Hong Kong has the lowest home ownership rate in the world, and the average home in the city costs as much as the average family earns in 16.7 years. Unsurprisingly, this concerning situation has led to a substantial number of disputes over landed properties.
One of the most common arguments to claim ownership of landed property is the common intention constructive trust.
Presumption of gift/advancement
Property disputes usually arise in a situation where one party has paid for all or part of the purchase price of a property, but for various reasons, the property is registered under another person's name. In such cases, equity imposes a presumption of resulting trust, meaning that the party who paid for the purchase price is presumed to hold the beneficial interest in the property.
However, this presumption is not absolute and can be rebutted or negated either by evidence of actual intention of the parties or by other presumptions. In cases involving property transfers between certain family members (such as transfers from husband to wife or from parents to children), the law presumes that the transfer was intended to be a gift to the recipient. Although this presumption of gift/advancement has been abolished or declined in some common law jurisdictions, it remains applicable in Hong Kong and is commonly relied on in family disputes on landed properties.
That said, the strength of the presumption of gift/advancement should not be overstated. As the Court of Final Appeal emphasized in Cheung Pui Yuen v Worldcup Investments Inc (2009) 12 HKCFAR 31: "The presumption of advancement is nothing more than an evidential tool; its weight varies with the circumstances of the case". Similarly, the Court of Appeal in Suen Shu Tai v Tam Fung Tai CACV 187/2013 also noted that "the presumption of advancement is rather a weak concept these days which can be rebutted on comparatively slight evidence".
In addition to family disputes, property disputes also arise between parties who are not related by blood. In such cases, the legal argument often centres on the concept of common intention constructive trust.
An oral promise or conduct can create an interest in a property
A common intention constructive trust arises when two parties (often in a relationship) have had a mutual intention of sharing the ownership of a property, even if that intention is not formally documented.
A recent case Leung Yiu Man v Chu Kuen [2024] HKCFI 2753 is yet another typical scenario where common intention constructive trust was considered by the Court:
The Plaintiff (Leung) and the Defendant (Chu) had an affair in the past, though they have never married. Leung claimed that he had a half interest in a flat registered solely in Chu's name, as he paid part of the purchase price for investment purpose and both parties had a common intention to share equal ownership of the flat at the time of purchase. Chu, on the other hand, denied the alleged common intention and asserted that Leung's financial contributions were mere gifts made out of love and affection.
The principles of common intention constructive trust are well-established. In the judgment, Deputy High Court Judge Kenneth Wong adopted the helpful summary by Coleman J in Lam Ka Kui v Choi Yuen Ling [2020] HKCFI 2647:
- Where a common intention constructive trust has arisen, ownership in the property is split into legal ownership and beneficial ownership. The trustee holds the legal title on trust for the beneficiary.
- Where a constructive trust is alleged to arise on the basis of the parties' common intention, it is the intention commonly held by the property owner and the plaintiff regarding their shared beneficial interests in the property that matters. The trust is constituted by the three elements of (i) the common intention, (ii) the plaintiff's detrimental reliance on their common intention, and (iii) the unconscionability of the property owner departing from it.
- The burden of proving each element of common intention, detrimental reliance and unconscionability is on the person seeking to show that the beneficial ownership is different from the legal ownership. The focus is on the intention of the parties at the time of acquisition of the asset. Contemporaneous conduct is inherently more likely to be a reliable indicator of intention, to be given greater weight, than are words and conduct after the event.
- Common intention can be expressed or implied. It can be deduced or inferred objectively from the parties' conduct. As a matter of common sense, it is easier to infer such an intention prior to the acquisition of property which results in an obvious change in legal ownership (rather than after such an acquisition where there is no change in legal ownership and a change in beneficial ownership is not otherwise apparent).
- In Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327, §§2.3-2.4, Cheung JA identified two situations where a common intention constructive trust may arise.
- The first 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. The finding of such an agreement or arrangement can only be based on evidence of express discussions between the partners, however imperfectly remembered and however imprecise their terms may have been.
- 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 mortgage instalment payments, will readily justify the inference necessary to the creation of a constructive trust."
In brief, the party who alleges a common intention constructive trust has the burden to prove that:
- There is a common intention between the parties that he/she shall have a beneficial interest in the property. The common intention can be express or inferred objectively from the parties' conduct.
- There has been detrimental reliance (such as contribution to the purchase price or mortgage payment of the property) based on the common intention; and
- It is unconscionable for the other party to depart from the common intention.
It is also stated in the judgment that in assessing the common intention of the parties, the modern approach is that the Court would adopt a holistic approach having regard to the context of the case.
Leung's claim eventually failed as he failed to discharge his burden of proving the existence of his alleged common intention. Based on the parties' testimony and the circumstantial evidence, the Judge preferred Chu's account of the events and concluded that the money advanced by Leung to Chu for the purchase of the flat was given out of love and affection.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
