plaintiff then proposed to the Defendants that he would have the Ground Floor whereas the Defendants
would have the 1st and 2nd Floors. The Defendants agreed. Hence, the 1st Plaintiff gave the keys to the 1st and
2nd Floors to the Defendants.
46. As to the allegations of the Defendants that the Plaintiffs had promised them one unit for each of the
Defendants, the 1st Plaintiff denied that such promise had ever been made. However, he also said that the
Defendants might have suggested that there was such a promise in oral conversations and in casual chats
("Chinese text"). But he was adamant that the Plaintiffs did not make such promises.1 Although he tried to
retract such evidence, I attach no weight to such retraction. I have listened to the digital recording of these parts
of his evidence carefully. It had not been suggested that these remarks had been made prior to the acquisition of
the properties. From the context in which the questions were asked by counsel and the answers were given by
the 1st Plaintiff, my understanding is that these conversations and chats took place after the Defendants had
moved into the houses.
47. The Defendants denied that there was such a meeting on 7 August 1983. They said they had entrusted the
Plaintiffs to deal with the Government concerning the surrender of the land and relocation of their families.
They respected their elders and believed that the Plaintiffs would take care of their interest. They did not take
part in any discussions and the decision about the distribution was made by the Plaintiffs. The Defendants said
they only did what the Plaintiffs told them to do in signing documents relating to these transactions.
My analysis as to the consensus in 1983 and the alleged promises by the uncles
48. I think it is necessary to distinguish between two different periods. The dividing line is the time of
acquisition of the Properties. In Gissing v Gissing [1971] AC 886 Lord Diplock observed at p. 906C to F,
"...[I]n the branch of English law relating to constructive, implied or resulting trusts effect is given to the
inferences as to the intentions of parties to a transaction which a reasonable man would draw from their words
or conduct and not to any subjective intention or absence of intention which was not made manifest at the time
of the transaction itself. It is for the court to determine what those inferences are.
In drawing such an inference, what spouses said and did which led up to the acquisition of a matrimonial home
and what they said and did while the acquisition was being carried through is on a different footing from what
they said and did after the acquisition was completed. Unless it is alleged that there was some subsequent fresh
agreement, acted upon by the parties, to vary the original beneficial interests created when the matrimonial
home was acquired, what they said and did after the acquisition was completed is relevant if it is explicable only
upon the basis of their having manifested to one another at the time of the acquisition some particular common
intention as to how the beneficial interests should be held." (my emphasis)
49. There is no plea of fresh agreement reached between the parties after the acquisition of the four properties in
the Re-re-re-amended Defence and Counterclaim. The focus is therefore on the parties' common intention when
the properties were acquired. Moreover, even if the case of the defence could be regarded as a claim based on a
fresh agreement, for reasons given in the other paragraphs in this judgment, I would also reject the same.
50. I shall first examine what happened prior to the acquisition. Despite the attempts by the 1st Plaintiff to
retract his evidence concerning the casual remarks, I have no difficulty in accepting his evidence that a
consensus was reached between the uncles and nephews at the meeting of 7 August 1983. In this respect I
preferred his evidence to the evidence of the Defence witnesses. I find it inherently unlikely that the Defendants
were not involved in the discussions in the family concerning relocation and the distribution of the units
amongst the four fongs. The 1st Defendant was 33 years old in 1983, the 3rd Defendant was 31, the 4th
Defendant was 29. They were capable of looking after their own interest and according to the evidence they did
take steps to do so. The 1st Defendant was appointed as the manager for the 5th and 6th Defendants. The 1st
Defendant gave evidence that initially, the uncles were minded to accept the Government's proposal of giving
the Fu family 2 pieces of land in exchange for Lot 924. It was upon the 1st Defendant's insistence that the Fus
asked for 4 pieces of land instead. The letter dated 1 July 1981 from the Fu family to the chairmen of Tsuen
Wan Rural Committee enlisting support for their request for more land was signed by the uncles and the 1st
Defendant. It was only after the District Officer had indicated by a letter dated 14 January 1982 that another two
pieces of land could be earmarked for the Fus that they executed the Deed of Surrender on 3 March 1982. The
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Defendants (except the 5th and 6th Defendants) executed that Deed personally. Likewise, they also executed the
Government Grants in respect of the 1st, 3rd and 4th Properties in which their respective shareholdings in the
Properties were set out. It is clear to me that the Defendants did have a say in the relocation arrangement and
they took part in the discussions.
51. Having fought hard to get four pieces of land from the Government, it is incredible that the Defendants just
left the actual distribution amongst the four fongs to the uncles. I have alluded to the manners in which the legal
title and the actual occupation of the four properties were distributed amongst the four fongs. It is quite obvious
that distribution was by reference to fongs. If these were all handled by the uncles without regard to the
Defendants, and if the uncles were trying to take advantages of the Defendants as alleged by the Defendants, I
find it difficult to understand why the distribution would be so favourable to the Defendants. The 1st Plaintiff
said in his evidence that the agreed arrangement was based on common understanding and made in the spirit of
tolerance and accommodation amongst family members. I find this to be more likely to be the truth than the
version put forward by the Defendants.
52. In respect of the sale of the Ground Floor of the 1st Property, the 2nd and 4th Defendants signed the Chinese
sale and purchase agreement (together with the three uncles) for selling that at the price of $300,000 on 9 May
1984 (at p. 144 of trial bundle). For the construction of the house at the 3rd Property, a contract was signed with
Wah Kee Construction Company on 24 September 1984 (at p. 177 of trial bundle). The 1st Plaintiff and the 4th
Defendant signed that contract. All the Defendants except the 5th Defendant signed an account statement dated
7 December 1986 (p. 272 of trial bundle) concerning the incomes and expenses for the construction of the 3rd
Property. Further, there was some refund of deposit from the contractor due to uncompleted works and
according to a document dated 18 November 1987, 2/3 was refunded to the Defendants whilst 1/3 was refunded
to the 1st Plaintiff. This document (at p. 330 of the trial bundle) was signed by the 3rd and 4th Defendants.
These documents, as well as the execution of the Government Grants, the Assignment of the Ground Floor of
the 1st Property to the purchaser and the Deeds of Mutual Covenants for the 1st Property in 1987 by the
Defendants, in my judgment, evidenced the involvements of the Defendants in the relocation process and the
distribution of the four properties in accordance with the understanding recorded in P-1 and their connivance to
the same.
53. I reject the evidence of the Defendants that in executing documents, they only did what their uncles told
them to do. Most of the Defendants were adults and as mentioned above, the 1st Defendant gave evidence of an
independent stance taken by them at least with regard to four pieces of land as a term for surrendering the old
lot. The statement of account mentioned in the last paragraph is also illuminating. It shows that the uncles did
account to the nephews about the construction costs. In my judgment, this piece of evidence is inconsistent with
the scenario put forward by the defence that the uncles kept the nephews in the dark and dictated them to sign
documents to implement whatever agreed upon by the uncles.
54. I also reject the contention of Mr Wong that the Defendants did not have any real participation in the
decision-making process and the Defendants were in a disadvantaged position in the discussions. The mere fact
that the Defendants did not dissent from the proposals put forward by the uncles did not place the uncles in a
position of trust and confidence. I am not satisfied on the evidence that in 1983, the uncles were holding a
fiduciary position towards the Defendants. The uncles were not acting as the guardians of their interests. It was
the 1st Defendant who acted as the trustee for the 5th and 6th Defendants. Mr Wong has not directed my
attention to any handicaps suffered by the Defendants which rendered them vulnerable or dependent upon the
advice or guidance from the uncles. As I said, the 1st to 4th Defendants were all adults at the material time and
they had voiced their independent stance and even managed to persuade the uncles to follow their wishes in
respect of the inadequacy of two pieces of land. There is no evidence whatsoever to suggest that the uncles had
exerted any actual undue influence over the Defendants regarding the agreement reached on 7 August 1983.
55. In my judgment, contrary to the suggestion of Mr Wong, the Defendants failed to establish any case of
undue influence, whether presumed or otherwise. I have already alluded to the lack of evidence as to actual
influence being exerted and as to the existence of a relationship of trust and confidence. Amongst the many
authorities included in his list of authorities, Mr Wong only referred me to Snell on Equity, 29th Edition p.
551-556 and Tate v Williamson (1866) LR 2 Ch 55 on the topic of undue influence in his closing submissions.
He did not indicate to me whether he was relying on a case of presumed undue influence or actual undue
influence, and if it was a case of presumed undue influence, whether it was Class 2A or Class 2B (see Chitty on
Contracts, 28th Edn. Para. 7-043). Given my above findings, there cannot be any actual undue influence nor
presumed undue influence of Class 2B type. Mr Wong cited Tate v Williamson (1866) LR 2 Ch 55 as an
example of undue influence exerted by an uncle over a nephew. Insofar as Mr Wong relied on this case as
falling under Class 2A (viz. presumption arising from certain specified relationships), I do not think this case
supports such a proposition. On my reading of this case, it was a decision under Class 2B (viz. presumed undue
influence arising from a de facto relationship of trust and confidence).
56. The equitable jurisdiction of the court in respect of undue influence has recently been examined by the
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Court of Final Appeal in Bank of China v Fung Chin Kan [2003] 1 HKLRD 181 at Paras. 49 to 51. The essence
of the jurisdiction is highlighted in the judgment of Lord Brightman in Hart v O'Connor [1985] AC 1000 at
1024 cited in Para. 50 in the judgment of Litton NPJ. I do not find any basis to suggest that the uncles had acted
unconscionably or that the Defendants had been victimized.
57. In my judgment, the 1st Plaintiff gave a credible account as to the circumstances under which P-1 was
prepared and handed to him. The contents of P-1 were consistent with what happened afterwards. There were
detail provisions in P-1 which are not relevant to the issues that I have to decide and they were unlikely to be
there if P-1 was made up for this litigation. As far as I can observe, the 1st Plaintiff is not a sophisticated person
and if his evidence about the meeting of 7 August 1983 was untrue, I am sure that he would be exposed by the
skilful cross-examination of Mr Wong. Yet, his evidence about this meeting and the consensus reached thereat
remained unshaken. I accept this part of his evidence as truthful.
58. I therefore find as a fact that the subsequent distribution of the properties in terms of occupation was in
accordance with a consensus reached between the uncles and nephews on 7 August 1983. Up to the acquisition
of the properties, there was no agreement or understanding that the nephews would each be given at least one
unit.
59. On the issue of beneficial ownership, no evidence has been adduced as to why the legal ownerships of the
four Properties were distributed in the manner as set out in the Government Grants. There is no evidence to
support the allegation in Paragraph 6A of the Re-re-re-amended Defence that the uncles "unilaterally abused
and/or misused their positions to allot more legal interests to themselves in the four properties". Mr Wong has
not drawn my attention to any evidence as to how the Government would normally apply its policy regarding
small houses for indigenous villagers in a relocation situation. The letter of 17 June 1994 from the District
Lands Office showed that the rights of the uncles and nephews had been exhausted by reason of their
acquisition of the 3rd and 4th Properties. But there is no evidence to indicate that the arrangement in the present
case was unusual or that it was procured by the uncles to benefit themselves.
60. Given the stance of the Plaintiffs as stated in Paragraph 33 above, they in effect said that the beneficial
ownerships were distributed in the same manner as legal ownerships. The Defendants contended otherwise. For
reasons already given, I am not satisfied that by the time the properties were acquired, there had been any
common understanding amongst the uncles and nephews that the beneficial ownership of the four properties
would be held collectively with 6/9 thereof belonging to the Defendants.
61. After the acquisition of the properties, based on the evidence of the 1st Plaintiff and the Defendants, I find
that the Defendants had on some occasions demanded for six units (but not 6/9 of the beneficial ownership).
However, the Plaintiffs had never promised the same. I do not think the 1st Plaintiff in his testimony ever
acknowledged that the Plaintiffs had acceded to such requests. Properly understood, his evidence was that he
had heard allegations by the Defendants that such promise had been made, but actually no promise had been
given by the uncles. As to the evidence of the Defendants, due to the unsatisfactory aspects set out in Paragraph
39 above, I am not satisfied on their evidence that any promise had been given by the Plaintiffs.
62. Further, as the Defendants had not told me the detailed circumstances under which the alleged conversations
took place and what had been said exactly, I am not satisfied that the alleged promises, even if they had been
given by the uncles, were meant to be legal binding. In any event, I am not satisfied that such alleged promises
can be relied upon to enable this court to draw an inference that there was such a common understanding at the
time when the properties were acquired. For these reasons, as well as the reasons given in Paragraph 38 above, I
am therefore of the view that the oral conversations between the uncles and the Defendants after the acquisition
cannot avail the Defendants in their claims, whether it be a claim for 6/9 of the beneficial ownerships or a claim
for 6 units.
63. The aforesaid findings dispose of Mr Wong's case for 6/9 beneficial ownership based on alleged promises
by the uncles. At this juncture, I reiterate that the defence has not pleaded a claim for 6/9 of the beneficial
ownership. The only claims pleaded were for no less than 6 units (Paragraph 6(b) of the Re-re-re-amended
Defence) and 1/12 interest for each defendant (Prayer (c) in the Counterclaim). This case of 6/9 beneficial
interest is clearly a recent invention. It cannot be found in pleadings nor in witness statements filed by the
Defendants. It took Mr Wong quite a while before he could pinpoint his case as such. I do not believe the
Defendants when they gave evidence to the effect that 6/9 beneficial interest had always been their case. If what
they said were true, I fail to see why it was not pleaded in their Defence. This again reflected adversely on their
credibility.
The loss of concessionary rights
64. The other basis on which Mr Wong advanced his case of 6/9 beneficial interest is the utilization of the
Defendants' rights as indigenous villagers with regard to the acquisition of the 3rd and 4th Properties. It is not
clear to me whether Mr Wong advanced this ground by reference to the principle of resulting trust or that of
constructive trust. On final analysis, it does not matter because in either case he failed. Since the 3rd and 4th
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Properties were granted by the Government to the uncles and the nephews at concessionary premium, the
Government regarded that as the exhaustion of their concessionary rights as indigenous villagers in relation to
acquisition of land in the New Territories. This stance of the Government was set out in a letter dated 17 June
1994 from the District Lands Officer of Tsuen Wan to the 1st Defendant.
65. It seems to me the loss of such concessionary rights is the real grievance of the Defendants. They thought it
was unfair to them even though the uncles' rights were also exhausted. Their reasoning is as follows: all their
rights had been exhausted whereas the rights of the sons of the uncles were left untouched. Hence, their cousins
were able to apply for other pieces of land with the benefit of concessionary rights whilst they could not do so.
Therefore, it is pleaded in Paragraph 12(b) of the re-re-re-amended Defence and Counterclaim,
"For some years the Defendants were prepared to tolerate the situation in anticipation that they would be able to
acquire additional small houses sites in accordance with government policy whereby each indigenous male is
entitled to a village house...."
When such expectation turned out to be unsustainable, the nephews blamed their uncles for the same.
66. The 1st Defendant said in his evidence that they did not know about such loss until a letter dated 22 May
1992 from the Tsuen Wan District Lands' Office. That letter was apparently written in response to a name list
submitted by the village representatives of the Hoi Pa village concerning applicants for acquisition of land at
concessionary rates as indigenous villagers. The District Lands' Office informed the parties that the names of,
inter alias, the uncles and nephews had to be deleted from the list because they had already benefited under the
policy.
67. The 1st Plaintiff also gave evidence that the uncles likewise were not aware of the loss of concessionary
rights until this letter of 1992. I accept his evidence. This is consistent with the fact that the names of the uncles
were also included in the list of applicants submitted to the District Lands' Office, hence there was reference to
the deletion of the uncles' names in the response of 22 May 1992.
68. I have no reason to believe that prior to that letter, the uncles knew more about the loss of concessionary
rights than the nephews. On the evidence before me, I have no reason to conclude that the District Officers who
handled the execution of documents concerning the relocation exercise had explained the matters in greater
details to the uncles than to the nephews. The Defendants (except 5th and 6th Defendants who were represented
by the 1st Defendant, not the uncles) attended the execution of the documents at the District Lands Office
personally. The letters from the District Officer dated 14 January 1982 was addressed to the uncles as well as
the nephews. Since the Defendants were anxious to fight for four pieces of land instead of two, they should have
read this letter as well. None of the Defendants who gave evidence before me has suggested that the Defendants
did not have any opportunity to read this letter. They must therefore be aware that the 3rd and 4th Properties
were sold to them instead of given to them by the Government in exchange for resumption of Lot 924.
69. Mr Wong submitted that the evidence of Fu Kwok Man showed that it was common knowledge that
indigenous villagers had concessionary rights. I fail to see how that could be relied upon to establish that the
uncles in fact knew of the loss of such rights between 1982 and 1992. As far as common knowledge is
concerned, Mr Wong has not put forward any reason why the Defendants were in a less advantaged position
than the uncles.
70. Neither party called evidence from the District Lands' Office as to the circumstances under which the
relevant Government Grants and the Deed of Surrender were executed by the uncles and nephews. I am
therefore unable to tell whether the loss of concessionary rights had been clearly explained to the uncles and
nephews between 1982 and 1984. On the material before the court, I would proceed on the basis that the uncles
and nephews were ignorant in that regard although the utilization of their concessionary rights should have been
apparent from Special Condition 13 in the Government Grants for the 3rd and 4th Properties. Based on the
evidence before me, I am not satisfied that the uncles had misled the nephews on the question as to loss of
concessionary rights. The uncles were equally ignorant in that regard.
71. I therefore reject the defence's suggestion of exploitation, non-disclosure or equitable fraud on the part of the
uncles in relation to the loss of concessionary rights. But this is not the end of the matter. Mr Wong also based
his argument on the contention that the concessionary rights should be regarded as contributions to the
acquisition of the 3rd and 4th Properties. He submitted that the uncles had benefited from the Defendants'
contributions and the in terms of head counts, since the Defendants provided 6 names whilst the uncles provided
3, the Defendants should be entitled to 6/9 beneficial interest. This seems to be an argument on resulting trust.
72. Taking it to its highest, I fail to see how that argument can be applied in respect of the 1st and 2nd
Properties. I also have difficulties in accepting that the uncles had benefited from the use of the Defendants'
names. The Defendants' case is that under the Government policy, each indigenous villager is entitled to one flat
built on land acquired at concessionary premium. Hence, the three Plaintiffs would be entitled to three flats. As
it turned out, in respect of the 3rd and 4th Properties, under the arrangement set out in P-1, the Plaintiffs got
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three flats. Therefore, the uncles did not benefit themselves from the use of the Defendants' names.
73. I am of course aware that despite the use of the names of all the Defendants in the 3rd and 4th Properties,
they only got three flats instead of six. I do not know the reason why the names of all six Defendants had to be
included in the Government Grants for the 3rd and 4th Properties. I do not know whether it was a special
requirement imposed by the Government. The defence adduced no evidence in that regard. I am therefore
unable to conclude that this was caused by the uncles. Prima face, the Defendants were given less than what
they were entitled under the usual Government policy. But I am unable to say that this was due to the fault of
the uncles. For reasons already given, my finding is that the Defendants were capable of looking after and
should have looked after their own interest. If they failed in that regard, they cannot cast the blame on their
uncles.
74. It is also not clear to me as to why the use of the names of the Defendants could be regarded as
contributions. Mr Wong referred to the fact that the parties were able to acquire the 3rd and 4th Properties at a
concessionary premium due to the status of the Defendants as indigenous villagers. However, the 1st to 3rd
Plaintiffs were also indigenous villagers and as mentioned above, they were entitled to acquire 3 flats at a
concessionary premium on their own account.
75. Moreover, the concessionary premium came with a price, the restrictive covenant under Special Condition
13 in the Government Grants. Hence, when an indigenous villager wishes to sell to outsiders, he has to pay back
the difference in the premium to the Government. Therefore, the concessionary premium is only a personal
entitlement of an indigenous villager. It is not transferable and though it is beneficial to the indigenous villager,
it is not a saleable right. I therefore reject Mr Wong's oral submission that this court should recognize that the
right to concessionary premium could be traded in the market. That submission is wrong in principle and
contrary to authorities, see Chung Mui Teck v Hang Tak Buddhist Hall CACV 20 of 2001, 22.5.2001. Mr Wong
relied on Li Pui Wan v Wong Mei Yin [1998] 1 HKLRD 84 to support his proposition and he also referred to
Sihombing & Wilkinson's Hong Kong Conveyancing Law and Practice Vol. 1, II [37]. Unfortunately, the
extract included by Mr Wong in his bundle of authorities is an out-dated version. I have checked the latest
edition of Sihombing & Wilkinson's Hong Kong Conveyancing Law and Practice. That paragraph has been
replaced with a paragraph containing explicit reference to Chung Mui Teck. When this court referred Mr Wong
to Chung Mui Teck in the course of his closing submission, he was unable to offer this court any assistance
regarding that decision. I have read Li Pui Wan and I cannot find anything therein to support Mr Wong's
proposition.
76. Mr Wong also argued that but for the use of all the Defendants' names, and thus the exhaustion of their
concessionary rights, the 3rd and 4th Properties could not be acquired. Given the failure of the Defendants to
adduce any evidence as to why the names of all the Defendants were included in the Government Grants when
three of them (plus the 1st to 3rd Plaintiffs) should be sufficient to satisfy the requirement under the usual
Government policy, I cannot be satisfied that without the inclusion of all Defendants as grantees in the
Government Grants for the 3rd and 4th Properties, the Government would not sell the same to the uncles and
nephews. Hence, this submission fails for want of evidence.
My conclusions on beneficial interest
77. For all these reasons, I am not satisfied that the beneficial interest in the properties should have any
correlation to the fact that all the Defendants were named as grantees (with the result that their rights as
indigenous villagers had been exhausted).
78. I would also observe that as far as the 3rd and 4th Properties were concerned, the Defendants' overall legal
interest is more than 1/4. They have 5/6 in respect of the 3rd Property and 1/3 in respect of the 4th Property. I do
not see anything intrinsically unfair or inequitable to the Defendants.
79. In the circumstances, the Defendants failed to convince me that there is any valid ground for intervention by
equity as to the distribution of the ownership of the four properties. I therefore hold that in the present case, the
beneficial ownership shall be in accordance with the legal titles as set out in the Government Grants. As
mentioned by Litton NPJ in Para. 51 of his judgment in Bank of China v Fung Chin Kan,
"[G]enerally speaking, when a person signs a legal document, he or she is bound by the act of signature: As a
matter of general law, it is no defence to say that he or she did not understand the contents of a legal document;
that person takes the chance of being bound by its terms, as he or she can take the simple precaution of not
signing until its contents have been fully explained and understood."
80. Having so decided, I accept the suggestion of Mr Cheung. I am of the view that the existing position with
regard to the 1st and 2nd Properties should not be disturbed. The Deeds of Mutual Covenants shall continue to
govern the rights and obligations between the parties. The sale proceeds of the First Floor of the 1st Property
should be released to the 3rd Plaintiff. Regarding the 3rd and 4th Properties, my present inclination is to order a
sale thereof with its sale proceeds after deducting expenses and costs (and it may include costs of the present
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action) to be distributed in accordance with the legal interest of the parties as set out in the Government Grants.
However, I will give an opportunity to the parties to address me before I make an order to such effect. If the
Defendants wish to retain the 3rd and 4th Properties, I will give them a chance to make a reasonable offer to the
Plaintiffs to acquire their interest in these properties. That offer should be made prior to restoration of the matter
before me. As indicated at the trial, I will hear parties on the exact form of the order which I am going to make.
If an order of sale has to be made, the parties should consult the Lands Department as to the form of order
bearing in mind the requirement under Special Conditions 12 and 13, particularly the requirement as to payment
of additional premium. Again this should be done prior to the restoration of the matter before me.
The Plaintiffs' claims in trespass
81. Lastly, I turn to the claims for trespass. There is no Deeds of Mutual Covenants for the 3rd and 4th
Properties. As co-owners, the Defendants were entitled to possession of each and every part of the properties
under common law. Trespass cannot be maintained by the Plaintiffs unless there was ouster. The considerations
under equity seems to be more flexible. In Re Pavlou [1993] 1 WLR 1046, Millett J (as he then was) said at p.
1050,
"First, a court of equity will order an inquiry and payment of occupation rent, not only in the case where the
co-owner in occupation has ousted the other, but in any other case in which it is necessary in order to do equity
between the parties that an occupation rent should be paid. The fact that there has not been an ouster or forceful
exclusion therefore is far from conclusive. ... The true position is that if a tenant in common leaves the property
voluntarily, but would be welcome back and would be in a position to enjoy his or her right to occupy, it would
normally not be fair or equitable to the remaining tenant in common to charge him or her with an occupation
rent which he or she never expected to pay."
(See also Dennis v McDonald [1982] Fam 63 and my recent decision in Chou Mei Iu v Kung Mui Fong HCMP
2026 of 2000, 28 February 2003.)
82. In the light of my findings above, I have no difficulty in concluding that the actions of the Defendants in
August 1999 constituted ouster and forcible exclusion of the 1st Plaintiff from the 3rd Property and the 2nd
Plaintiff from the 4th Property. Although at the material time, the actual occupant of the Ground Floor of the
3rd Property was the 4th Plaintiff, given the consensus reached in August 1983 and the distribution of the keys
of the 3rd Property and the relationships between the parties, the Defendants must have known that she
occupied the same with the permission of the 1st Plaintiff. In fact, the 1st and 4th Defendants went to the
premises of the 1st Plaintiff to locate the 4th Plaintiff to demand for keys from her. Likewise, although the
tenancy of the 1st Floor of the 4th Property was handled by Fu Sau Chun after the 2nd Plaintiff emigrated to
Canada, I infer that the Defendants must have known that the tenant was a tenant of the 2nd Plaintiff. In the
circumstances, the forcible expulsion of the 4th Plaintiff and the procurement of the tenant to leave the 1st Floor
of the 4th Property together with the subsequent occupation and change of locks of these units by the
Defendants were plainly conducts calculating to exclude the Plaintiffs from the use and occupation of the units.
83. Bearing in mind the conducts of the Defendants and the means they employed to secure their possession of
the two units, I do not consider the fact that the 1st and 2nd Plaintiffs had not asked for new keys to the units as
an indication that they were content to be excluded. Reports were made to the police and the Writ in this action
was issued on 11 October 1999 with prayers asking for, inter alias, relief pertaining to the removal of the locks
installed by the Defendants at the Ground Floor of the 3rd Property and the 1st Floor of the 4th Property. The
response of the Defendants as set out in the Defence was that the Plaintiffs had deprived the Defendants' lawful
right of use and enjoyment of these two units (see Paragraph 16 of the Re-re-re-amended Defence). Obviously,
it would be futile for the Plaintiffs to demand for keys to those units, particularly in the light of the manner in
which the Defendants harassed the 4th Plaintiff and their lack of remorse.
84. The 5th Defendant said in his evidence that the 1st Plaintiff could resume his use of the 3rd Property but it
was a matter that had to be discussed amongst all co-owners and the living requirements of all parties had to be
considered. In view of what the Defendants had done, I can hardly believe this as the sincere stance of the
Defendants. Further, as the 5th Defendant himself admitted, there had not been any meeting of co-owners
before the Defendants started to take possession of the three units in the 3rd and 4th Properties previously
occupied or used by the Plaintiffs.
85. The Defendants cannot deny that up to August 1999, all the parties had been enjoying exclusive use and
occupation of the units in the 3rd and 4th Properties in accordance with the distribution which I find the parties
had agreed upon in 1983 and such agreement was subsequently put into effect when keys of the units were
distributed upon completion of construction. The Plaintiffs had never disturbed the Defendants' occupation and
use of the units distributed to them. The Defendants therefore have enjoyed the benefit of the 1983 agreement
throughout these years. Parties have been dealing with their own units in accordance with that arrangement for a
substantial period of time.
86. Mr Cheung relied on the doctrine of part performance to argue that even in the absence of deeds of mutual
255
Page 14
covenants regarding the 3rd and 4th Properties, the 1983 agreement should be given effect by this court and the
1st and 2nd Plaintiffs should be regarded as having the right to exclusive possession of the Ground Floor of the
3rd Property and First Floor of the 4th Property respectively.
87. Mr Wong submitted that this court should not affirm the 1983 agreement as it would be unfair to the
Defendants. Given my findings as to the circumstances under which the 1983 agreement came into existence
and the developments since 1983, also having regard to the fact that under the 1983 agreement the Defendants
actually got more than 1/4 in terms of beneficial ownership as well as actual use of the properties, I do not find
that there is any good reason why equity should not give effect to that agreement. In coming to that conclusion,
I have also borne in mind the detriment suffered by the Defendants as to their loss of concessionary rights. For
reasons already given, I do not regard that as a sufficient reason to disregard the consensus reached between the
uncles and nephews in 1983.
88. For the sake of completeness, I record that Mr Wong also argued that the distribution in 1983 entailed the
Defendants lived in a less satisfactory conditions than the Plaintiffs. He submitted this is by itself a hardship. I
am not aware of any principle of law or equity which enable a co-owner to claim a greater share in the
beneficial ownership of the property or a right to encroach upon the exclusive right of possession of other
co-owners simply because he finds he has inadequate space to live. The absurdity of such a proposition is
readily highlighted by applying that to co-owners in a multi-storey building in Hong Kong. Mr Wong has not
advanced any argument before me to suggest the law should be different when the co-owners were uncles and
nephews. Neither is there any expert evidence to warrant different consideration in terms of rights of indigenous
villagers in the New Territories. Further, on the evidence before me, I am not satisfied that as things stood in
1983, the Defendants would not have adequate space to live under the arrangement envisaged by the 1983
agreement. As the 1st Plaintiff said, the living condition was much more crowded when everyone was living at
Lot 924.
89. I therefore accept the submission of Mr Cheung that the 1983 agreement should be given effect. Equity
looks on that as done which ought to be done. Hence, in the eyes of equity, as between the Plaintiffs and the
Defendants, covenants for exclusive possession in respect of the respective units in the 3rd and 4th Properties
distributed to the uncles and nephews after completion of construction are deemed to have been given by them
to one another.
90. Even if I were incorrect in the above analysis as to the effect of the 1983 agreement, the same conclusion is
reached by way of estoppel by convention. It seems to me that obviously, the uncles and nephews have been
dealing with each other over the years on the shared assumption that exclusive possession was given to the
respective parties who were given the keys to the respective units. It would be unjust and unconscionable to
allow the Defendants to go back on it after so many years by relying on a defence of lack of formal covenant. In
this connection, I do not regard the demands by the Defendants for more units as being inconsistent with such
shared assumption. On the contrary, such demands reinforced this conclusion. If the Defendants were not
proceeding on the basis that exclusive possession of the units had been distributed, they needed not demand for
redistribution.
91. I am therefore of the view that damages for trespass should be awarded to the 1st and 2nd Plaintiffs by
reason of their being ousted from the use and occupation of the 3rd and 4th Properties by the Defendants
(except the 2nd Defendant) and such damages should be assessed by reference to their respective loss of use of
the Ground Floor of the 3rd Property and First Floor of the 4th Property. Mr Cheung invited me to assessed the
damages by reference to the rent regarding the First Floor of the 4th Property which the 2nd Plaintiff had been
collecting before the Defendants caused his tenant to leave. The valuation reports produced by the Defendants
did not deal with the rental values of the properties. On the evidence before me, I have no reason to believe the
rent paid by the former tenant at the rate of $4,000 per month was not indicative of market rent. I shall therefore
adopt that as the basis for the calculation of damages. In the case of the 1st Plaintiff, damages should start to run
from 7 August 1999 whilst in the case of the 2nd Plaintiff, it started to run from 1st September 1999. Damages
shall continue to run until the sale of the properties or otherwise determination of the co-ownership. If the 3rd
and 4th Properties were to be sold, such damages shall be deductible by way of equitable accounting from the
proceeds payable to the Defendants (other than the 2nd Defendant) on account of their interest in the properties.
92. I am conscious of the fact that the 1st Plaintiff only has 1/6 legal interest in the 3rd Property. However,
under the 1983 agreement, he was entitled to exclusive occupation and use of one unit in the 3rd Property.
There is no rule of law which prescribes that a 1/6 owner could not have exclusive possession of more than 1/6.
It depends on the agreement between the co-owners. In the present case, regarding the 3rd Property, I find there
was an agreement that the 1st Plaintiff would enjoy exclusive possession of the Ground Floor. In those
circumstances, in my judgment, damages shall be calculated by reference to the loss of use of that unit. Since
Mr Cheung did not ask for more than 1/6 of the net proceeds upon sale of the 3rd Property, I need not consider
whether the 1st Plaintiff should be entitled to more than 1/6 of the proceeds in the light of this special agreement
concerning exclusive possession.
256
Page 15
93. As regards the damages to the properties of the 4th Plaintiff, there is plainly no defence on liability. Mr
Wong challenged the quantum. The 4th Plaintiff gave evidence that she estimated the damages to her properties
to be around $40,000 to $50,000 (for items 4 to 14, 18 and 20 particularized under Paragraph 12 of the
Amended Statement of Claim) whilst the decoration of the premises was about $150,000. Mr Wong suggested
that some of the damaged items could still be usable and the 4th Plaintiff just abandoned some items because
she had no place to store the same. There is no plea of failure to mitigate damages in the Re-re-re-amended
Defence. Hence, the only question is whether I am satisfied that these losses were caused by the actions of the
4th, 5th and 6th Defendants to the 4th Plaintiff. Having examined the photographs and listened carefully to the
evidence of the 4th Plaintiff, bearing in mind the items damaged and the extent of damages shown in the
photographs, I must say the figure of $40,000 to $50,000 is a very conservative estimate. Taking into account
the factor of depreciation given the fact that the 4th Plaintiff was ousted from her home, I would award damages
(including fittings and decorations) in the sum of $100,000 to the 4th Plaintiff.
94. The 4th Plaintiff also asked for aggravated or exemplary damages. Mr Cheung relied on the case of Yeung
Wah v Alfa Sea Limited, HCA No. A426 of 1992, 8.6.1993. In that case, Deputy Judge Yeung (as he then was)
awarded $50,000 by way of exemplary damages to a harassed tenant. In so doing, His Lordship followed a dicta
of Lord Denning in Drane v Evangelou [1978] 1 WLR 455. The rationale was that when a landlord resorted to
harassment to evict a tenant and adopted tactics with blatant and wilful disregard of the rights of such tenant,
exemplary damages could be awarded to teach the wrongdoer that tort does not pay.
95. It is important to distinguish between exemplary damages and aggravated damages. The proper approach is
to consider whether aggravated damages should be awarded and what is the appropriate amount for such
damages first. After that has been done, this court should ask itself whether the award of general and aggravated
damages is inadequate to punish and deter a defendant. If it is inadequate, it has to be asked whether the criteria
in Rookes v Barnard [1964] AC 1129 for award of exemplary damages could be satisfied and if yes, what is the
appropriate figure for exemplary damages. On such distinction in the context of wrongful eviction, see Lawton
LJ in Drane v Evangelou [1978] 1 WLR 455 at p. 461; McMillan v Singh (1984) 17 HLR 120 and Ramdath v
Daley (1993) 25 HLR 273.
96. As Lawton LJ said in Drane v Evangelou at p. 461,
"To deprive a man of a roof over his head in my judgment is one of the worst torts which can be committed. It
causes stress, worry and anxiety. It brings the law into disrepute if people like the defendant can act with
impunity in the way he did."
97. In many respects what the 4th to 6th Defendants did to the 4th Plaintiff in the present case is outrageous.
The facts speak for itself in this regard. As I said, they remained unrepentant. No apology has been offered. The
5th Defendant gave evidence that since the Plaintiffs had reported the incidents to police, there could not be any
further dealings between the uncles and the nephews. In other words, he is of the view that it was wrong for the
4th Plaintiff to make a report to the police. None of the Defendants who gave evidence before me exhibited any
sense of regret, not to say remorse, for the uncivilized acts committed on 7th August 1999. All these added
insult to injury.
98. I think it is fully justified that the 4th to 6th Defendants should be ordered to pay aggravated damages to the
4th Plaintiff. As to the quantum of aggravated damages, bearing in mind this is to compensate the 4th Plaintiff
for injury to her feelings, I will make an award in the sum of $50,000 under this head.
99. As to exemplary damages, on the facts of the present case, I am not satisfied that the 4th to 6th Defendants
committed the tort against the 4th Plaintiff with an expectation to make a greater profit than the damages
payable. Having regard to the other damages which I have already awarded, and the fact that these Defendants
were convicted and sentenced for criminal damages, I do not think this case calls for any award of exemplary
damages. I therefore make no award under this head.
Disposal
100. I will leave it to the parties to see whether they can agree on the order that this court should make in the
light of this judgment. Parties should liaise with each other in that regard. If no agreement can be reached within
one month, the case should be restored before me. Given the manner in which the 3rd and 4th Properties are to
be disposed of, I do not think the Plaintiffs need the injunctive relief set out in the Statement of Claim. It also
follows from what I have said that the Counterclaim is dismissed. I also wish to hear parties on the question of
costs, in particular whether any order should be made by this court pursuant to Section 17(3) of the Legal Aid
Ordinance. I was told by Mr Wong that although he and those instructing him also acted for the 5th Defendant,
legal aid has only been granted to the 1st, 3rd, 4th and 6th Defendants. As the Director of Legal Aid may also
have an interest on the question of costs as well as the proceeds of sale under Section 18A and 19A of the Legal
Aid Ordinance, I also direct that notice be given to the Director as to the restored hearing so that if the Director
so wishes, he could also address this court on those questions. The parties should also consult the Director as to
the proposed order for sale, in particular the term as to distribution of sale proceeds.
257
Page 16
1 Evidence-in-chief on 25 February 2003 at 4:26 to 4:27 p.m.; cross-examination at 4:30 to 4:39 p.m. on 25
February 2003 and 11:10 to 11:14 a.m. and 11:16 a.m. on 26 February 2003.
© 2021 Thomson Reuters
258
Chen Yu Tsui v Tong Kui Kwong (Deputy Judge Barnabas
[2006] 1 HKC Fung) 23
A CHEN YU TSUI v TONG KUI KWONG
COURT OF FIRST INSTANCE

ACTION NO 1 OF 2003
DEPUTY JUDGE BARNABAS FUNG
25–29 APRIL, 4–6, 12–13 MAY, 3, 8 JUNE, 25 OCTOBER 2005
B
Land – Co-ownership – Tenants in common – Duty to account for rent –
Consideration of principles at common law, equity and by partition
legislation governing countervailing claims between co-owners
C Equity – Equitable accounting – Principles – Co-owners of property – Duty
to account for rent – Receipt as agent of co-owner – No duty to account arose
as incident of co-ownership
Trust – Constructive trust – Agent in receipt of rent for co-owner – Whether

D agent a constructive trustee for rent received – Whether statutes of limitation
apply – Limitation Ordinance (Cap 347) s 20(1)
Limitation of Actions – Trust property – Claim for account of rent received

as agent of co-owner – Whether equitable claim time-barred – Whether claim
based on constructive trust proprietary or merely personal in nature –
E Limitation Ordinance (Cap 347) s 20(1)
土地 – 共同擁有人 – 分權共有人 – 將租金報帳的責任 – – 考慮

普通法的原則，衡平法及分劃法例以監管共同擁有人之間的抵
銷申索
F
衡平法 – 公平的帳目 – 原則 – 共同擁有物業 – 將租金報帳的責
任 – 共同擁有人的代理人的收入 – 就共同擁有人的事件上未有
產生報帳的責任
G
信託 – 法律構定信託 – 代理人代共同擁有人收取租金 – 代理就
收取的租金一事上可否構成法律構定受託人 – 可否採用關於時
效的法規 – 《時效條例》(第347章)第20(1)條
H 訴訟時限 – 信託財產 – 就由共同擁有人的代理人收取的租金帳
目申索 – 衡平法申索是否喪失時效 – 根據法律構定信託是否屬
所有權利或純粹個人的性質 – 《時效條
例》(第347章)第20(1)條
I
KM Tong (the deceased) and the defendant were brothers. They purchased a
property in Kowloon and were registered as tenants in common of the property.
The property was completed in 1968 and since completion, it was let to the family
partnership in which the deceased and the defendant were partners. In 1973, the
family partnership was incorporated with the deceased, the defendant, their two
259
brothers and the defendant’s wife as shareholders and the deceased and the A
defendant as directors. The registered office of the incorporated company was at
the property. The accounts showed that between 1987 and 1992, a monthly rent
of $15,000 was paid by the company to the defendant for the letting of the
property. The deceased became a full time employee in 1984 and left the company
in 1991. Between 1987 and 1989, the deceased received sums out of the rent B
account of the company. In April 1993 the deceased through his solicitors
demanded the company for the payment of arrears of rent from November 1991
to March 1993. The company ceased to be the tenant of the property in 1998. The
defendant admitted that a personal subsidy of $7,500 per month was paid by him
to the deceased, but denied that the company ever paid the deceased any rental.
The plaintiff, as executrix of the deceased, commenced proceedings on behalf of C
the deceased’s estate against the defendant for an account of rent collected by the
defendant. The defendant counterclaimed for declarations that (i) he was the
beneficial owner of the whole property because he had paid the purchase price of
the property entirely by himself and pursuant to the common intention of the
deceased and the defendant; (ii) the deceased was to hold the half share of the D
property conveyed into his name as trustee for the defendant; (iii) the monthly
sums of $15,000 were paid by the company to the defendant for the letting of his
interest in the property and (iv) that the sums paid to the deceased were a monthly
personal subsidy.
Held, giving judgment to the plaintiff: E

(1) As to the beneficial ownership of the property, the burden of proof of
provision of the entire purchase price rested with the defendant, whereas the
burden of proof relating to the receipt of rent rested with the plaintiff. Granted that
the plaintiff’s witnesses and the documentary evidence tendered were hearsay in
nature, there was one document which stood apart, namely the letter by the F
defendant to the Commissioner of Inland Revenue stating that he was owner of
only half share of the property. It might have been drafted by someone else, but
it was signed by the defendant and was an admission against interest. On the
evidence, the deceased was a beneficial owner of the half share of the property.
There was a joint letting of the property to the company prior to November 1991
whereby the deceased received half share of the rent. The joint letting continued G
after November 1991, when the company continued in occupation of the property
and had been paying rent for such occupation. The deceased’s half share of the
rent since November 1991 had been received by the defendant. As for the
subsequent years, as the defendant chose not to disclose the relevant accounting
documents, the court would make an adverse inference against him and also infer H
that the company was still paying the same rent in 1998 (at paras 49–56, 73–86).
(2) In common law, a co-owner not in occupation was normally virtually
without remedy. The common law position was altered by the Administration of
Justice Act 1705 (4 & 5 Statute of Anne c 3 s 27) which enabled a joint tenant and
a tenant in common to bring an action of account against another as bailiff. In
I
other words where one co-owner, either by express agreement or impliedly from
conduct, undertook the task of collecting rents on behalf of co-owners and
distributing them, he was a bailiff on behalf of other co-owners and was at all
times liable to an action at law for a share. Upon the repeal of the Statute of Anne,
a co-owner out of occupation had a remedy at law in two situations: damages for
260
[2006] 1 HKC Fung) 25
A occupation rent for ouster, or an account if the other co-owner had rendered
himself liable as agent or bailiff. Agency and ouster aside, the duty to account
would arise in partition actions, administration actions, other cases where there
was a fund in court, where the court made an order for sale as an alternative to
partition, or an account for a share of rent where one party claimed an interest in
B property by reason of a resulting trust or constructive trust. There was no duty to
account for rent received by one co-owner arising simply by reason of the
incidence of co-ownership. However, on the facts of this case, the defendant had
been an agent of the deceased in collection of rent since November 1991 and was
liable to account the rent received to the deceased. Dicta of Meagher JA in
Forgeard v Shanahan (1994) 35 NSWLR 206 applied. Strelly v Winson (1685) 1
C Vern 298, Leake v Cordeaux (1856) 4 WR 806, Hitchins v Hitchins (1057/1997,
NSW SC, 11 December 1998, Bryson J, unreported) and Ryan v Dries [2002]
NSWCA 3 considered (at paras 87–106).
(4) (3) The plaintiff’s claim on behalf of the deceased was not statute-barred
because her claim was proprietary as opposed to merely personal in nature. The
D defendant was a constructive trustee in the real or institutional sense for the rent
he received as agent of the deceased from the company after November 1991. In
so far as the defendant had collected the rent payable to the deceased, it was his
duty to hand them over to the deceased as a conduit. Paragon Finance plc v DB
Thakerar & Co (a firm) [1999] 1 All ER 400, Coulthard v Disco Mix Club Ltd
[2000] 1 WLR 707 and Secretary for Justice v Hon Kam Wing & Ors [2003] 1
E HKLRD 524 considered (at paras 115–125).
Cases referred to
Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, [1968] 3 All
ER 651, [1968] 3 WLR 1097 (HL)
F Coulthard v Disco Mix Club Ltd & Ors [1999] 2 All ER 457, [2000] 1 WLR
707, [1999] FSR 900 (Ch D)
Forgeard v Shanahan (1994) 35 NSWLR 206 (NSW CA)
Green v Briggs (1847) 6 Hare 393, 17 LJ Ch 323, 11 LTOS 412, 67 ER 1219
(Ch D)
G Henderson v Eason (1851) 17 QB 701, 21 LJQB 82, 18 LTOS 142, 117 ER
1451 (Ex Ch)
Hitchins v Hitchins (1057/1997, 11 December 1998, Bryson J, unreported)
(NSW SC)
Jacobs v Seward (1872) LR 5 HL 464, 41 LJCP 221, 27 LT 185, 36 JP 771 (HL)
Kennedy v de Trafford [1897] AC 180, [1895–99] All ER Rep 408, (1987) 66
H LJ Ch 413, 76 LT 427, 45 WR 671 (HL)
Leake v Cordeaux (1856) 4 WR 806 (CA)
Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All ER 400 (CA)
Ryan v Dries [2002] NSWCA 3 (NSW CA)
Secretary for Justice v Hon Kam Wing & Ors [2003] 1 HKLRD 524 (CFI)
I Strelly v Winson (1685) 1 Vern 298, 23 ER 480
Tinsley v Milligan [1994] 1 AC 340, [1993] 3 All ER 65, [1993] 3 WLR 126
(HL)
Tribe v Tribe [1996] Ch 107, [1995] 4 All ER 236, [1995] 3 WLR 913 (CA)
Yue Shiu Ngam v Zen She Lin & Anor [1999] 2 HKLRD 21 (CFI)
261
Legislation referred to A
Administration of Justice Act 1705 [UK] s 27 (Statute of Anne (4 Anne, c 3 s
27))
Application of English Laws Ordinance (Cap 88)
Conveyancing Act 1919 [NSW] s 66G
Law of Property (Amendment) Act 1924 [UK] s 10
Limitation Ordinance (Cap 347) ss 4(1), (2), (7), 20(2) B
Supreme Court Ordinance 1844 s 3
Other sources referred to 5.

Bowstead & Reynolds Agency (17th Ed, 2001) 2-030, 6-040 6.
Coke (Sir Edward) Commentary on Littleton (1823) 172a, 200b 7. C
Meagher, Gummow and Lehane Equity: Doctrine and Remedies (4th Ed, 2002)
25-605 8.
Woodfall Law of Landlord and Tenant (Release 21) 2.102 9.
Snell Equity (13th Ed, 2000) 44-09
D
[Editorial note: as to constructive trusts and liability to account for profits from
trust property, see Halsbury’s Laws of Hong Kong Vol 26, Trusts [400.082] et
seq.]
Action
E
This was the trial of an action commenced by the plaintiff, Chen Yu Tsui, the
executrix of the will of the deceased, Tong Kui Ming, on behalf of the deceased’s
estate for an account of the rent received by the defendant, Tong Kui Kwong, in
respect of the deceased’s interest in a property in Kowloon. The facts appear
sufficiently in the following judgment.
F
Chan Chi Hung SC (Gallant YT Ho & Co) for the plaintiff.
Michael Yin (Yu Tsang & Loong) for the defendant.
Deputy Judge Barnabas Fung:
1. The plaintiff’s late husband Mr Tong Kui Ming (deceased) and the G
defendant are registered tenants in common in equal share of Block D, 3/F,
1 Walnut Street, Kowloon (the Property). The plaintiff is suing on behalf
of the deceased’s estate for an account of rent collected by the defendant.
The defendant counterclaims a declaration that the deceased held the half
share of the Property as trustee for him, and denies that the deceased’s H
estate is entitled to any rent (at paras 49–56, 73–86)..
Introduction
2. The deceased was the younger brother of the defendant. They were I
partners in the family partnership of Kong Hing Plastic Factory (the
Factory).
3. In 1973, the partnership was incorporated as Kong Hing Plastic
Factory Ltd (the Company). The shareholders were: the defendant (1,200
262
[2006] 1 HKC Fung) 27
A shares); the deceased and the two younger brothers (500 shares each);
Madam Cheung Po Ling, the defendant’s wife (400 shares). The deceased
and the defendant are the two permanent directors of the Company. The
defendant is the Chairman of the Company, and the deceased became a full
time employee of the Company in 1984.
B
4. On 20 February 1967, the deceased and the defendant entered into an
agreement for the purchase of the Property. The purchase price was
$107,996. The construction of the Property was then still uncompleted.
Prior to completion, certain part payments as deposit and instalments were
C made.
5. On 14 March 1968, the sale and purchase was completed. On the
same date, the deceased and the defendant executed a mortgage in favour
of the Hang Seng Bank Ltd to secure the loan and interest of $60,553. The
loan was repayable by 19 equal instalments of $3,187. On 16 October
D 1969, the Property was reassigned to the deceased and the defendant upon
repayment.
6. Ever since completion, the Property was let to the Factory, and then
the Company for the use as office and/or factory. The registered office of
the Company was and is situated at the Property. The accounts of the
E
Company showed that between 1987 and 1992, a monthly rent of $15,000
was paid by the Company in respect of the Property. It is not in dispute that
between 1987 and 1989, the deceased received sums out of the Rent
Account of the Company. The entries do not always show $7,500 per
F month, but the defendant admitted that a personal subsidy of $7,500 per
month was paid by him to the deceased, which unbeknown to him at the
time was booked to the Rent Account. The payment stopped after 11
November 1991.
7. The deceased left the employment of the Company some time after
G November 1991.
8. On 1 April 1993, the deceased through his solicitors wrote to the
Company demanding payment of the arrears of rent in respect of the
Property (being the half payable to the deceased) from 1 November 1991
to 31 March 1993 in the sum of $127,500 ($7,500 x 17).
H
Plaintiff’s case
9. The plaintiff’s pleaded case can be summarised as follows:

I (1) The plaintiff is beneficially entitled to half share of the Property as
tenant-in-common.
(2) Since completion of the purchase in about March 1968, the Property
was let by the deceased and the defendant to the Factory and later
to the Company.
263
(3) From October 1988 to 1991, the rent paid by the Company was A
$15,000 per month, ie $7,500 each to the deceased and the
defendant for their respective half share of the Property.
(4) After 11 November 1991 and continuing, the Company has been
paying the deceased’s rent to the defendant receiving as the
deceased’s agent for the use of the deceased (the Collected Rents). B
(5) Since 1993 and from time to time, rent was revised.
10. It is common ground that the Company’s audited accounts show
that rent was paid in respect of the Property up to the end of 1998. No
further accounts have been produced. The Company is not wound up and C
the court is asked to infer that the defendant is still in receipt of rent.
11. Mr Chan SC for the plaintiff based the claim as follows:
(1) duty to account in equity as between co-owners;
(2) agency and breach of fiduciary duty;
D
(3) money had or received or unjust enrichment or restitution;
(4) constructive trustee and liability to account for the Collected Rents
with all
Mr Chan profits that
clarified and/or
he interest thereon. any occupation rent on the
is not claiming
ground of ouster.
E
Defence case
12. The defendant’s pleaded case can be summarised as follows:

(1) The purchase price of the Property (deposit, downpayment and
mortgage loan) was paid for entirely by the defendant pursuant to F
the common intention of the deceased and the defendant that the
deceased would hold the half share of the Property conveyed into
his name as trustee for the defendant, and the defendant
counterclaims a declaration that he owns the entire beneficial
interest in the Property. G
(2) Until the end of December 1998, $15,000 was paid by the Company
to the defendant for the letting of his interest in the Property (as
beneficial owner of the whole of the Property or alternatively for his
share as tenant in common).
H
(3) It is denied that the Company ever paid $7,500 to the deceased as
rental, and it is denied that the defendant was ever appointed by the
deceased as his agent for the letting of the Property or the receiving
of rent from the Company.
(4) At the end of December 1998, the Company ceased to be the tenant I
of the Property and thereafter, the defendant has not received any
further rent in respect of the Property.
(5) Insofar as the plaintiff’s claim against the defendant for rent
collected prior to 2 January 1997 is founded on simple contract or
264
[2006] 1 HKC Fung) 29
A tort or on account or an action of breach of trust, the same is

time-barred by virtue of s 4(1) and (2) and s 20(2) of the Limitation
Ordinance (Cap 347).
13. The defendant admitted that he had paid the deceased a personal
subsidy of $7,500 per month. This subsidy ceased on 11 November 1991.
B
14. Further, Mr Yin for the defendant stated that in the event that the
deceased were found to be a beneficial owner, the plaintiff is put to the
strict proof of whether:
(a) Prior to 11 November 1991, there is one single letting jointly by the
C deceased and the defendant, or two separate lettings of the
respective shares of the Property;
(b) If there were one joint letting, whether the same letting continued
after 11 November 1991, or it was replaced a new letting by the
defendant at $15,000.
D
(c) If there were two separate lettings, whether the defendant had let his
half share to the Company at $15,000 after 11 November 1991.
Issues
E 15. The issues in this case are:
(1) Beneficial ownership of the Property:
(a) Whether the deceased provided the entire purchase price of the
Property;
F (b) Whether the deceased received any rent from the Property;
(c) If the deceased were a trustee of the defendant for the Property,
whether the trust was for an illegal purpose with an intention of
defrauding the Commissioner for Inland Revenue (CIR);
G (2) Whether the defendant collected the rent for the deceased after
November 1991:
(a) If the deceased were a beneficial owner, whether the rent paid by
the Company from November 1991 to 1998 related to the
deceased’s half share of the Property;
H
(b) The amount of rent for 1996 and 1997;
(c) Whether the Company is still paying rent from 1999 until now;
(3) Whether tenants in common are accountable to each other in equity
for rents collected by one of them;
I
(4) Whether the defendant collected the rent as agent for the deceased;
(5) Whether the defendant held the Collected Rent as constructive
trustee for the deceased;
(6) Restitution;
265
(7) Limitation of action. A
Plaintiff’s evidence
16. Both the plaintiff and her daughter Tong Kit Chi (PW2) gave evidence
that the deceased had told them that he paid for half of the purchase price B
of the Property, and he retained the mortgage instalment receipts of
repayment made by him.
17. The plaintiff only met the deceased in 1969. But she said by reason
of the deceased’s education and career, he should have means to purchase
the Property in 1967. He graduated from university in Taiwan in 1963, and C
returned to join a French construction company as a draftsman, rising to
assistant engineer. In 1965, he joined a shipping company as assistant
engineer, and eventually as general manager.
18. Mr Lee Yuet Man (PW1) had known the deceased and the D
defendant for over 30 years. He introduced the Property to the deceased
and the defendant. He said that at around the time of the purchase, the
deceased had a good job, and was very thrifty. The deceased once said he
used all his money to help the family business. Mr Lee had accompanied
the deceased to the bank to pay the mortgage instalments, and he E
presumed it was for the Property.
19. Miss Tong Kwok Wai (PW3) is the sister of the deceased and the
defendant. She said when the Property was purchased, she asked the
defendant whether he had enough money. The defendant told her that the
Property was purchased with the deceased, and the mortgage instalments F
were paid by them together, and there should be no problem. She said the
deceased once told her that he received a cheque for rent from the
Company. She said what caused the rift between the deceased and the
defendant was that the defendant highhandedly increased his shareholding
in the Company. G
20. It is noted that on or about 28 August 1992, the defendant’s
shareholding in the Company was increased to 4,100 shares with the
others remaining unchanged.
21. The daughter produced documents from the belongings of the
deceased to support the purchase and receipt of rent by the deceased. They H
include:
(1) A memo written by the deceased when he contemplated legal
proceedings against the defendant in 1993. The memo stated, inter
alia, that: I
(a) the Property was purchased by both the defendant and himself
as tenants in common in equal share;
(b) he contributed to the purchase including eleven mortgage
instalments by cash between November 1967 and September 1969;
266
[2006] 1 HKC Fung) 31
A (c) the Property was occupied by the Factory since September 1967
and then by the Company since 1973;
(d) various rents were paid by the Factory and the Company to both
the defendant and himself, and the rent from October 1988 to
October 1991 was $7,500 per month;
B
(e) the last payment of rent to him was made on 11 November 1991.
(2) An original receipt from Messrs Woo & Kwan, Solicitors dated 10
November 1967 for $3,187 being part payment of the purchase
price of the Property.
C (3) 10 original receipts for $3,187 each between 29 March 1968 and 25
September 1969 for the mortgage instalments to the Hang Seng
Bank Ltd.
(4) Notices for Assessment and Demand for Tax to the deceased for
years of assessment 1966/67 to 1972/73 showing:
D
Year of Date of Issue Assessable Profit
Assessment from
Properties
1966/67 — $0
E 1967/68 30 July 1973 $6,410
1968/69 29 June 1973 $6,410
1969/70 29 June 1973 $5,128
1970/71 13 July 1974 $5,128
1971/72 29 May 1974 $5,128
F
(5) A letter dated 11 December 1982 by the deceased to the CIR stating
properties owned under his name and his wife’s name included the
Property purchased on 20 February 1967 for rental purpose, and his
share in the Property was half, and his share in the purchase price
G was $53,998, and the payment method being $26,674.765 during 20
February 1967 to February 1968 by his earning and saving and
$27,323.235 as from February 1968 by mortgage instalments to the
Hang Seng Bank.
(6) A letter dated 25 February 1983 by the defendant to the CIR stating
H properties owned by him and his wife included the Property
purchased on 20 February 1967 for rental purpose and his share in
the Property was half, and the purchase price was $53,998 with term
of payment of initial payments of $26,674.763 made during 20
February 1967 to February 1968, and the balance of $27,323.235
I was paid by mortgage instalments to Hang Seng Bank Ltd.
(7) A letter dated 3 October 1983 by the defendant to the CIR that he
obtained a loan of $80,000 from the deceased or the initial payment
of a property at 9 Elm Street, Tai Kok Tsui purchased on 30 August
1974 for the price of $500,000.
267
(8) Payment vouchers of the Company between 1987 and 1989 stating A
payment of rent for the Property (without specifying the recipient)
approved by the defendant and with the deceased’s signatures, with
a particular one dated 9 November 1989 stating ‘Rent – KM Tong
Rent for 3/F ‘D’ (May to September) $37,500’.
(9) An Audit Confirmation dated 24 July 1992 sent by Messrs MB Lee B
& Co, auditors for the Company to the deceased and signed by the
deceased confirming as at 31 December 1991, the rent payable for
the Property on the deceased’s account was $15,000.
(10) A letter dated 19 January 1993 by Messrs MB Lee & Co to the C
Commissioner for Canada stating that the deceased has been
receiving rent from the Property ever since 1973, in support of the
deceased’s application for immigration.
22. The plaintiff relied on the audited accounts of the Company to
prove that the Company had paid rent for the Property up to the financial D
year ending 31 December 1998. The details are as follows:
Year Amount
1991 $180,000
1992 $180,000 E
1993 $252,000
1994 $216,000
1995 $216,000
1998 $216,000
F
23. The audited accounts of the Company for 1996 and 1997 are not
produced. The plaintiff’s contention is that judging from 1994, 1995 and
1998, the rent for 1996 and 1997 should be $216,000.
24. The plaintiff has asked the defendant to produce the audited
G
accounts of the Company from 1999. The defendant refused to do so. The
plaintiff relies on the fact that up to the present, the Company is not wound
up, and the Property is still the registered office for the Company, and
contends that rent is still being paid by the Company for the Property.
25. The plaintiff sought to rebut the defendant’s allegation that the H
Company ceased production since 1993, and had moved out of the
Property since 1993 by referring to the Company’s documents.
26. In the Supporting Analysis for Factory Rent and Rates in the
audited accounts of the Company for 1995, both the Property and the
adjacent property of Block B & C were included under factory premises. I
In the Supporting Analysis for 1998, the Property was still stated to be the
office and Block B & C were the warehouse.
27. In the Company’s Notice of Extraordinary General Meeting on 3
January 2000 (EGM) signed by the defendant as Chairman, it stated that
268
[2006] 1 HKC Fung) 33
A ‘Toy business has slowed down much due to increasing replacement of

electronic toys’; ‘Especially in Swatow, the costs are only 70% as much as
in Hong Kong’; ‘Some Hong Kong factories have already closed down as
Hong Kong factories cannot compete’; ‘In view of above and future status,
we suggest that we have to hold a meeting to discuss the following issues:
B A) Closing our company effectively from Jan 1, 2000. B) Other alternative
methods.’
28. The minutes of the EGM and meeting of the Board of Directors of
the Company on 3 January 2000 stated that it was ‘resolved that the
meeting concluded that our Company would be closed & that production
C would stop effectively from January 4, 2000’; ‘Our company would
proceed to sell all the inventories & assets for cash to pay off all debts
including staff.’
29. Miss Tong Kit Chi said that in October 2001, she visited the
D
Property and saw the door was open with workers going in and out of it.
She said that meant the Company was still occupying the Property.
Defence evidence
30. The defendant said he purchased the Property entirely with his own
E
money. He used his personal cheque to pay the deposit of $15,979, and he
retained a photocopy of the receipt. He also retained the original sales and
purchase agreement. The original assignment is kept by the mortgagee
bank upon the re-mortgage in 1980, and it was not returned because the
bank required the signature of the deceased.
F
31. The defendant said the deceased had no money for the purchase.
The deceased only returned from Taiwan in late 1964, not 1963. In 1967,
the deceased earned $500 to $600 per month. Due to over-spending, the
deceased often had to borrow money from him. The defendant said he
G never told PW3 that the Property was purchased by the deceased and
himself jointly.
32. The defendant said he might have asked the deceased to pay the
mortgage instalments, but he gave the deceased the money and the
deceased always gave him back the receipts. The mortgage instalment
H receipts were later stolen by the deceased.
33. At the time of the purchase, the defendant was not yet married.
Originally, he intended to purchase the Property under his sole name. But
a friend told him that in case he were to die unexpectedly, his assets would
be frozen pending payment of estate duty and/or grant of probate. If he
I added a name of someone he could trust as the owner, the Property would
not be frozen, and his family could use the rent in the meantime, or
mortgage the Property to borrow money. He asked to ‘borrow’ the
deceased’s name. The deceased said no problem and promised to transfer
the Property back to him at any time. He only intended the arrangement to
269
be interim, and he would ask the deceased to transfer the half share back A
to him after he got married and gained confidence in his wife.
34. In 1982 after his son was born, the deceased offered to transfer the
half share of the Property back to him. The defendant said there was no
urgency. Secondly, the Tong family would not give valuable property to a
woman, and his mother might object to giving property to a daughter in B
law. In 1992, he asked the deceased to give him back his half share of the
Property but the deceased made excuses for not doing so.
35. The defendant said his letter to the CIR in 1983 stating the deceased
and him jointly owned the Property was untrue. At that time both the
deceased and him faced CIR enquiries. The deceased had already replied C
and stated the position of ownership as per the Land Registry record. The
deceased drafted the letter for him along the same line. He never read the
letter because the deceased said it was alright. He did not care whether the
letter stated the true position.
D
36. The defendant admitted that he had paid a personal subsidy of
$7,500 per month to the deceased. In 1987 or 1988, the deceased asked for
a pay rise. At the relevant time, the deceased’s monthly salary was
$10,000. The defendant said the Company would not do so, but he could
personally give the deceased $7,500 per month. It was purely co-incidental E
that monthly rent he received from the Company was $15,000 and the
monthly subsidy was $7,500.
37. At the time his wife was responsible for keeping the accounts for
the Company. He told his wife to pay $7,500 per month to the deceased.
He did not know that his wife had paid it out of the Company’s Rent F
Account. He did not know about the payment vouchers of the Company at
the time. He only knew about them after the present litigation. The initials
on the payment vouchers purportedly showing he had approved the
payment of rent were not made by him. He had authorized his wife to
initial on his behalf generally. G
38. The defendant said the Company ran a special system of cash
expenditure. In order to increase the cash flow of the Company, he would
not normally withdraw the rent due to him unless he needed money.
Whenever purchases in cash were needed, the sum would be booked to the
Rent Account and charged against his unwithdrawn rental income. For H
example, if the staff member needed to make purchase of $10,000, he
would pay the staff $10,000. After the purchase, he would give the receipt
of $10,000 to the Company and the Company would pay him back
$10,000 from the Rent Account. He expected the $7,500 might have been
booked to the Rent Account in this manner. It would explain why the I
payment vouchers retained by the deceased stated ‘rent’.
39. In late 1991, the defendant stopped the subsidy of $7,500. The
subsidy was subject to the conditions that the deceased had to work
diligently and to make a moulding machine work. The deceased failed to
270
[2006] 1 HKC Fung) 35
A do so. After that, his mother told him that the deceased took away the
mortgage instalment receipts placed in two boxes in her mother’s room.
40. Mr But Hoi Hung (DW3), an employee of the Company, produced
a Cash Advance Book purportedly to prove the above system. Mr But
could only tell of cash advances to him in making purchases, he did not
B know about the accounting system and in particular the use of the Rent
Account. The Cash Advance Book covered the period from 1995 to 1997.
The defendant’s wife emigrated to Canada in 1994 and she ceased to keep
the books of the Company. From then on, the system of cash advance was
handled by the defendant himself.
C
41. The Defence originally pleaded that the Company ceased renting
the Property in 1993. After discovery of the Company’s audited accounts
disclosing the payment of rent until 1998, the Defence was amended. The
defendant said the Company ceased production in Hong Kong in 1993. He
told his wife to move out of the Property and not to pay rent anymore. His
D
understanding was no rent was paid since 1993, and he only realized at the
end of 1998 that his wife made a mistake in continuing to pay rent. He told
his wife to stop paying rent after 1998. He signed the audited accounts
without looking at the description in the Supporting Analysis for rent. The
accounts for 1999 were drawn up but not audited. There were no further
E
accounts done.
42. Since 1993, the Property could not be used or rented out because of
concrete spalling. He asked his staff to repair it but they never got round
to do it. It was basically left idle since 1993, and was used to store some
F useless items and fixtures for convenience, and the staff might have used
the toilet. There was no urgency to let it out. Since the Company still
occupied Block B & C, the Property was kept as the registered office
merely for correspondence.
43. The defendant explained that the production referred to in the
G minutes of the EGM in 2000 was not the business directly operated by the
Company, but business of Woo Hing in the Mainland. Woo Hing is a
factory owned by the defendant and his wife. It is not a subsidiary of the
Company. It is a sub-contractor of the Company.
44. The defendant’s wife Cheung Po Ling (DW3) handled the accounts
H of the Company before she emigrated to Canada in 1994. She had no
formal training in book keeping. She treated the Rent Account as the
defendant’s personal Auto Teller Machine. Therefore, when the defendant
asked her to pay the deceased $7,500 subsidy per month, she
subconsciously charged it to the Rent Account. She never encountered a
I situation where the Rent Account was insufficient for cash purchases
because she would see to it not being so. In 1992, the accountant said it
was messy to charge cash purchases to the Rent Account and suggested
that a Petty Cash Account be used. Since 1992, the Rent Account was only
used for rent and not cash purchases.
271
45. Madam Cheung said she put the defendant’s initial on the payment A
vouchers because the auditors said the payment vouchers should be
approved by someone. She said that she feared no consequence of putting
other’s initial because the defendant would never check on her. Although
she had emigrated in 1994, she would come back to supervise the drawing
up of the annual accounts. She told the book keeper to book rent of B
$15,000 per month. Even in 1998 where she did not return to Hong Kong,
she told the book keeper to do the same for the 1997 accounts. The
payment voucher dated 9 November 1989 stating ‘Rent – KM Tong Rent
for 3/F ‘D’ (May to September) $37,500’ was not prepared by her although
so stated. The deceased prepared it for her when he came up to receive C
payment of subsidy.
46. Madam Cheung said after 1993, the Company only used the
Property as the office, and the warehouse was move to neighbouring
premises of Block B & C. Finally in 1999, even the office was moved to
Block B. D
47. Madam Cheung said the rent for 1996 and 1997 should be $180,000
(ie $15,000 per month) instead of $216,000 (ie $18,000 per month) as in
1994, 1995 and 1998, because there were periodic fluctuations in the rental
market.
E
48. Mr William Lee Cheuk Yin (DW2) is the manager of Messrs MB
Lee & Co. Mr Lee was in charge of the Company’s audit from 1974 to its
cessation of business in 1998. In relation to the Audit Confirmation dated
24 July 1992 asking the deceased to confirm that the Company owed the
him rent for the Property in the sum of $15,000, he presumed that his staff
F
would send audit confirmations to both owners based on the record of
owners in the Land Registry. There should be no enquiry as to who
actually received the rent as the auditor of the Company was only
concerned with payment of rent, not with the receipt. On the other hand,
he never heard from anyone that the rent payment to the deceased was not
G
real. As to the letter to the Commission for Canada, he drafted it based on
information supplied by the deceased.
Beneficial ownership of the Property

49. The burden of proof of provision of the entire purchase price rests H
with the defendant, whereas the burden of proof relating to the receipt of
rent rests with the plaintiff.
50. Mr Yin for the defendant pointed out that the defendant is the only
witness with personal knowledge of the purchase. The plaintiff’s evidence
is either hearsay, or documentary hearsay. Mr Yin submitted that the I
plaintiff should not reap a forensic advantage by reason of the deceased
not being available for cross-examination.
51. Mr Yin submitted that it is common ground that at the time of the
purchase the deceased did not have other business or investment, and the
272
[2006] 1 HKC Fung) 37
A Factory never distributed profits to the partners. The deceased simply

could not have afforded to purchase the Property. Mr Lee Yuet Man did not
know whether the deceased was paying the mortgage instalments for the
Property or else. Miss Tong Kwok Wai had an axe to grind against the
defendant because they had quarrelled over other investments, and at any
B rate, she was dismissed from the Company by the defendant allegedly for
poor performance.
52. Mr Yin submitted that the documentary evidence are inconclusive.
The Audit Confirmation was issued on the basis of the owner’s record of
the Land Registry. The letter to the Commission of Canada was written on
C the instructions supplied by the deceased.
53. The tax record was inconsistent with the date of occupation of the
Property. The assignment was dated 14 March 1968, which meant the
occupation of the Property should commence from mid-March 1968.
Hence, the assessable profits from Properties for the years of assessment
D 1967/68 and 1968/69 could not possibly have been the same $6,410. Even
the deceased stated in his memo that renting only commenced in
September 1968. It either means the assessable profits from properties for
1967/68 were mis-stated, or they related to other properties. Further, the
assessments were retrospectively raised in 1973 and the rental income
E could have been mis-stated.
54. The mortgage instalment receipts could not prove the source of
fund. In any case, the deceased only had some mortgage instalment
receipts and one downpayment receipt, but not other payment record. The
deceased had 10 receipts out of 19 instalments in total. That is not
F
consistent with paying half of the instalments. Except for the one payment
voucher dated 9 November 1989, the others never stated the payment to
the deceased was rent. And that one was but an aberration.
55. Mr Yin submitted that although the defendant produced only one
G copy of the downpayment receipt of $15,979, it is not surprising since the
purchase was 40 years ago and the documents could have been lost.
56. Granted that the plaintiff’s witnesses and the documentary evidence
referred to above are hearsay in nature, I consider that one document
stands apart from them, that is the letter by the defendant to the CIR
H stating that he was owner of only half share of the Property. It might have
been drafted by someone else, but it was signed by the defendant. It is an
admission against interest.
57. Mr Chan for the plaintiff submitted even if the court were to accept
that the letter did not state the truth, it would mean the defendant was
I defrauding the CIR, and the original intention to avoid the Property being
frozen was also improper. Hence, the defendant is not entitled to rely on
any resulting trust in his favour by reason of illegality.
58. Mr Yin submitted that the defendant’s intention to save the Property
from being frozen pending payment of estate duty is not necessarily
273
illegal, and the letter to the CIR stating he owned only half of the Property A
was not part of any underlying transaction at the time of the creation of the
trust. Hence, the defendant did not have to rely on any facts disclosing any
illegality to prove the resulting trust.
59. In Tinsley v Milligan [1994] 1 AC 340, the plaintiff and the
defendant, two single women, purchased a house in which they lived B
together and which was vested in the sole name of the plaintiff, but on the
understanding that they were joint beneficial owners of the property. The
purpose of that arrangement was to assist in the perpetration of frauds on
the Department of Social Security. A quarrel between the parties led to the
plaintiff moving out, leaving the defendant in occupation. The plaintiff C
claimed possession asserting sole ownership of the property. The
defendant counterclaimed a declaration that the property was held by the
plaintiff on trust for the parties in equal shares and for an order for sale.
The House of Lords (by a majority) held that a claimant to an interest in
property, whether based on a legal or equitable title, was entitled to D
recover if he was not forced to plead or rely on an illegality, even although
it transpired that the title on which he relied was acquired in the course of
carrying through an illegal transaction; that in the circumstances, by
showing that she had contributed to the purchase price of the property and
that there was a common understanding between the parties that they E
owned the property equally, the defendant had established a resulting trust;
that there was no necessity to prove the reason for conveyance into the
sole name of the plaintiff, which was irrelevant to the defendant’s claim,
and that since there was no evidence to rebut the presumption of a
resulting trust the defendant was entitled to succeed on her counterclaim. F
Lord Browne-Wilkinson stated at 371F-H that:
Where the presumption of resulting trust applies, the plaintiff does not have to
rely on the illegality. If he proves that the property is vested in the defendant
alone but the plaintiff provided part of the purchase money, or voluntarily G
transferred the property to the defendant, the plaintiff establishes his claim
under a resulting trust unless either the contrary presumption of advancement
displaces the presumption of resulting trust. Therefore, in cases where the
presumption of advancement does not apply, a plaintiff can establish his
equitable interest in the property without relying in any way on the underlying H
illegal transaction.
60. In Tribe v Tribe [1996] Ch 107, the English Court of Appeal held
that an action for restitution could be brought by the transferor either at
common law or in equity, but as a general rule would fail if it would be
illegal for the transferor to retain any interest in the property; that in a case I
where no presumption of advancement arose a transferor could recover
property transferred without consideration if he could do so without
reliance on an illegality and could show an intention to retain a beneficial
interest in the property; where the presumption of advancement arose, an
274
[2006] 1 HKC Fung) 39
A exception to the general rule against recovery applied if the illegal purpose
which the transferor had to rely on in order to rebut the presumption had
not been carried into effect in any way.
61. Tinsley v Milligan has been considered and Tribe v Tribe has been
applied in Hong Kong in Yue Shiu Ngam v Zen She Lin & Anor [1999] 2
B
HKLRD 21per Beeson J.
62. Mr Chan sought to argue that the doctrine of locus poenitentiate
discussed by Millet LJ (as he then was) in Tribe v Tribe ought to be applied
in the present case, in view of the defendant further perpetrating the fraud
C against the CIR in his letter dated 3 October 1983. I am afraid I shall not
delve into this interesting topic as I reject the defendant’s evidence that his
letter to the CIR did not state the true position, just as I reject his evidence
on the provision of the entire purchase price of the Property.
63. The defendant’s allegation that by adding the deceased name as a
D joint owner would save the Property from being frozen pending the
payment of estate duty is ludicrous. He agreed that his friend who gave
him this advice did not know any law, and he did not know whether the
Property would be frozen if there were two owners, or whether it would
also be frozen if the deceased were to die first, yet he never sought the
E advice conveniently available from the solicitor who acted for him in the
purchase of the Property. His explanation that the solicitor only knew how
to collect money is simply incredible.
64. The defendant said the deceased had no money for the purchase
F because he was a spendthrift and often had to borrow money from him. If
so, why would he trust the deceased to make him a trustee of the Property?
Further, he told the CIR that he had borrowed $80,000 from the deceased
to purchase another property. True that related to a later period in 1983, but
it was contrary to the picture of the deceased’s spendthrift and
G impecuniosities the defendant was trying to paint.
65. The defendant said he was in no hurry to get the half share back
from the deceased in 1982 because he feared his mother might object to
his wife holding valuable property of the family. Yet, he had given his wife
400 shares in the Company in 1974, and he had purchased another
H property jointly with her in 1979. He said the deceased stole the mortgage
instalment receipts inside two boxes which held title documents, yet
somehow he still retained the sale and purchase agreement and a
photocopy deposit receipt.
66. As to receipt of rent by the deceased before November 1991,
I Mr Yin submitted that the payment vouchers were not rental receipts. Mr
William Li of the auditors said that the function of the payment voucher
was only to record how an item of expenditure is to be classified in the
Company’s books. The fact that the deceased had also signed on the
payment vouchers only made it a receipt, not necessarily rental receipt.
275
The single payment voucher dated 9 November 1989 which referred to A

payment of rent of the Property to the deceased was but an aberration.
67. Mr Yin also pointed out that the payment vouchers were not always
in amount of $7,500 or multiples or factors of $7,500, and might not relate
to the payment of half of the rent. Be that as it may, the defendant did not
deny that $7,500 were paid to the deceased monthly. The only dispute was B
whether it was rent or a personal subsidy. On this point, I totally reject the
evidence of the defendant and his wife.
68. The defendant and Madam Cheung’s evidence of the use of Rent
Account for cash purchases by the staff before 1993 was contrived and
convoluted. I cannot imagine the amount of cash purchases of the C
Company would be artificially limited by the amount of unwithdrawn rent
at any time. It is even more incredible that after her emigration to Canada,
Madam Cheung told the clerk to continue to book rent for the Property
between 1993 and 1998 without the knowledge of the defendant.
D
69. The defendant said according to his understanding at the time, there
was no payment of rent since 1993. Then as far as the defendant was
concerned, cash purchases could not be charged against the Rent Account
any more. When being asked what account would be used instead, the
defendant could only say that no account was necessary.
E
70. On the other hand, given the defendant’s understanding that no rent
was charged and the practice of charging cash purchases against the Rent
Account had ceased in 1994, the Rent Account would have been saddled
with undistributed rent (as rent was actually charged). When being asked
where the rent from 1993 to 1998 had gone while there was no withdrawal F
nor contra entries against the Rent Account, again, the defendant could
only say his wife would know.
71. Madam Cheung said she put the defendant’s initials on the payment
vouchers in order to satisfy the auditor’s query that they were not properly
approved. What is the credibility of one who could do such a thing? I find G
that she is simply trying to shield the defendant from the fact that he
actually knew and approved of the payment of $7,500 to the deceased out
of the Company’s Rent Account. I reject her evidence on this point and
find to the contrary.
72. I find that the payment voucher dated 9 November 1989 was an H
accurate record of what it stated: ‘Rent – KM Tong Rent for 3/F ‘D’ (May
to September) $37,500’. Although this was the only voucher which
connected the deceased to payment of rent of the Property, I am satisfied
that the other vouchers were in the same vein. I find that the deceased did
receive half of the rent paid by the Company for the Property up to I
October 1991. The payment of rent to the deceased by the Company was
with the knowledge and approval of the defendant.
73. All in all, I disbelieve the defendant and his wife. They are using
each other as excuses for lies they each told. I reject the defendant’s
276
[2006] 1 HKC Fung) 41
A evidence that he had provided all the purchase money of the Property and
that there was a common intention that the deceased would hold the half
share in trust for him. I find that the deceased was a beneficial owner of
the half share of the Property, and he received $7,500 as rent from the
Property before 11 November 1991.
B
Payment of rent by the Company after November 1991
74. The first issue was whether there was one joint letting after November
1991.
C 75. Mr Chan referred to Woodfall’s Law of Landlord and Tenant
(Release 21) at 2.102 that:
Each tenant in common could at common law make a lease in respect of his
own share alone, the interest of each being separate and distinct, and if tenants
D in common all joined in one lease it operated as a lease by each of his respective
share, and a confirmation by each as to the shares of the others.
76. He contended that all along, the letting to the Company was a joint
letting by the deceased and the defendant.
76. Mr Yin submitted that even if the deceased did receive rent of
E
$7,500 per month from the Company before November 1991, it did not
necessarily mean that there was a joint letting by the deceased and the
defendant either before or as from November 1991.
77. Mr Yin referred to Jacobs v Seward (1872) LR 5 HL 464 as an
F illustration that tenants in common could lease their respective share of the
land without reference or even knowledge of each other. By reason of the
unity of possession of the tenancy in common, the lessee is entitled to
occupy the entire property. As a general proposition, I agree. But the
position must be viewed against the circumstances of the case.
G 78. The Property was let to the Factory ever since it was first occupied.
The deceased and the defendant were partners of the Factory. Then it was
let to the Company, and they were the two permanent directors of the
Company. Since 1984, the deceased also worked for the Company at the
Property. At the relevant time, the rent paid by the Company was $15,000
H per month. I have already found the deceased received the rent of $7,500
per month. The only reasonable inference is that there was one joint letting
and the deceased received half of the rent.
79. The defendant’s only evidence of any change in the letting was that
the Company had ceased renting the Property since 1993. This is contrary
I to the audited accounts of the Company. The effect of Madam Cheung’s
evidence was that she just continued to book the same (and revised) rent
from 1993 to 1998 without the defendant’s knowledge. I reject their
evidence. I find that the Company was paying rent for the Property from
November 1991 to the end of 1998 at the least.
277
80. The next issue is whether the rent paid by the Company from A
November 1991 to 1998 covered the half share of the Property of the
deceased. Notwithstanding that the deceased no longer worked for the
Company, his shareholding and permanent directorship of the Company
remained unchanged. There is no documentary evidence of the Company
as to any change of letting. The only reasonable inference is that the B
previous joint letting arrangement continued save that the deceased was
not paid his half share of the rent after 11 November 1991.
81. Mr Yin referred to the letter of the solicitors for the deceased dated
1 April 1993, giving notice to the Company that the half of the rentals of
the Property payable to the deceased would be increased from $7,500 to C
$12,000 per month with effect from 1 May 1993. Mr Yin submitted that
this indicated there were separate instead of joint letting. In the light of all
the evidence, I do not find those letters casting any doubt on my
conclusion on joint letting.
D
82. The next issue is the amount of rent for 1996 and 1997. Madam
Cheung said it was $180,000 (ie $15,000 per month) as in 1991 and 1992,
as opposed to $216,000 (ie $18,000 per month) for 1994, 1995 and 1998.
She said that was due to fluctuations in the rental market. I reject the
evidence of Madam Cheung and infer that the rent for 1996 and 1997 was
E
$18,000 per month.
83. The next issue is whether the Company was paying rent for the
Property from 1999 onwards. The defendant said the production of the
Company stopped in 1993, and since then, the Property was only of
limited use: as the registered office for the Company, storage for unused F
items and unremoved shelves, and toilet for the staff. The minutes of the
EGM held on 3 January 2000 stated that the business had slowed down,
but not stopped. The defendant explained that the business referred to was
Woo Hing, not the Company. It was not so stated in the minutes. In any
case, Woo Hing belonged to the defendant and Madam Cheung. The G
deceased and the other shareholders had no interest in it. I reject the
evidence of the defendant that the Company’s production ceased in 1993.
84. The registered office of the Company is still at the Property. I find
that that Company is still occupying the Property now, at least to the same H
limited extent as in 1993 to 1998 as alleged by the defendant himself.
85. Although there was no written tenancy agreement, the use of the
Property was stated in writing in the Company’s audited accounts up to
1998. If there were any change in the position thereafter, the matter should
be stated in the 1999 accounts. The defendant had access to the unaudited I
accounts for 1999. He could have produced the accounts to rebut the
payment of rent if that was the case. As for the subsequent years, as the
Company is still in existence, there ought to be some accounts, at least for
the shareholders. Since the defendant chose not to disclose the 1999
278
[2006] 1 HKC Fung) 43
A unaudited accounts or any other accounting documents, an adverse

inference is more readily drawn against him. Hence, I infer that the
Company is still paying the same rent as in 1998.
Finding of facts
B
86. On the accepted evidence, I find that:
(1) The deceased was a beneficial owner of the half share of the
Property;
(2) There was a joint letting of the Property to the Company prior to
C
November 1991 whereby the deceased received half share of the
rent;
(3) After November 1991, the joint letting continued;
(4) The Company was and is in continued occupation of the Property
D since 11 November 1991;
(5) The Company was and is continuing to pay rent for the Property
since 11 November 1991;
(6) The rent for 1996 and 1997 were $18,000 per month;
E (7) The rent from 1999 onwards is $18,000 per month;
(8) The deceased’s half share of the rent since 11 November 1991 was
received by the defendant.
Equitable Accounting
F
87. The position of joint tenant or tenant in common at common law is
stated in Sir Edward Coke’s Commentary On Littleton (1823) at 172a and
200b, as cited in Henderson v Eason (1851) 17 QB 701, 707-8, 117 ER
1451, 1453:
G
If there be two joint tenants or tenants in common of land, and the one make
the other his bailiff of his moiety, he shall have an action of account against him
as bailiff, and so are the books to be intended, that speak of an action of account
in that case.
H
But although one tenant in common or joint tenant without being made bailiff
take the whole profits, no action of account lieth against him; for in an action
of account he must charge him either as guardian, bailiff, or receiver, as hath
been said before, which he cannot do in this case, unless his companion
constitute his bailiff.
I
88. In 1705, the Administration of Justice Act, s 27, often cited as the
Statute of 4 & 5 Anne c 3 s 27, gave a joint tenant or tenant in common
at law the right to an account against the other co-owners where they had
taken more than their fair share of the rents and profits of the land. This
279
statute was repealed by the Law of Property (Amendment) Act 1924, s 10. A
The statute was originally applied in Hong Kong by s 3 of the Supreme
Court Ordinance 1844. However, it was repealed in 1966 by non-adoption
under the Application of English Law Ordinance (Cap 88).
89. Mr Chan submitted that even without the Statute of Anne, there has
always been a duty to account as between co-owners in equity. He relied B
on Strelly v Winson (1685) 1 Vern 298, 23 ER 480 for the proposition.
90. In Strelly v Winson, there being three part-owners of a ship, one of
them refuses to fit out the ship to sea, and the others do it without his
consent, and the ship is lost in the voyage, it was held by the Lord Keeper
of the Great Seal in the Court of Chancery that: C
In this case the loss of the ship shall be equally borne by all three; for though
one of the partners did not consent to fitting out of the ship, yet he would have
been entitled to one third part of the freight, and in this court should have had
an account of the third part of the profits of that voyage: (2), and so where one D
tenant in common receives all the profits, he shall account in this court as bailiff
to the other two for two-thirds.
91. Mr Chan also relied on Leake v Cordeaux (1856) 4 WR 806 where
a tenant in common of a farm brought a suit in equity against his co-tenant,
who had alone occupied it and cultivated, for a moiety of the profits. On E
appeal, Turner LJ said that:
It was clear from the case decided before the statute of Anne, and from Turner
v. Morgan, which had been decided subsequently, that a tenant in common
always had a remedy in this court against his co-tenant by a bill for account. F
The only question was on what principle the account should be taken, which
question was not now before the Court.
92. Mr Yin submitted that the remedy of accounting is an ancillary
jurisdiction in equity. It is either ordered in aid of an equitable right, eg an
account given by a trustee to a cestui que trust, or ordered in aid of a legal G
right, eg the duty to account by an agent to the principal. He referred to
Snell’s Equity (13th Ed, 2000) at 44-09 on accounting between co-owners:
(a) Background. Where land is held by several co-tenants they are all, as
between themselves, entitled to possession of the whole. Hence there is no H
remedy in trespass against an occupying co-owner unless he has ousted or
excluded the other or others. There is no exclusion if one merely stays away,
allowing the other to occupy a house or take all the profits whether by way of
rents, crops or minerals. Where one ousts the other or others, he will be liable
for an occupation rent. Where there is no ouster there is no such liability in the I
absence of any contract to pay rent or other assumption of liability. If a
co-tenant was dissatisfied with the situation, his remedy was to apply to the
court for an order compelling partition. From 1868 the court was empowered,
in the alternative, to order a sale of the jointly-owned land.
280
[2006] 1 HKC Fung) 45
A (b) Accounting. A statute of 1705 gave a joint tenant or tenant in common at

law a right to an account against the other co-owners where they had taken
more than their fair share of the rents and profits of the land. Courts of equity
would direct similar inquiries especially in the case of beneficiaries under
trusts. More significantly, in partition actions in which court of equity had
B exclusive jurisdiction, the court would inquire into the position between the
co-owners so as to adjust accounts between them consequent on making an
order for partition or sale. If it were found that one party was in occupation
to the exclusion of the other, the court would direct an inquiry as to the
occupation rent to be paid unless it were shown that the party not in
occupation could have enjoyed the right to occupy but chose not to do so
C voluntarily. Conversely, if the occupier has expended money in
improvements or repairs, the court will inquire into the amount of the
increased value as a result of such expenditure and give him credit for it. The
increase value is a charge on the land to be paid out of the proceeds before
division, but liability for an occupation rent is personal to the occupying
D co-owner and is not chargeable on the purchaser or mortgagee of his share.
The 1925 legislation abolished partition actions and imposed a trust for sale
on all form of co-ownership. A co-owner who wishes to terminate the joint
tenancy may seek an order for sale and as ancillary to the sale the court can
direct the same type of accounts as formerly in a partition action.
E 93. Mr Yin referred to Kennedy v de Trafford [1897] AC 180 where the
House of Lords held that there is no fiduciary relationship between tenants
in common of real estate as such. Nor can one tenant in common of real
estate by leaving the management of the property in the hands of his
co-tenant impose upon him an obligation of a fiduciary character. Lord
F Hershell said at p 186 that:
Dodson was an owner of this property – the owner of an undivided moiety, it
is true, but each owner of an undivided moiety is none the less truly an owner
– and Dodson in collecting those rents and profits collected them in the right
which he possessed as a co-owner of the property. He did not need agency or
G the appointment of agent to justify him in collecting those rents. If nothing had
ever passed between the two co-owners which constituted an authority from the
one to act for the other, his right to collect those rents would not have been one
jot or one tittle less than it was. No doubt an arrangement was come to that these
rents when collected were to be paid into a bank upon which both the co-owners
H were to draw, but that was an arrangement that might have been put an end to
at any time. It was merely an arrangement which was come to by voluntary
agreement between the two co-owners. Each co-owner would have an
obligation to account to the other in respect of any rents he collected or moneys
he received under it.
I 94. In the Australian textbook Meagher, Gummow and Lehane’s
Equity: Doctrine and Remedies (4th Ed, 2002) at 25-605, the authors dealt
with the right to an account by joint tenants or tenants-in common of realty
or personalty inter se, where one co-owner contributes more than the other
co-owners to the property owned by them all, or one co-owner receives
281
more profits from the property than his colleagues. The Statute of Anne A
has also been repealed in New South Wales. The learned authors stated
that:
It was in these circumstances that a statutory remedy of account was given to

all co-owners against their colleagues: 4 & 5 Anne c.3 s.27. Apart from statute, B
in equity there is ancient but frequent forgotten authority that one co-owner
could be sued in account, but perhaps at the suit of all the others: Strelly v.
Winson (1685) 1 Vern 297 (sic.); 23 ER 480. The only other remedy was also
provided in equity, where an account lay as incidental to a suit for partition:
Swan v. Swan (1819) 8 Price 518, 146 ER 1281; Pascoe v. Swan (1859) 27 Beav C
508, 54 ER 201; Leigh v. Dickenson (1884) 15 QBD 60, [1881-5] All ER Rep
1099; or in proceedings analogous thereto: for example, suits to regulate the
distribution of the proceeds of the co-owned property after a mortgagee’s sale:
Re: Cook’s Mortgage [1896] 1 Ch 923. It is in this category that one should
place the decision of Millet J (as he then was) in Re Pavlou (a bankrupt) [1993]
3 All ER 955, [1993] 1 WLR 1406. D
95. It is noted that Meagher, Gummow and Lehane observed that the
equitable jurisdiction referred to in Strelly vWinson was somewhat
shadowy. One of the authors, Meagher JA of the Court of Appeal of New
South Wales, commented in Forgeard v Shanahan (1994) 35 NSWLR 206 E
that Strelly vWinson was an Admiralty case wandering into the Chancery
Courts, a solitary and curious decision which might suggest the contrary
to the other authorities.
96. In Forgeard v Shanahan, there was an application for appointment
of a trustee for sale under s 66G of the Conveyancing Act 1919 (NSW). F
(Section 66G empowers the court to order statutory trusts for sale or
partition of property held in co-ownership.) The plaintiff sought to make
the defendant accountable for an occupation fee, and the defendant sought
an allowance in her favour for the expenditure incurred by her. This raises
the question of what rights one co-owner has against another, particularly G
when one has been in occupation and the other has not. Meagher JA (with
whom Mahoney JA agreed) summarized the position as follows:
1. Since both joint tenants and tenants in common have joint possession of the
land in which they have the estate, it was a settled rule of law that the H
possession of any one of them was the possession of the other of them, so as
(for example) to prevent the statutes of limitation from affecting them; nor did
the bare receipt of all the rents and profits by one operate as an ouster of the
other: Ford v Grey (1703) 1 Salk 285, 91 ER 253, 6 Mod 44, 87 ER 807.
I
2. It follows that, where one co-owner is in occupation and the other not, but
there has been no actual ouster or exclusion by the former of the latter, the
law treats the latter simply as someone who has chosen not to exercise his
legal right to occupy the land.
282
[2006] 1 HKC Fung) 47
A 3. It also follows that a co-owner not in occupation was normally virtually

without remedy. He could not sue in trespass unless there was an ouster
(Creswell v Hughes (1862) l H & C 421, 158 ER 950). In the case of
personalty, he could not bring trover, absent ouster (Jacobs v Seward (1872)
LR 5 HL 464), and even the secret removal of chattels by one co-owner for
the purpose of selling them and applying them to his own use, did not amount
B
to a conversion or confer any right on a co-tenant to sue in trover: Jones v
Brown (1856) 25 LJ (Ex) 345. A co-owner out of occupation could not even
recover his share of rents and profits if the co-owner in occupation
appropriated them to himself; no action of account lay either at law or in
equity: Henderson v Eason (1851) 17 QB 701, 117 ER 1451 at 1457 per
C Parke B.
4. Apart from statute, a co-owner out of occupation had remedies at law in two
situations, and no more. If he had been ousted, he could bring ejectment and
mesne profits: Goodtitle v Tombs (1770) 3 Wilson 118, 95 ER 965; Luke v
D Luke (1936) 36 SR (NSW) 310; Dennis v McDonald [1982] 2 WLR 275. If,
on the other hand, his co-owner were in occupation by agreement that
co-owner became an agent or bailiff and rendered himself liable in a common
law action of account. In either case (i.e. of ouster or occupation by
agreement) he would be liable for rents actually received and possibly also for
E an occupation fee.
5. Apart from Statute, in equity the plight of a co-owner not in occupation was
little better. There did not seem to be any action which would render a
co-owner in occupation liable to refund any rents received, much less liable
F for an occupation fee. It is true that there is a solitary and curious decision in
1685 which might suggest the contrary. That case is Strelly v Winson (1685)
1 Vern 297, 23 ER 480, an Admiralty case which seems to have wandered into
the Chancery Courts. In the course of the judgment the Lord Keeper said: ‘and
so where one tenant in common receives all the profits, he shall account in this
court as bailiff to the other two for two-thirds’, a proposition which has never
G been relied on, or even noticed, in any case decided since that date.
6. In 1705 things improved a bit with a statute of Anne. That statute is properly
cited as 4 & 5 Anne c 3 s 27, although often referred to as 4 Anne cl6 s27.
Insofar as it is here relevant it provides:
H
‘And from and after the said first day of Trinity term shall and may be
brought… by one joint tenant and tenant in common his executors and
administrators against the other as bailiff for receiving more than comes to his
just share or proportion and against the executor and administrator of such
I joint tenant or tenant in common.’
Thereafter, as far as rents actually received were concerned, a non-occupying

co-owner had a statutory right of action both at law and in equity, which caused
the courts no problem subject to occasional disputation about what constituted
283
an accountable ‘rent’: see, for example, Wheeler v Horne (1851) Willes 208, A
125 ER 1135 and Squire v Rogers (1979) 27 ALR 330 at 343.
7. In New South Wales the Statute of Anne although formerly available, was
repealed by the Imperial Acts Application Act, 1969, a piece of legislation
recommended by a Law Reform Commission. It is a neat illustration of the B
havoc which can be wrought by high-minded but ignorant people, putting
litigants in New South Wales back into the position they would have been in
before 1705 in England.
8. So much for rents actually received. Turning to the liability of a co-owner in C

occupation to pay an occupation fee, the position at law is fairly clear. He was
not liable unless he excluded his co-owner, in which case he rendered himself
liable in ejectment and for mesne profits, or if he constituted himself a bailiff,
in which event he would be liable in an action of account, like any other bailiff:
In re Tolman’s Estate (1928) 23 Tas LR 29 at 31; Rees v Rees [1931] SASR 78
at 80-81. Indeed, the whole bias of the law against making a co-owner in D
occupation liable to account is precisely based on the rationale that if such a
liability were to exist a co-owner could, by abstaining from entering into
occupation, turn his co-owner into an involuntary bailiff. As far as equity is
concerned, an occupation fee will be exacted in at least two circumstances:
first, in a partition suit (or related litigation): if there has been an exclusion, the E
tenant in occupation will be charged with an occupation fee: see, for example,
Pascoe v Swan (1859) 27 Beav 508, 54 ER 201: this is an example of equity
following the law; and secondly, if the owner in occupation claims an
allowance in respect of improvements effected by him, equity will permit such
an allowance only on terms that he is accountable for an occupation fee this is
F
an example of he who comes to equity having to do equity: see Teasdale v
Sanderson (1864) 33 Beav 534, 55 ER 476.
97. In paras 9 to 14, Meagher JA dealt with the principles relating to the
claim of an allowance for improvement and its variation and the set-off
against an occupation fee, and his Lordship continued: G
15. All the above principles are applied in partition actions, and cannot be relied
on elsewhere, except in administration actions: Lawledge v Tyndall [1896] 1 Ch
923; Boulter v Boulter (1898) 19 LR(NSW) Eq 135; and in other cases where
there is a fund in court eg. because of a resumption: Brickwood v Young (1905)
H
2 CLR 387. They should also be applied, as Mr Harris argued, in cases where
the court decrees sale under section 66G of the Conveyancing Act, 1919. Sale
and partition are true alternatives, and should, mutatis mutandis, be governed by
the same principles.
98. Mr Yin echoed the point that Strelly v Winson was an Admiralty I
case wandering into the Chancery Courts and referred to Green v Briggs
(1847) 6 Hare 393 for the proposition that the law relating to the earnings
of a ship, whether as freight, cargo or otherwise, follows the general law
of partnership. Sir James Wigram VC said at pp 402-3:
284
[2006] 1 HKC Fung) 49
A Holderness v. Shackels (8 B. & C. 612) is a case in point. The Court

distinguished between the ship itself and her earnings; and held in that case that
although part-owners were tenants in common of the ship, they were jointly
interested in the use and employment of the ship, and that the law as to earnings
must follow the law in partnership cases. And in Ex parte Hill the
B Vice-Chancellor said, ‘If there had been no sale the creditors would have had
no lien on the ship, because that was not joint property; but the earnings of the
ship would have been joint property, and liable to the joint creditors, not from
any doctrine peculiar to the earnings of a ship, but on the general principle
applicable to the joint property of every partnership’ (1 Madd. 66).
C 99. Mr Chan referred to two Australian cases which have acted on the
authority of Strelly v Winson. In Ryan v Dries [2002] NSWCA 3, Hodgson
JA of the Court of Appeal of New South Wales said:
63. There is a quite detailed discussion of the principles by Meagher JA in
Forgeard v Shanahan (1994) 35 NSWLR 206 at 221-6. Mahoney JA (at 219)
D
agreed in the principles stated by Meagher JA. However, some of the statements
of principle in that case were obiter only, and in some respects I am not in
complete agreement with them. Because some of these principles are relevant
to this case, I should indicate the areas where I have some disagreement.
E
64. At 222, Meagher JA said that, apart from statute, there did not seem to be
any action by which one co-owner could recover a share of rent received by
the other co-owner. He referred to the case of Strelly v Winson (1685) 1 Vern
297, 25 ER 480, which decided otherwise, but pointed out that this case had
not subsequently been relied on or noticed. He noted that the same result was
F provided by a 1705 statute; but that this statute had been repealed in New
South Wales by the Imperial Acts Application Act 1969, so that the remedy
provided by the 1705 statute was not available in New South Wales.
65. For my part, with respect, I would be prepared to act on the authority of
G Strelly v Winson, and would treat its lack of subsequent celebration as
explicable by reason of the passing of the statute just twenty years later. For
my part, I cannot accept that a court exercising equitable principles would not
treat a co-owner of property who had collected rents paid for the use of that
property as having done so as an agent for all co-owners and liable to account
H to other co-owners. I would respectfully agree with the statement made in the
1670s in Lord Nottingham’s ‘Manual of Chancery Practice’ and
‘Prolegomena of Chancery and Equity’ (D.E.C. Yale ed., Cambridge
University Press, 1965) at p.214 that in such a case ‘equity construes all
receipts to the common profit, and that without great strain’.
I
66. At 224, Meagher JA said that a co-owner who has effected repairs and
maintenance to a co-owned property, as distinct from making improvements
cannot have any allowance, and he referred inter alia to Leigh v Dickenson
(1884) 15 QBD 60. That case did decide, as noted in the headnote, that a
co-owner of a house who expends money on ordinary repairs has no right of
285
action against another co-owner. However, the judgment of Cotton LJ at 67 A

makes it clear that, if the value of a property is increased by repairs, a
co-owner who paid for the repairs is entitled, in partition proceedings, for an
allowance in respect of that increase in value (that is, treating repairs as no
different from improvements). Brett LJ at 65 noted that no claim for partition
was made in that case, and while Lindley J did not refer to partition, he said B
he was of the same opinion as the other judges.
67. At 224, Meagher JA also said that the principles can only be applied in
partition actions, administration actions, where there is a fund in court, and
where the court orders sale under section 66G of the Conveyancing Act. I note
C
that in (Luke v Luke (1936) 36 SR(NSW) 310) at 318, Long Innes CJ in Eq
expressed the view that the maxim requiring the seeker of equity to do equity
is not limited to suits for partition; and in my opinion, the principles may be
applicable in a case where one party claims an interest in property by reason
of a resulting trust or constructive trust, and the court is asked to quantify that
interest. D
100. The other case is Hitchins v Hitchins (1057/97 NSW Supreme
Court, 11 December 1998), where Bryson J referred to Forgeard v
Shanahan and said at pp 5-6 of the judgment:
E
At 223 Meagher JA said ‘Indeed, the whole bias of the law against making a
co-owner in occupation liable to account is precisely based on the rationale that
if such a liability were to exist a co-owner could, by abstaining from entering
into occupation, turn his co-owner into an involuntary bailiff.’ This observation
sufficiently explains the common law rule stated by Lord Coke: a co-owner
could not impose responsibility for looking after his interests on another F
co-owner simply by staying away from the land, but there was such
responsibility to a co-owner who was actively excluded, or on a co-owner who
in some way undertook the responsibility.
The law as stated by Lord Coke was taken in later times to have been the law G
in 1685 when Strelly v Winson (1685) 1 Vernon 297, 23 ER 480, on which
Meagher JA commented at 222, was decided. In Henderson v Eason, Strelly
v Winson although not noticed, in the judgment, conforming with Meagher
JA’s comment at 222, was the subject of notice in the argument and there
disposed of; see QB 715-716, ER 1456 where the anonymous case reported H
at Skinner 230 seems to have been treated as the same case as Strelly v
Winson and was disposed of with Parke B’s observation that ‘… by the
context it seems to be grounded upon a supposed consent’.
Meagher JA showed at paragraphs 6 and 7 that the Common Law was altered
I
by the Administration of Justice Act 1705, 4 & 5 Anne c.3 s 27 which enabled
a joint tenant and a tenant in common to bring an action of account against
another as bailiff ‘for receiving more than comes to his just share or
proportion’. The Law Reform Commission addressed the Administration of
Justice Act 1705 in their report on the application of the Imperial Acts LRC
286
[2006] 1 HKC Fung) 51
A 4 of November 1967 and recommended the re-enactment of some of its

provisions, now found in s 34 of the Imperial Acts Application Act. Their
report at page 103 shows that they regarded s 27 as procedural only; they said
‘The more modern procedure is by suit in Equity. This provision is
unnecessary.’ The Commissioners were distinguished lawyers: Mr justice
B Manning then a judge of this Court and Mr Hector Scott, for long Deputy
Crown Solicitor and deeply learned with a reputation for caution and deep
research.
In my opinion where one co-owner in any way, either by express agreement

or impliedly from conduct, undertook the task of collecting rents on behalf of
C co-owners and distributing them he was, in Lord Coke’s expression, a bailiff
or in more modern language he acted on behalf of the co-owners and was at
all times liable to an action at law for a share, and the effect of the Statute of
Anne in that case was no more than procedural, even though it had a
substantive effect in some cases. In my opinion its repeal has no continuing
D effect on procedure, because since 1972 there no longer is any procedure in
this Court which could be recognized as an action for account at Common
Law. The effect of its repeal on rights of substance, of which Meagher JA
spoke so deprecatingly at paragraph 8, is not an effect which relates to the
rights of the present parties. Neither the Statute of Anne nor its repeal had any
effect on equitable claims.
E
101. It is noted that in none of the cases cited by Mr Chan that the claim
for accounting was based simply on the incidence of co-ownership. In
Ryan v Dries, the court was concerned with the quantification of an
interest held on resulting trust. In Hitchins v Hitchins, the co-owners were
F in partnership and one managed fund for the other co-owners. As Bryson
J said, the co-owner who in some way undertook the responsibility was
accountable as fiduciary. The duty to account seems to be grounded on a
supposed consent.
102. In Leake v Cordeaux, an undivided moiety of the estate at Bilsby,
G Lincolnshire was held by John Taylor, and another undivided moiety was
held on trust for sale for his sister Frances Taylor. John Taylor was in
occupation of the estate and cultivated it for his own benefit. The estate
was sold by Cordeaux, the trustee by succession. John Taylor made a
claim against the estate of Frances Taylor for money expanded by him for
H the benefit of the estate. The plaintiff took out letters of administration de
bonis non of the estate of Frances Taylor, and instituted the suit against
Cordeaux to pay over the purchase money, so that it might be ascertained
what was due to John Taylor for improvement, and that he might be
charged with an occupation rent. Hence, the account was taken when the
I relationship between the tenants in common came to an end, and the
position was akin to partition.
103. With due deference to Meagher JA, I adopt his analysis on the
duty to account between co-owners for rent received in Forgeard v
Shanahan. Upon the repeal of the Statute of Anne, a co-owner out of
287
occupation has remedies at law in two situations: damages for occupation A

rent for ouster, or an account if the other co-owner has rendered himself
liable as agent or bailiff. Agency and ouster aside, the duty to account will
arise in partition actions, administration actions, in other cases where there
is a fund in court, or where the court makes an order for sale as an
alternative to partition, or as suggested by Hodgson JA in Ryan v Dries, an B
account for a share of rent where one party claims an interest in property
by reason of a resulting trust or constructive trust, and the court is asked
to quantify that interest.
104. Strelly v Winson seems to be in opposite to the mainstream of the
authorities. The statement in Strelly v Winson that ‘so where one tenant in C
common receives all the profits, he shall account in this court as bailiff to
the other’ seems to have loomed larger than its fact that the part owners of
a ship were partners of the venture of the ship.
105. Hence, I find that there is no duty to account for rent received by
D
one co-owner arising simply by reason of the incidence of co-ownership.
106. Be that as it may, Mr Chan submitted that on the facts of this case,
an agency should be implied upon the defendant. I shall consider this
point.
E
Agency
107. Bowstead & Reynolds on Agency (17th Ed, 2001) at 2-030 stated
that:
F
Agreement between principal and agent may be implied in a case where one
party conducted himself towards another in such a way that it is reasonable for
that other to infer from that conduct consent to the agency relationship.
108. Mr Yin submitted that there was no agency between the deceased
and the defendant before November 1991 as the Company paid the rent to G
the deceased directly. Thereafter, the defendant could not have been an
agent as he never consented to it. On the contrary, he denied that the
deceased was either a beneficial owner, or had ever received any rent from
the Company. How then could he be taken to have collected rent on behalf
of the deceased? Further, the deceased wrote to the Company demanding H
the payment of the arrears of rent, and purportedly to increase the rent for
his half share. These acts were inconsistent with any agency.
109. Mr Chan submitted there was a joint letting by the deceased and
defendant after November 1991 (as actually found by me). Hence, the
Company continued to be liable to pay rent to the deceased. As from I
November 1991 to 1998, the Company’s audited accounts recorded full
payment of the rent on the Property without provision for any arrears due
to the deceased. Hence, as far as the Company was concerned, the debt to
the deceased had been fully discharged. As a matter of fact, all the rent was
288
[2006] 1 HKC Fung) 53
A received by the defendant since November 1991. As the Chairman and

majority shareholder and controlling mind of the Company, the defendant
must be taken to be ad idem in knowledge with the Company. The
Company could not have recorded in the accounts that it had made full
payment of the rent on the Property if the defendant had not collected the
B rent on behalf of the deceased and giving discharge to the Company on
behalf of the deceased. Hence, the defendant cannot be allowed to
approbate and reprobate, and must be held to have collected the rent as an
agent of the deceased.
110. Mr Yin submitted that even assuming that the deceased accepted
the instruction from the Company to pay the deceased, it only made the
C defendant an agent of the Company, but not an agent of the deceased.
111. I agree with the submission of Mr Chan. As I have found against
the defendant on the resulting trust and personal subsidy of $7,500, the
truth is the defendant knew from the beginning that the deceased was a
beneficial owner of the half share and the deceased had been receiving half
D of the rent before November 1991. He cannot be allowed to gainsay the
position otherwise. Insofar as the defendant was trying to do so, it must
have been his lame excuse to hold on to the rent payable to the deceased.
This evidence must be rejected as contrary to the truth.
112. The defendant did not merely accept the instruction from the
E Company to pay the deceased. It had given discharge to the Company on
behalf of the deceased, such that the Company could report in the audited
accounts that the rent on the Property was fully paid. Hence, the defendant
must be taken to be an agent of the deceased.
113. Granted that the deceased did write to the Company demanding
the arrears and increase of rent. However, there is nothing inconsistent
F given that he must have regarded the defendant as controlling the
Company.
114. Hence, I find that the defendant has been an agent of the deceased
in collecting the rent since 11 November 1991. The defendant is liable to
account to the deceased. However, this is not the end of the matter,
G because the deceased’s claim is subject to a limitation period of six years,
unless the claim is proprietary as opposed to merely personal in nature.
Constructive trust
115. Mr Chan submitted that the defendant was a constructive trustee in
H collecting the rent as agent for the deceased.
116. Bowstead & Reynolds(op cit) at 6-040 deals with when an agent
holds for principal as trustee:
When agent holds for principal as trustee. The analogy with trust would
suggest first, that when an agent holds title to money or other property for his
I principal, he always does so (in situations where the principal does not himself
own it) as trustee. This would often be impractical and has never been the rule.
It is perfectly possible for property so held, especially money, to be the agent’s
own, and mixed with his own assets subject only to a duty to transfer or account
for it to his principal. Equally however he may certainly hold as trustee.
289
Sometimes the answer turns on the contract between principal and agent. It is A
clear in this context and in general that the existence of a contractual
relationship of debtor and creditor between the parties does not prevent the
existence of a simultaneous trust relationship, or a fiduciary relationship of a
less onerous nature involving nevertheless that certain money or property is
held on trust. Thus it may be provided expressly between principal and agent B
that money received is so held. At other times the intention to create a trust may
be inferred; the matter turns on the objective interpretation, according to general
principles, of the intentions of the parties. It is sometimes said that there is a
prima facie duty on an agent to keep the principal’s money and property
separate; but it may be that even this is overstated…
C
117. Insofar as Mr Chan is relying on a constructive trust to avoid the
application of the statute of limitation, it is necessary to distinguish
between constructive trust in the true or institutional sense and
‘constructive trust’ in the remedial sense. A claim based on the former is
proprietary in nature and is not barred by the lapse of time. The statute of D
limitation has been held to apply to the later by analogy.
118. Section 20(1) of the Limitation Ordinance provides that:
No period of limitation prescribed by this Ordinance shall apply to an action by

E
a beneficiary under a trust, being an action–
(a) in respect of any fraud or fraudulent breach of trust to which the trustee
was a party or privy; or
(b) to recover from the trustee trust property or the proceeds thereof in the F
possession of the trustee, or previously received by the trustee and converted
to his use.
119. On the other hand, s 4(7) of the Limitation Ordinance provides
that the general period of limitation of six years in actions of contract or
G
on tort, etc may be applied to other equitable relief by analogy:
This section shall not apply to any claim for specific performance of a contract
or for an injunction or for other equitable relief, except in so far as any
provision thereof may be applied by the court by analogy in like manner as the
corresponding enactment contained in the Limitation Act 1980 (1980 c. 58 H
U.K.) is applied in the English Courts.
120. In Paragon Finance plc v DB Thakerar & Co (a firm) [1999] 1 All
ER 400, Millet LJ (as he then was) said at pp 408j to 409g:
I
Regrettably, however, the expressions ‘constructive trust’ and ‘constructive
trustee’ have been used by equity lawyers to describe two entirely different
situations. The first covers those cases already mentioned, where the defendant,
though not expressly appointed as trustee, has assumed the duties of a trustee
by a lawful transaction which was independent of and preceded the breach of
290
[2006] 1 HKC Fung) 55
A trust and is not impeached by the plaintiff. The second covers those cases where
the trust obligation arises as a direct consequence of the unlawful transaction
which is impeached by the plaintiff.
A constructive trust arises by operation of law whenever the circumstances

B are such that it would be unconscionable for the owner of property (usually
but not necessarily the legal estate) to assert his own beneficial interest in the
property and deny the beneficial interest of another. In the first class of case,
however, the constructive trustee really is a trustee. He does not receive the
trust property in his own right but by a transaction by which both parties
intend to create a trust from the outset and which is not impugned by the
C plaintiff. His possession of the property is coloured from the first by the trust
and confidence by means of which he obtained it, and his subsequent
appropriation of the property to his own use is a breach of that trust…
The second class of case is different. It arises when the defendant is

D implicated in a fraud. Equity has always given relief against fraud by making
any person sufficiently implicated in the fraud accountable in equity. In such
a case he is traditionally though I think unfortunately described as a
constructive trustee and said to be ‘liable to account as constructive trustee’.
Such a person is not in fact a trustee at all, even though he may be liable to
E account as if he were. He never assumes the position of a trustee, and if he
receives the trust property at all it is adversely to the plaintiff by an unlawful
transaction which is impugned by the plaintiff. In such a case the expressions
‘constructive trust’ and ‘constructive trustee’ are misleading, for there is no
trust and usually no possibility of a proprietary remedy; they are ‘nothing
more than a formula for equitable relief’: Selangor United Rubber Estates Ltd
F v Cradock (No 3) [1968] 2 All ER 1073 at 1097, [1968] 1 WLR 1555 at 1582
per Ungoed-Thomas J. …
The importance of the distinction between the two categories of constructive

trust lies in the application of the statutes of limitation. Before 1890
G constructive trusts of the first kind were treated in the same way as express
trusts and were often confusingly described as such; claims against the trustee
were not barred by the passage of time. Constructive trusts of the second kind
however were treated differently. They were not in reality trusts at all, but
merely a remedial mechanism by which equity gave relief for fraud. The
H Court of Chancery, which applied the statutes of limitation by analogy, was
not misled by its own terminology; it gave effect to the reality of the situation
by applying the statute to the fraud which gave rise to the defendant’s liability:
see Soar v Ashwell [1893] 2 QB 390 at 393, [1891-4] All ER Rep 991 at 993
per Lord Esher MR:
I
If the breach of the legal relation relied on … makes, in the view of a Court
of Equity, the defendant a trustee for the plaintiff, the Court of Equity treats
the defendant as a trustee … by construction, and the trust is called a
constructive trust; and against the breach which by construction creates the
trust the Court of Equity allows Statutes of Limitation to be vouched.
291
121. In Coulthard v Disco Mix Club Ltd [2000] 1 WLR 707, Deputy A
Sher QC said at 730B-C:
Now, in my judgment, the true breaches of fiduciary duty, i.e. the allegations of
deliberate and dishonest under-accounting, are based on the same factual
allegations as the common law claims of fraud. The breaches of fiduciary duty B
are thus no more that the equitable counterparts of the claims at common law.
The court of equity, in granting relief for such breaches would be exercising a
concurrent jurisdiction with that of the common law. I have little doubt but that
to such a claim the statute would have been applied.
122. Mr Chan submitted that the defendant in receiving the deceased’s C
rent on his behalf owed him a fiduciary duty, and was liable to him as a
constructive trustee (of a real constructive trust of the first kind), as there
could not be any contemplation that the defendant could use the
deceased’s rent as part of the defendant’s cash flow, nor was the
relationship between the deceased and the defendant a commercial one D
(they were just brothers) in relation to the defendant’s collection of the
deceased’s rent on behalf of the deceased.
123. Mr Yin submitted that a constructive trust which give rise to
proprietary relief cannot arise in the absence of an intention to create a
trust. E
124. In Secretary for Justice v Hon Kam Wing & Ors [2003] 1 HKLRD
524, where the Government claimed under a constructive trust the bribe
received by a civil servant, Deputy Judge Barma SC (as he then was) said
at 537E-G:
F
I would accept that most trusts arise as the result of some agreement or
understanding between the trustee and some other person (not necessarily the
beneficiary – in the classic case of an express trust, the agreement is between
the trustee and the settlor, who may not be a beneficiary, and the beneficiaries
may never have been consulted in relation to the setting up of the trust). G
However, it does not seem to me that every trust must arise in this way. The
present case would appear to be one in which there was no consensus or
agreement as to the creation of the trust, but the trust seems to me nonetheless
to be a real one, in which Hon is properly to be described as a trustee for the
Government.
H
125. And his Lordship held that the trust was a real one and was not
time-barred.
125. I have already found that the defendant was an agent of the
deceased in receipt of the rent paid by the Company to the deceased after
11 November 1991. I proceed to find that the defendant was a constructive I
trustee in the real or institutional sense for such rent. Insofar as the
defendant had collected those rent from the Company, it was his duty to
hand them over to the deceased as a conduit. There was no occasion to
suggest that the defendant could use the money first before paying the
292
[2006] 1 HKC Fung) 57
A deceased. True that the Company in the past might not have paid the
deceased promptly by month, but it is one thing for the Company to retain
the money before payment to the deceased, and an entirely different matter
for the defendant to retain it after payment by the Company as recorded in
the audited accounts. Hence, the plaintiff’s claim is not statute-barred.
B 126. By reason of my conclusion on constructive trust, it is not
necessary for me to examine Mr Chan’s contention of the primary trust
under Barclays Bank Ltd v Quistclose Investments Ltd [1970] AC 567, or
under money had and received and other claims of restitution.
C Conclusion
127. In the premises, I hold that the defendant is liable to account to the
deceased’s estate the Collected Rent, at the rates I have found above.
128. As I have not been addressed on tracing of the Collected Rent into
D other properties, I shall not order any consequential relief.
129. I order that the defendant do pay interest at judgment rate from the
date of the writ.
130. I make an order nisi that subject to any costs order made
previously, the defendant do pay the costs of the action to the plaintiff, to
E
be taxed if cost agreed.
Reported by PY Lo
293
[2012] 5 HKLRD 637
Khan
and
Mansoori
————
(Court of First Instance)
(High Court Action No 1380 of 2012)
————
Deputy Judge Sakhrani in Chambers

29 October 2012
Land law — co-ownership — tenant in common — partition — order for

sale sought — compensation for ouster — occupation rent
Civil procedure — interlocutory injunction — ouster — whether serious
issue to be tried — whether damages adequate remedy — balance of
convenience
⼟土地法 — 共同擁有權 — 分權共有 — 分劃 — 申索售賣令 — 為驅趕⽽而
作出的補償 — 佔⽤用租⾦金金
⺠民事訴訟程序 — 非正審強制令 — 驅趕 — 是否有須予認真處理理的爭論
點須作審訊 — 損害賠償是否適當的補救 — 公正條件的平衡
P and D1–2 were brothers and tenants in common in equal shares
of a workshop at which C, a business of which P and D1 were
partners, operated until recently. P lived in the USA and, since the
workshop was acquired in 2006, had visited it only twice. P fell out
with D1–2. In July 2012, without P’s knowledge, D1 changed C’s
registered address and also the lock to the workshop and refused P
access to it. P brought proceedings for the sale of the workshop
under the Partition Ordinance (Cap.352) and now sought an
interlocutory injunction to restrain D1 from denying him access to
and reasonable use of the workshop.
Held, dismissing the application, that:

(1) There was a serious question to be tried as to whether P was
a beneficial owner of the workshop or a mere nominee of
D1–2 as they alleged. (See para.9.)
(2) However, damages would be an adequate remedy should P
succeed at trial. Provided he established a right to enter the
workshop as a co-owner, he would be entitled to an
occupation rent for being ousted. There was no difficulty in
engaging experts for valuations of the market rent in order to
294
637 2012/12/6—15:34
assess such damages. Further, P had no real need to enter the

workshop pending trial. C’s registered address had been
changed to P’s residential address in Hong Kong and P had
no interest in two businesses which continued to operate at
the workshop (Tang Yin Ling v Wong Sai (unrep., HCMP
2527/1992, [1994] HKLY 720) applied). (See paras.14–17.)
Application
This was an application by the plaintiff for an interlocutory injunction
to restrain the defendant from ousting him from a property which
they co-owned. The facts are set out in the judgment.
Mr Chan Pak Kong, instructed by Eric Yu & Co, for the plaintiff.
Ms Janine Cheung, instructed by Dissanayake & Associates, for the
first defendant.

American Cyanamid Co v Ethicon Ltd [1975] AC 396, [1975] 2
WLR 316, [1975] 1 All ER 504
Tang Yin Ling v Wong Sai (unrep., HCMP 2527/1992, [1994]
HKLY 720)
Deputy Judge Sakhrani

1. These proceedings concern the property known as Workshop
Unit No 3, 12th Floor, Guardforce Centre, 3 Hok Yuen Street East,
Kowloon (the workshop).
2. The plaintiff, the first defendant and the second defendant,
who are brothers, are the registered co-owners of the workshop,
each holding a one-third share as tenants in common.
3. There has been a falling-out in the relationship between the
parties, with the plaintiff on one side and the first and second
defendants on the other side.
4. The plaintiff and the first defendant are also partners in a
business known as Gem Lustre Co (Gem Lustre) which, until
recently, carried on business at the workshop.
5. On 9 July 2012, the registered address of Gem Lustre was
changed by the first defendant to a residential address at Windsor
Mansion, Tsim Sha Tsui, without the knowledge of the plaintiff.
The first defendant also changed the lock to the workshop. The
plaintiff previously had a key to the workshop, but he was unable
to gain entry to the workshop after the lock had been changed.
6. The first defendant has refused to let the plaintiff enter the
workshop as from July 2012.
7. The plaintiff brings this action seeking an order for sale of
the workshop under the Partition Ordinance (Cap.352). He also
seeks an order against the first defendant prohibiting him from
295
637 2012/12/6—15:34
Khan v Mansoori
[2012] 5 HKLRD 637 Deputy Judge Sakhrani 639
having access to and using the workshop insofar as his use of the
same is reasonable and from doing any act to oust him from the
workshop. He also claims damages.
8. In the application before me by summons dated 6 August
2012, the plaintiff seeks an interlocutory injunction restraining the
first defendant from prohibiting him from having access to and using
the workshop insofar as his use of the same is reasonable and from
doing any act to oust him from the workshop.
9. On the evidence before the Court I am satisfied that there
is a serious question to be tried as to whether the plaintiff is a
beneficial owner of the workshop or whether he is a mere nominee
of the first and second defendants as they allege. This is a matter
to be resolved at trial. Suffice it to say, I am satisfied that there is
a serious question to be tried as to this.
10. I go on to consider the balance of convenience.
11. As to the balance of convenience, the governing principle
is that the court should first consider whether, if the plaintiff were
to succeed at trial in establishing his right to a permanent injunction,
he would be adequately compensated by an award of damages for
the loss he would have sustained as a result of the defendants
continuing to do what was sought to be enjoined between the time
of the application and the trial. If damages in the measure
recoverable at common law would be an adequate remedy and the
defendant would be in a financial position to pay them, no
interlocutory injunction should normally be granted however strong
the plaintiff ’s claim appeared to be at that stage (per Lord Diplock
in American Cyanamid Co v Ethicon Ltd [1975] AC 396, 408).
12. The evidence shows that since the acquisition of the
workshop in September 2006 the plaintiff has only visited the
workshop twice, once in 2008 and the other occasion in 2010. It is
common ground that the plaintiff lives in the USA and he has not
been a frequent visitor to Hong Kong.
13. The registered address of Gem Lustre has already been
moved to the address where the plaintiff temporarily stays when he
is in Hong Kong. The evidence also shows that there are two other
businesses which are operating at the workshop, namely NB
Diamonds and AR Jewels. The plaintiff has no interest in these two
businesses.
14. The plaintiff asserts a right to enter the workshop as a
co-owner. He has been ousted by the first defendant from entering
the workshop as from July 2012. Despite Mr Chan’s submissions,
I am unable to see why damages would not be an adequate remedy
for the plaintiff should he succeed in his claims at trial. He would
then be entitled to damages for being ousted.
15. Where a co-owner ousts another co-owner from the
property they co-own, he will be liable for an occupation rent (see
296
637 2012/12/6—15:34
para.53 of the judgment of Woo J, as he then was, in Tang Yin

Ling v Wong Sai (unrep., HCMP 2527/1992, [1994] HKLY 720).
I do not see any difficulty in engaging experts to give their valuation
on market rent for the purpose of assessing damages in the event
the plaintiff succeeds at trial.
16. I would also observe that there is no evidence in the
material before me to suggest that the plaintiff has any real need to
enter the workshop between now and the time of trial. As I have
said, the registered address of Gem Lustre has already been moved
elsewhere to where the plaintiff resides when he is in Hong Kong.
The remaining businesses operating at the workshop are businesses
in which the plaintiff has no interest.
17. I am satisfied that damages would be an adequate remedy
for the plaintiff should he succeed at trial. That being so, I dismiss
the plaintiff ’s application by summons dated 6 August 2012.
Reported by Shin Su Wen
297
637 2012/12/6—15:34

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For hearing before the Moot Court of Final Appeal on 22 Feb 2021 at 1800 hours.

LIST OF AUTHORITIES FOR THE DAUGHTER

(In the order of submission)

1. Stack v Dowden [2007] UKHL 17, [2007] 2 AC 432

2. Lloyds Bank v Rosset [1991] 1 AC 107

3. Mo Ying v Brillex Development [2014] 3 HKLRD 224

5. Sky Heart Ltd v Lee Hysan Co Ltd (1997-98) 1 HKCFAR 318

6. Hong Kong Civil Procedure 2021, §E2/17/1

7. Re Superyield Holdings Ltd [2000] 2 HKC 90

8. British Airways Board v Lakers Airways Ltd [1985] AC 58

9. Clerk & Lindsell on Torts, 23rd Ed, §18-27 and §28-06

10. Snell’s Equity, 34th Ed, §§18-026, 18-033 and 18-034

12. Chen Yu Tsui v Tong Kui Kwong [2006] 1 HKC 23

13. Khan v Mansoori [2012] 5 HKLRD 637

The following cases are referred to in the opinions of their Lordships:

APPEAL from the Court of Appeal

A A constructive trust can arise by express agreement or by inference from

Their Lordships took time for consideration. F

25 April. LORD HOFFMANN

LORD HOPE OF CRAIGHEAD G

LORD WALKER OF GESTINGTHORPE

Lord Chancellor in 1966) rather than being circumvented by the rather A

A corresponding to their overall contributions. In a case about bene!cial

BARONESS HALE OF RICHMOND

How does this problem come about?

$$transcends all rights, legal or equitable"". That section 17 conferred any A

A Cohabitation"", in Alison Park, et al (eds), British Social Attitudes: Public

joint names without express declaration of the bene!cial interests. A

The applicable legal principles

A 60 The presumption of resulting trust is not a rule of law. According to

A Ch 638, described by Chadwick LJ as $$an important turning point"" and

66 However, Chadwick LJ went on to say at para 26, that: A

$$there is no reason in principle why the approach to the second

assumed to have intended for their bene!cial ownership. I also think it is A

Applying the law to the facts

payments necessary to keep it going. It is not surprising that the Court of A

anything a factor telling against the exercise of this discretion. I would A

Bene"cial ownership: some general points

A 101 The determination of the ownership of the bene!cial interest in a

thrown up by cases such as this, and it would be a disservice to the important A

Bene"cial ownership on acquisition: di›erential contributions

A applied) both historically and more recently. Eyre CB described it as a

Bene"cial ownership on acquisition: constructive trust B

A uncertain because it is unclear whether one considers a hypothetical

C Bene"cial ownership: events after the acquisition of the house

The payment issue

Solicitors: Attiyah Lone, Hammersmith; Walter Jennings & Son, Kentish

LLOYDS BANK PLC APPELLANTS

Land Registration—Overriding interest—"Actual occupation"—Semi-

A h u s b a n d a n d wife, t h e first a n d second defendants, wished

p The following additional cases were cited in argument:

APPEAL from the Court of Appeal.

Michael Crystal Q.C., Alastair Walton and Simon Browne-Wilkinson

Their Lordships took time for consideration.

29 March. LORD BRIDGE OF HARWICH. My Lords, the subject

Deputy Judge Eugene Fung SC

Land law — beneficial ownership — family home — property purchased

responsible for the family’s financial support, while W would be

Held, dismissing W’s action, that:

v Burns [1984] Ch 317, Grant v Edwards [1986] Ch 638,