CACV 107/2017
[2020] HKCA 148
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 107 OF 2017
(ON APPEAL FROM HCA NO. 1652 OF 2012)
________________________
BETWEEN
CHEUNG LAI MUI (張麗梅),
Plaintiff
and
CHEUNG WAI SHING (張偉城)
1st Defendant
CHEUNG WAI MIN (張偉冕)
2nd Defendant
CHEUNG CHI YUNG (張智勇)
3rd Defendant
________________________
Before:
Hon Lam VP, Cheung and Au JJA in Court
Date of Hearing:
20 December 2019
Date of Judgment: 5 March 2020
________________________
J U D G M E N T
________________________
Hon Lam VP:
1.1 I have the benefit of reading the judgment of Cheung JA in draft. I gratefully adopt the nomenclature, the background and the facts as set out in the judgment of Cheung JA. I agree that the claim of the 3rd defendant based on constructive trust has to be remitted to the court below. On proprietary estoppel, my view is that the claim should be remitted for determining if it was reasonable for the 3rd defendant to rely on the Common Understanding reached amongst Fuk, Wan and Kau after their demise and the question of relief. Further, in the event that the court below ruled against the 3rd defendant on the remitted issues concerning constructive trust and proprietary estoppel based on promise/assurance, then the court will need to consider estoppel by acquiescence or standing by along the line proposed by Cheung JA. I agree with Cheung JA that on the findings by the judge, the use and occupation of the Disputed Land by the 3rd defendant was with the permission of the legal owners. There is thus no viable claim of adverse possession. Though I agree that the judge had not satisfactorily addressed the basis for granting account of rent and it should be remitted, I respectfully differ from Cheung JA with regard to the scope of the remittance for that claim. I do not see any valid basis for permitting the plaintiff to rely on issues that have not been pleaded nor argued in the court below in assessing if an account should be ordered under the modern approach. For my part, given the limited scope of the outstanding issues, I see no reason why the case should not be remitted back to Wilson Chan J as opposed to having a retrial before another judge.
1.2 My reasons are as follows.
1.3 In respect of the claim based on constructive trust, I agree with Cheung JA that as a matter of law the cut-off date should be the date of death of the legal owners. Thus, if there were no detrimental reliance on the part of 3rd defendant by the time of the death of legal owners of the Disputed Land, he cannot assert a claim based on constructive trust.
1.4 The difference between a claim based on a common intention constructive trust and proprietary estoppel was highlighted by Lord Walker in Stack v Dowden [2007] 2 WLR 831 at [37],
“ I have to say that I am now rather less enthusiastic about the notion that proprietary estoppel and ‘common [intention]’ constructive trusts can or should be completely assimilated. Proprietary 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 satisfied 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 contrast, is identifying the true beneficial owner or owners, and the size of their beneficial interests.”
1.5 In order to acquire beneficial ownership in a property, the claimant of a common intention constructive trust must establish all the elements before the trust is constituted. In Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 at [38], Ribeiro PJ said,
“… The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom.”
1.6 If the element of detrimental reliance is not present at the time of the death of legal owner, the claimant cannot be regarded as a beneficial owner. In that event, as submitted by Ms Eu SC, the beneficial ownership of the property would be devolved either by way of testamentary disposition or in accordance with the law on intestacy without being encumbered by any constructive trust.
1.7 In the present case, there were three legal co-owners: Fuk, Kau and Wan. They died on different dates. Fuk died between 1991 and 1992. Kau passed away in 1997 and Wan passed away in 1999. The finding of the Judge was that there was a common intention on the part of all three of them. Fuk died intestate and it seems that under the law intestacy his estate, subject to payment of debts, passed to his two brothers Kau and Wan. There is evidence that Kau and Wan adhered to the common intention after Fuk’s death.
1.8 Against such background, I would for my part require more inputs from the parties before deciding which date amongst the three dates of death should be the cut-off point for ascertaining if there were detrimental reliance on the part of the 3rd defendant to support a claim for constructive trust. This could be a matter falling within the remittance to the court below.
1.9 I agree with Cheung JA that the Judge did not make findings on the adequacy of detriment prior to the building of the two structures (which took place after the deaths of Fuk, Kau and Wan). In light of our holding on principle relating to the cut-off date, this issue is of vital importance to the adjudication on the constructive trust claim.
1.10 In respect of the claim based on proprietary or other form of estoppels, my own view is that the equitable doctrine of estoppels is more flexible in achieving justice between the parties. As highlighted by Lord Walker in Stack v Dowden , supra, the equity is to be satisfied by the minimum award necessary to do justice, see also the judgment of Ribeiro PJ in Luo Xing Juan v Estate of Hui Shui See , supra. at [65] to [73].
1.11 In Walton v Walton [1994] CA Transcript No 479, at para 21, Hoffmann LJ (as he then was) said (in a passage cited by Lord Neuberger in Thorner v Major [2009] 1 WLR 776 at [101]),
“equitable estoppel [by contrast with contract] … does not look forward into the future[; it] looks backwards from the moment when the promise falls due to be performed
1.12 In Gillett v Holt [2001] Ch 210, Walker LJ (as he then was) at p.236G examined the extent of equity by reference to the period when the assurances were given down to the time when those assurances were repudiated. His Lordship also said that a broad approach is necessary.
1.13 In the context of analysis by way of proprietary estoppel arising from promise or assurance (which seems to me to be the applicable strand of estoppel here), I am of the view that the whole chronology of events starting from the communication of the common intention of Fuk, Kau and Wan to the 3rd defendant to the time when the plaintiff commenced the action has to be taken into account instead of rigidly dissecting the events into two different phases (phase one being before the deaths of Fuk, Kau and Wan and phase two being the period after the plaintiff becomes the personal representatives of the estates of Fuk and Kau) with separate analysis for each phase.
1.14 The three main elements for proprietary estoppel were identified by Lord Walker in Thorner v Major [2009] 1 WLR 776 at [29]: (a) a representation or assurance made to the claimant; (b) reliance on it by the claimant; and (c) detriment to the claimant in consequence of his reasonable reliance.
1.15 It is clear that reliance is not sufficient, it has to be reasonable reliance, see also the discussion of Lord Hoffmann at [5], Lord Scott at [15], Lord Rodger at [26] and Lord Neuberger at [77] to [78]. In Luo Xing Juan v Estate of Hui Shui See , supra. at [55], Ribeiro PJ also alluded to reasonable reliance albeit the discussion was in the context of promissory estoppel after noting the affinity of the two doctrines of estoppel at [54].
1.16 Another way of expressing this requirement is that if the reliance is not reasonable, it would not be unconscionable for the representor to go back on a gratuitous assurance. In Gillett v Holt , supra, at p.225 Robert Walker LJ underlined the prevention of unconscionable conduct as the fundamental aim of the equity,
“… Moreover the fundamental principle that equity is concerned to prevent unconscionable conduct permeates all the elements of the doctrine [of proprietary estoppel]. In the end the court must look at the matter in the round.”
1.17 Thus, in Luo Xing Juan v Estate of Hui Shui See , supra. at p.25B, Ribeiro PJ cited Jennings v Rice [2003] 1 P & CR 8 for the relationship between reliance and unconscionablility,
“… it is where ‘the quality of the assurances which give rise to the claimant’s expectations and the extent of the claimant’s detrimental reliance on the assurances’ in combination make it unconscionable for the promisor to go back on his promise that the doctrine applies.”
1.18 See also Knowles v Knowles [2008] UKPC 30 at [27] on the endorsement of the prevention of unconscionability as the essence of the doctrine of proprietary estoppel.
1.19 As illustrated by Thorner v Major , supra, the assessment of reasonable reliance must depend on the factual context and the relationship and dealings between the parties throughout the entire period. The same must be true in the assessment of unconscionability.
1.20 In this connection, I do not accept the argument of Ms Eu that the period must end with the demise of Fuk, Kau and Wan as their conscience could not be bound after death. The authorities clearly show that the equity arising from an estoppel can bind the estate of the promisor after his death: Thorner v Major, Luo Xing Juan v Estate of Hui Shui See and Jennings v Rice are cases concerning litigations between a claimant and those representing the estate. Knowles v Knowles , supra (cited by Ms Eu) does not support such a proposition. The analysis in the judgment of the Privy Council was based on estoppel by acquiescence instead of estoppel by representation or promise. On the facts of that case, no reliance could be placed on the assurance from the deceased mother (Violet) as she only had a life interest in the property. Nor, as far as I can gather from the judgment, did the claimant rely on such assurance.
1.21 In my view, the more pertinent question in the present appeal is whether the 3rd defendant could still reasonably rely on the promise or assurance of Fuk, Kau and Wan after their respective demise in undertaking the construction works on the Disputed Land so that after such detrimental reliance the reneging of the promise or assurance can be regarded as unconscionable.
1.22 In the discussion on the element of detriment, Robert Walker LJ in Gillett v Holt , supra, at p.232E alluded to the judgment of Slade LJ in Jones v Watkins 26 Nov 1987, Court of Appeal Transcript No 1200 of 1987 as providing helpful observations. The second of the several propositions set out there is that the issue of detriment must be judged at the moment when the person who has given the assurance seeks to go back on it. Robert Walker LJ discussed the authority cited by Slade LJ for this proposition and traced it back to the judgment of Dixon J in Grundt v Great Boulder Pty Gold Mines Ltd (1937) 59 CLR 641 at 674-675. For present purposes, I would just cite the following part of the dictum of Dixon J,
“… [The purpose of the doctrine of estoppel by representation] is to avoid or prevent a detriment to the party asserting the estoppel by compelling the opposite party to adhere to the assumption upon which the former acted or abstained from acting. This means that the real detriment or harm from which the law seeks to give protection is that which would flow from the change of position if the assumption were deserted that led to it. So long as the assumption is adhered to, the party who altered his situation upon the faith of it cannot complain
1.23 Robert Walker LJ then at p.233D demonstrated the proposition by reference to the facts of Inwards v Baker [1965] 2 QB 29.
“If in a situation like that in Inwards v Baker, a man is encouraged to build a bungalow on his father’s land and does so, the question of detriment is, so long as no dispute arises, equivocal If and when the father (or his personal representative) decides to go back on the assurance and assert an adverse claim
1.24 The going back from an assurance can take place either during the lifetime of a promisor or after his death when his estate is administered by his personal representative. There are many cases in this jurisdiction (particularly for land in the New Territories) where the landowners have long been absent or no step is taken to effect a grant or to appoint a personal representative for a long period after a landowner passes away and the occupier of such land continues to use the property on the strength of a promise of the deceased owner. In many cases, the occupier actually would not have any means to know if an absent owner (who may have been living overseas) has passed away. Thus, whilst recognizing that detrimental reliance before demise of the promisor was not in issue in Gillett v Holt , supra, and Inwards v Baker , supra, I do not see any cogent reason for rigidly having a cut-off date upon the demise of the promisor as pre-empting the operation of equity if it is otherwise reasonable for the promisee to continue to rely on the promise in the meantime. Thus, if there were reasonable reliance, the unconscionability is to be assessed at the time when the promisor or, after his death his personal representative goes back on the assurance. The question of detriment is to be considered only when dispute has arisen.
1.25 In Powell v Benney [2007] EWCA Civ 1283, Deputy Judge Levy QC held that on the facts of that case on the death of the deceased when it was found he died intestate it has to be taken that he had gone back on his promise to leave the subject property to the claimants. There was actually no issue as to the relevant point in time for the assessment of detriment because what happened in that case was that shortly after the death of the promisor the claimants asked the personal representative for a transfer of the subject property and such request was declined, see [10] of the judgment. The point was therefore not contentious and the Court of Appeal did not find it necessary to comment on it.
1.26 Whilst I have no reason to disagree with such finding on the facts of that case, I do not think it can be extrapolated into a proposition of law that the question of detriment must be assessed by reference to the state of affairs upon the death of a deceased promisor who had died intestate or made no provision in his will for the bequest of the subject property according to his earlier assurance.
1.27 In my judgment, it remains a question of fact as to when it could be said that the promisor had gone back on his promise. Apart from the course of dealings between the parties, the terms of the promise could also be important. This question is obviously related to the question of reasonable reliance posed at [1.21] above.
1.28 In this connection, it should be noted that the Common Understanding as formulated before the Judge (and accepted by him as a finding of fact and the basis for assessing the proprietary estoppel claim) was that the 3rd defendant could use and own the Disputed Land as his home and he could build a small house there when he became an adult, see [6] of the judgment below. It was not a promise or assurance that the legal owners would transfer the legal title of the Disputed Land to the 3rd defendant by way of testamentary disposition. Up to the time when the structures were constructed in 2002 and 2003, the promise had apparently been adhered to.
1.29 Bearing such context in mind, it is not surprising that the Judge attached great significance to the Consent Statement of 25 March 1997 signed by Wan and Kau.
1.30 On the evidence, up to the death of all three brothers, they had adhered to the promise of allowing the 3rd defendant to use the Disputed Land as his own and to build a house there.
1.31 Due to the way in which arguments proceeded in the court below, the Judge did not consider if it was reasonable for the 3rd defendant to rely on the promise or assurance of the three brothers when he proceeded further to build the two structures in 2002 and 2003 after their demise.
1.32 The plaintiff did not obtain the grant for the estate of Fuk until 2006 though she had already obtained the grant in respect of the estate of Kau in 1998. According to the evidence of the defence (which was accepted by the judge), the plaintiff was in harmonious relationship with them after the death of the three brothers. The occupation and use of the Disputed Land by the 3rd defendant was not disturbed. The plaintiff’s case was also that she was friendly with the 3rd defendant and she visited his family after the birth of his son after 2003. The plaintiff obtained the consent of the 3rd defendant in her application for grant in respect of the estate of Kau in 2006.
1.33 Notwithstanding so, I accept there may be other matters which the court should take account in deciding if there was reasonable reliance by the 3rd defendant after the demise of Fuk, Kau and Wan. The plaintiff should have the opportunity to address the court on this question. I will remit this question to the judge.
1.34 In respect of the question of knowledge, I respectfully agree with Cheung JA’s analysis that in respect of proprietary estoppel based on promise or representation, knowledge of the detriment is only a subsidiary issue and not by itself an essential ingredient.
1.35 Based on my analysis, the 3rd defendant’s claim based on proprietary estoppel by virtue of promise should be upheld and it is not necessary to consider the claim based on acquiescence or standing by on the part of the plaintiff separately.
1.36 However, as I have mentioned earlier, the court has great flexibility in granting relief in proprietary estoppel and the relevant principles were discussed in Luo Xing Juan v Estate of Hui Shui See , supra. at [65] to [73]. It seems that counsel had not addressed the judge in this regard and in view of his holding on the constructive trust claim the judge did not address the question of relief for the claim of proprietary estoppel in his judgment.
1.37 Before us, counsel also did not address us on relief if the 3rd defendant only succeed on proprietary estoppel but not on constructive trust.
1.38 Since the parties may still wish to pursue the litigation regarding the constructive trust claim and, if the 3rd defendant succeeds in that claim it may overtake any question of relief for proprietary estoppel, I will remit the issue of relief on proprietary estoppel to the Court of First Instance.
1.39 I agree with Cheung JA that the claim for adverse possession cannot succeed in light of the finding of the judge on Common Understanding and the consent given by the three brothers to the 3rd defendant to use and occupy the Disputed Land.
1.40 As regards the order for account on the counterclaim, as the modern approach has not been addressed by the judge and he found that there was no ouster, the claim should be remitted to the judge. The occupation of the Disputed Land was the only matter raised by way of defence to the counterclaim for account. The other matters alluded to by Cheung JA at [7.6] below have not been pleaded in the Re-amended Reply to the Re-amended Defence and Re-amended Defence to Re-amended Counterclaim. Limitation has to be pleaded before a party can rely on it as a defence, see Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286 at [50]. I cannot see the relevance of the state of other pieces of land and the collection of rents therefrom when the plaintiff has not pleaded any set off arising from such matters and no such evidence had been adduced at the trial. With respect, it would be wrong in principle to allow the plaintiff to have a second bite of the cherry when no justification has been provided for permitting any investigation into such unpleaded matters which had not been properly raised during trial.
1.41 The position regarding expenses on rebuilding House 774 is different. It has been raised at para 27 of the Re-amended Reply to the Re-amended Defence and Re-amended Defence to Re-amended Counterclaim. It should be taken into account based on the equitable approach discussed below.
1.42 In respect of the finding that there was no ouster, it should not be a bar to a claim for equitable account in light of the authorities cited at [7.2] and [7.3] below. Those authorities were not cited in Chen Yu Tsui v Tong Kui Kwong [2006] 1 HKC 23 and Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286. As the Court of Appeal actually decided the appeal in the latter case on the basis that the defendant was the bailiff of the other co-owners, its approval of the former case was only obiter. That should not bar this Court from re-examining the law in light of the modern position as reflected in the English authorities of Re Pavlou (A Bankrupt) [1993] 1 WLR 1046 and Re Byford (deceased) [2004] 1 P & CR 12 159, which has been followed by Ng J in Leung Siu Man v Leung Yiu Tai [2019] HKCFI 1971 .
1.43 I see no reason why the modern approach should not be followed in Hong Kong. In other words, a court of equity will order an inquiry and payment of occupation rent even if there is no ouster when it is necessary to do so to do equity between the parties.
1.44 For my part, I will set aside the judgment of the judge and remit the issues identified at [1.1], [1.8] to [1.9], [1.31] and [1.33], and [1.41] above and if necessary, [6.40] and [6.41] below to Wilson Chan J for determination in accordance with the legal analysis set out above. Other than those issues, the findings of Wilson Chan J in the judgment are not to be disturbed. Hence, it would not be a retrial and it is a case management matter for the judge to decide if there is any need to hear additional evidence and if so on what terms.
Hon Cheung JA :
I． The appeal
2.1 Cheung Ping Wan (‘Wan’), Cheung Ping Kau (‘Kau’) and Cheung Ping Fuk alias Cheung Bing Fuk (‘Fuk’) were the registered tenants in common of a piece of land in Sha Kok Mei Village, Sai Kung, New Territories (‘Village’) known as Lot No. 1101 in Demarcation District 221 (‘the Disputed Land’), each holding one-third equal and undivided shares.
2.2 Their father Cheung Tak Ming was the former owner of the Disputed Land. Wan, Kau and Fuk were his sons. The Judge found that it is common ground that Wan, Kau and Fuk treated each other as brothers with equal status and equal entitlement as borne out by the Succession Conveyance dated 21 June 1978 signed by them and the letter dated 11 October 1971 signed by Kau who was then outside Hong Kong, acknowledging the estate of Cheung Tak Ming belonged to the three brothers in equal shares.
2.3 When Kau passed away in 1997, probate of his will was granted on 27 October 1998 to the plaintiff who was Kau’s adopted daughter and she became the executrix of his estate. Fuk passed away sometime between September 1991 and May 1992. The exact date could not be determined because he had committed suicide. Letters of administration of Fuk’s estate were also granted to the plaintiff on 9 May 2006 and she became the administratrix of Fuk’s estate. As such the plaintiff is the legal owner of two-thirds and the beneficial owner of half of the Disputed Land because upon the death of Fuk who died intestate, his interest passed on to his two brothers in equal shares.
2.4 Wan had a son and a daughter, namely the 1st and 2nd defendants. Wan passed away in 1999 and the 1st defendant became the executor of his estate. Wan’s share of the Disputed Land was devolved upon the 1st and 2nd defendants as co-owners in equal shares. The 3rd defendant is the son of the 1st defendant.
2.5 Apart from the 1st defendant, the 3rd defendant is the only surviving male descendant of the Cheung family.
2.6 The plaintiff claimed that the defendants had without her knowledge and consent erected two large unauthorised structures on the Disputed Land. They had further erected a gate to control access to the Disputed Land. The plaintiff sought, among other things, an order to compel the defendants to remove the structures from the Disputed Land.
2.7 The defence of the 3rd defendant is that he is the sole beneficial owner of the Disputed Land by reason of, amongst other things, common intention constructive trust, proprietary estoppel and estoppel by silence.
2.8 The 1st and 2nd defendants also raised a counterclaim against the plaintiff for an account and enquiry of the rent received by her and for one-third of the rental income of a house erected on Lot 774 in DD 221 (‘House 774’) which is also under the common ownership of the plaintiff and the 1st and 2nd defendants.
2.9 Wilson Chan J dismissed the plaintiff’s claim. He gave judgment in favour of the defendants by declaring the 3rd defendant to be beneficial owner of the Disputed Land. He also made an alternative finding that the 3rd defendant became a beneficial owner by reason of adverse possession. He ordered the plaintiff to give an account and payment to the 1st and 2nd defendants of the rent she received.
2.10 The plaintiff now appeals.
II. The parties’ case
1) The defendants’ case
3.1 As it was the defendants who asserted that the 3rd defendant has a beneficial interest by reason of common intention construction trust and estoppel, I will deal with their case first.
3.2 The 3rd defendant had since his childhood lived in a house erected on Lot No. 1099 in DD 221 which was adjacent to the Disputed Land. Lot No. 1099 belonged solely to Wan. The 3rd defendant constantly visited and played on the Disputed Land when he was a child and teenager. As early as around 1977 or 1978, senior members of the Cheung family, including Wan, Kau and Fuk had already reached a general consensus that the 3rd defendant should own and inherit the Disputed Land when he became an adult. Since as early as around 1990, there has been a family agreement, common understanding and consensus amongst the members of the Cheung family, including Wan, Kau and Fuk, the 1st and 2nd defendants, that the 3rd defendant, should become the sole owner of the Disputed Land, and he could build a small house on that land (‘the Common Understanding’). The 3rd defendant was assured of this promise in family gatherings.
3.3 Pursuant to this Common Understanding, the 3rd defendant has maintained walls and fences to surround and enclose the Disputed Land. In about 2002, he erected a one-storey building there (‘Structure B’). In about 2003, he erected a one-storey building there based on some pre-existing structures that had already been in existence since the 1970s and subsequently in about 2011 or 2012 he further expanded and converted this one-storey building to become a two-storey building. Since 2002 or 2003, the 3rd defendant and his family have lived in and occupied the two structures, together with the garden and other facilities on the Disputed Land. He carried out improvement works and maintenance works in relation to the two structures as well as the garden and facilities on the Disputed Land.
3.4 The 3rd defendant pleaded that the plaintiff was aware of the construction, improvement and maintenance works carried out by him and had raised no objections.
3.5 The plaintiff lived in and still lives in House 774, which was and is very near to Lot No. 11 with a walking distance of two minutes only. The relationship between the plaintiff and the 3rd defendant only deteriorated in 2012 when the plaintiff sought to pressurize the 1st and 2nd defendants, to sell Lot No. 443 in DD 221 to some developers. Until 2012, the relationship between the plaintiff and the 3rd defendant was harmonious, and the plaintiff was invited by the 3rd defendant to visit his home on the Disputed Land on various occasions. For example, the 3rd defendant did invite the plaintiff to come to his son’s birthday party held at his home. The plaintiff was well aware of the conditions of the Disputed Land throughout the years as well as works carried out by the 3rd defendant there and she chose not to raise any objections.
3.6 The 3rd defendant pleaded that as a result of the consent, acquiescence and silence on the part of the 1st and 2nd defendants, the plaintiff and their predecessors-in-title, he all along had treated himself as the owner of the Disputed Land and he continuously carried out works to improve and maintain the Disputed Land. He pleaded that it would be unjust, unfair and unconscionable for the plaintiff, the 1st defendant and the 2nd defendant (as well as their predecessors-in-title, namely, Wan, Kau and Fuk) to deny his interests.
2) The plaintiff’s case
3.7 The plaintiff denied that she had knowledge of the Common Understanding. She denied that she had acquiesced in the works carried out by the 3rd defendant on the Disputed Land. As the 1st and 2nd defendants’ own land was in front of the Disputed Land, she thought the works were carried out by them. She only took action when it was discovered that building works were carried out on top of the then one-storey structure of Structure B which might endanger the passers-by.
III. The Judge’s assessment of the parties
4.1 In terms of the credibility of the witnesses, the Judge found that the plaintiff is not a credible or reliable witness.
4.2 On the other hand, the Judge found that the 1st , 2nd and 3rd defendants are creditable witnesses. The Judge found that there was, indeed, the Common Understanding. He held that the evidence shows that the 3rd defendant has been treating the Disputed Land as his own property and not of some future entitlement. The Judge found that the overwhelming evidence shows that the 3rd defendant consistently drew a distinction between the Disputed Land and other ancestral land of the Cheung family. The 3rd defendant said that other ancestral land would only be provided to him in the future if the same was not sold by the 1st and 2nd defendants, and he would only own these pieces of land after the 1st and 2nd defendants have passed away. In contrast, the 3rd defendant said that he already owns the Disputed Land as of now.
4.3 The Judge had also considered the attitude of the paper owners. He held :
‘ 87. The attitude of the paper owners is also relevant. In contrast to the 3rd defendant’s extensive use and occupation of the Disputed Land, the paper owners (ie the 1st defendant, the 2nd defendant and the plaintiff) had almost nothing to do with the Disputed Land throughout the years. They had done nothing to protect/maintain the Disputed Land. None of them took steps to interfere with the extensive works being carried out by the 3rd defendant on the Disputed Land, and none of them occupied/used the Disputed Land. ...’
4.4 The Judge also found that there was no dispute that the plaintiff was fully aware of the works carried out by the 3rd defendant on the Disputed Land. The plaintiff further admitted in her evidence that the 3rd defendant had never asked for her permission before he built anything on the Disputed Land.
IV. The Law
1) Common intention constructive trust
5.1 The law in this area is not disputed. Ribeiro PJ explained common intention constructive trust in Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 :
‘ 38. Where a constructive trust is alleged to arise on the basis of the parties’ common intention, it is the intention commonly held by the property owner and the claimant regarding their shared beneficial interests in the property that matters. The trust is constituted by the claimant’s detrimental reliance on their common intention and the unconscionability of the property owner departing therefrom.’
5.2 The onus is upon the person seeking to show that the beneficial ownership is different from the legal ownership : see Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985.
5.3 The common intention can be express or implied. It can be deduced or inferred objectively from the parties’ conduct: Mo Ying at paragraph 5.17; Stack v Dowden [2007] 2 AC 432 at paragraphs 126, 128; Halsbury’s Laws of England : Trust and Powers (5th Ed) at paragraph 117.
2) Proprietary estoppel
5.4 The requirements as for proprietary estoppel are :
(1) A representation or assurance made to the claimant;
(2) Reliance on it by the claimant; and
(3) Detriment to the claimant in consequence of his/her reasonable reliance.
See : Thorner v Major and others [2009] 1 WLR 776 per Lord Walker of Gestingthorpe at [29].
5.5 Lord Scott of Foscote elaborated in the same case :
‘ 15. …. These elements would, I think, always be necessary but might, in a particular case, not be sufficient. Thus, for example, the representation or assurance would need to have been sufficiently clear and unequivocal; the reliance by the claimant would need to have been reasonable in all the circumstances; and the detriment would need to have been sufficiently substantial to justify the intervention of equity.’ (emphasis added)
3) Estoppel by silence
5.6 The principles in relation to the doctrine of estoppel by silence is summarised in Mo Ying at paragraph 8.2 :
‘ 1) An estoppel by silence, inaction or acquiescence arises where “a reasonable man would expect the person against whom the estoppel is raised, acting honestly and responsibly, to bring the true facts to the attention of the other party known to him to be under a mistake as to their respective rights and obligations” and this has been approved as the general principle underlying “estoppel by acquiescence”: see Spencer Bower on the Law Relating to Estoppel by Representation (4th ed., 2004) para.III.4.3, at p.48, citing Moorgate Mercantile Co Ltd v Twitchings [1977] AC 890 , 903F (per Lord Wilberforce). See also Lee Bing Chueng v Secretary for Justice [2013] 3 HKC 511 at [40]-[45] (DHCJ Marlene Ng).
2) A duty to speak, such as to found an estoppel on silence will arise in circumstances:
(1) “[w]here a person, having a title or right to property of any kind, perceives that another person is innocently, and ignorant, conducting himself with reference to the property in a manner inconsistent with such right or rights”: see Spencer Bower on the Law Relating to Estoppel by Representation (4th ed., 2004), para.III.4.4(1);
(2) “[w]here an owner becomes aware that someone is attempting to dispose of his property”, and in such circumstances “he is bound to assert his rights and, if he fails to do so, he may be estopped against the disponee”. “His silence may be a representation either that he has no title or that the person dealing with the property has his authority”: see Handley on Estoppel by Conduct and Election (2006), para.3-012; or
(3) “[w]hen anything in order to a purchase is publicly transacted, and a third person, knowing thereof, and of his own right to the lands intended to be purchased, doth not give the purchaser notice of such right, he shall never afterwards be admitted to set up such right to avoid the purchase; for it was an apparent fraud in him not to give notice of his title to the intended purchaser … and in such cases infancy … shall be no excuse”: see Savage v Foster (1722) 9 Mod Rep 35, 37 (see also Spiro v Lintern [1973] 1 WLR 1002 , 1010F-1011D).’
5.7 Although promissory estoppel was also relied upon by the defendants, it is apparent from the arguments before us, the focus is on common intention constructive trust, proprietary estoppel and estoppel by silence. Of these three, proprietary estoppel is at the forefront of the arguments.
V. Grounds of appeal
6.1 Ms Eu SC (together with Mr Wong), who did not appear below for the plaintiff advanced five grounds of appeal on the following issues :
(1) Existence of common intention constructive trust, proprietary estoppel and estoppel by standing by;
(2) Existence of the Common Understanding;
(3) Specific issues in estoppel by silence;
(4) Adverse possession; and
(5) Accounts.
1) Existence of the Common Understanding
(i) The plaintiff’s arguments
6.2 Ms Eu submitted that the Judge erred in law in finding common intention constructive trust, proprietary estoppel and estoppel by silence in favour of the 3rd defendant. She emphasised that the plaintiff is not mounting an appeal on the finding of facts by the Judge but rather the Judge was wrong on the legal conclusions. Notwithstanding this stand, my view is that her second ground of appeal is a challenge to the findings of fact by the Judge, specifically on the formation of the Common Understanding. The Common Understanding is the foundation upon which the various causes of action are to be established. As such, it is more logical to deal with this ground first before I examine whether the Judge had erred on the conclusion on law.
6.3 Paragraph 99 of the judgment stated that :
‘ 99. Summarising all the evidence, I accept as a fact that the Common Understanding was at least discussed/mentioned in the following occasions. Many examples were elaborated in the 2nd defendant’s oral evidence when she was asked to give details. In the present case, there was a clear express Common Understanding and/or assurance that the 3rd defendant should become the sole owner of the Disputed Land and that he could use it as his home.
June 1978
The Common Understanding was discussed after Wan, Kau, and Fuk successfully applied for the succession of Great Grand Father’s land, at Lot 1099 during lunch. Inter alios the 1st , 2nd and 3rd defendants were also present.
1978
During the 1st defendant’s 31 year-old birthday celebration, the Common Understanding was discussed.
Chinese New Year in 1978
Wan, Kau, Fuk, the 1st defendant, the 3rd defendant, and other family members were present and the Common Understanding was discussed during meals.
1970s-1996
The 2nd defendant went back to the Village since she was sick and the Common Understanding was discussed and conveyed to her by Fuk, Kau, and Yu from time to time.
Chinese New Year (unknown year)
Wan, Kau, and Fuk gathered together to discuss matters relating to the Cheung Family, including House 774 and ancestral land. The Common Understanding was mentioned again.
1984
Fuk visited the 2nd defendant at her shop in Sai Kung and the Common Understanding was discussed.
1985
Kau talked about the Common Understanding with the 2nd defendant when he visited her at her shop in Kwun Tong.’
6.4 Ms Eu submitted that the Judge erred in finding there was a ‘Common Understanding’ in that the 3rd defendant, being born on 11 March 1971, only reached his age of majority on 1 October 1990 by virtue of section 2(2) of the Age of Majority (Related Provisions) Ordinance (Cap. 410). There is no evidence that he had reached his age of majority in any of the seven occasions listed in paragraph 99 of the judgment. The 3rd defendant was only present in two of those occasions, namely, in June 1978 and the Chinese New Year in 1978 respectively, when he was only 6 or 7 years old at the time. Thus the 3rd defendant was incapable of forming any common understanding with any of the three registered owners.
6.5 She further submitted that none of the so-called ‘very compelling and incontrovertible documents’ referred to in the judgment evidenced the Common Understanding. The 97 Consent Statement (as defined in paragraph 82 of the judgment) by Wan and Kau agreed that the 3rd defendant could build a house on the Disputed Land but did not mention anything about making a gift (whether past, immediate or future) of the Disputed Land to the 3rd defendant. The Succession Conveyance dated 21 June 1978 (paragraph 84 of the judgment) related to the succession of Wan, Kau and Fuk to the Disputed Land and did not mention anything about the 3rd defendant, let alone a gift of the Disputed Land to him. The letter dated 11 October 1971 written and signed by Kau (paragraph 84 of the judgment) merely authorized Wan to handle Kau’s estate but did not mention anything about the 3rd defendant, let alone a gift of the Disputed Land to the 3rd defendant.
6.6 She referred to De Bruyne v De Bruyne [2010] EWCA Civ 519 where Patten LJ (with whom Sir Paul Kennedy and Thorpe LJ agreed) accepted the appellant’s argument that ‘it was legally impermissible for the Judge to attribute to children as young as two a common intention of the kind described in cases like Lloyds Bank plc v Rossett given that they were both actually and legally incapable of having any effective intention or understanding in relation to the ownership of the shares’. Patten LJ held :
‘ 48. It is, I think, artificial and unrealistic to decide the question whether the Husband took the shares in 1991 free of or subject to any trust by reference to a set of principles designed to resolve issues of beneficial ownership between adult co-habitees in a property. The children cannot be regarded as privy to any common intention or understanding in a real way.’
(ii) My view
6.7 In my view, when the Judge referred to the seven occasions he was dealing with the occasions when the Common Understanding was reached by the three brothers up to 1985. But this is not the end of the matter because there is also the evidence of the 3rd defendant that there were occasions in the 1990s (by then he was already 19) when the Common Understanding was discussed in the family gatherings by the three brothers. The 3rd defendant was never cross-examined on his age when he said he attended the family gatherings where this Common Understanding was discussed.
6.8 Knowledge of the Common Understanding is plainly a matter within the privy of the defendants. The Judge was entitled to accept their evidence on this issue. The plaintiff did not suggest that she was present at these family gatherings. Wan was the eldest son of the Cheung Tak Ming. Kau and Fuk did not have children of their own. Bearing in mind the setting of this case is in a traditional Chinese family in the New Territories and once the Judge accepted the evidence of the defendants, he was clearly entitled to find the existence of the Common Understanding.
6.9 De Bruyne is clearly distinguishable on the facts. It is concerned with a discretionary trust drafted by professionals, and the promise relating to the children was contained in a formal letter dated 30 September 1991. It was doubtful as to whether the children were aware of the letter. The children there never acted on it to their detriment.
6.10 In respect of the documentary evidence, the Judge held that :
‘ 94. First, the authorities suggest that “when the parties are in a personal relationship (as contrasted with parties in a commercial transaction), it would be unrealistic to expect written records of assurances…”: Chen Tek Yee v Chan Moon Shing , CACV 136/2015 (Judgment dated 29.02.2016) at paragraph 29, per Yuen JA. The observation must be correct: otherwise, the doctrine of common intention constructive trust and proprietary estoppel would not have developed at all.
95. Secondly, this case concerns a traditional Chinese family, where filial piety and mutual trust is paramount. Members of the family dealt with each other on the basis of trust, not mistrust. They could not have envisaged litigation in the future, and they would not have generated records to protect themselves out of the blue.
96. Thirdly, there is no evidence suggesting that Wan had the habit of making written records. The evidence shows that Wan would only write to pursue a specific purpose, for example, applying for building a small house on Lot 1099.
97. Fourthly, members of the Cheung Family have relatively low education level. None of them was sophisticated commercial people. They would not have created written documents to protect themselves.
98. Fifthly, in any event, the 97 Consent Statement is the best contemporaneous documentary evidence, and it is very much incontrovertible.’
6.11 As the Judge held :
‘ 82. The Consent Statement dated 25 March 1997 (“the 97 Consent Statement”) is a piece of very compelling documentary evidence. In it, Wan and Kau agreed that the 3rd defendant could build a house on the Disputed Land. The consent was unconditional. There was no restriction as to (i) timing; and (ii) location of the house. Fuk was unable to sign the 97 Consent Statement only because he had already passed away as of March 1997.
83. The plaintiff is not even in a position to challenge the 97 Consent Statement. She admitted that Kau would not tell her about many important matters, and she knew nothing about the 97 Consent Statement.’
6.12 Considering all the circumstances of the case, the plaintiff fails to show that the Judge’s findings of fact are plainly wrong.
2) Existence of the common intention constructive trust, proprietary estoppel and estoppel by silence
(i) The plaintiff’s arguments
6.13 This ground of appeal is more substantial. Ms Eu argued that the ‘Common Understanding’ found by the Judge was at best an intention to make a future gift. A declaration of future intention to make a gift of land not evidenced in writing is not enforceable against or binding on the intended donor or his estate. Such ‘Common Understanding’ cannot give rise to common intention constructive trust, proprietary estoppel and estoppel by silence as it cannot bind the conscience of the intended donor without evidence of sufficiently substantial detrimental reliance on the part of the intended donee that is known to the intended donor. The 3rd defendant failed to prove that there was sufficiently substantial detrimental reliance known to all or any of the three registered owners of the Disputed Land (namely, Wan, Kau and Fuk) prior to their respective death. While Fuk died between September 1991 and early 1992, the 3rd defendant did not plead any detrimental reliance (let alone sufficiently substantial one) known to Fuk prior to his death. The detrimental reliance relied on by the 3rd defendant prior to the death of Kau in 1997, or prior to the death of Wan in 1999, was insufficient to give rise to common intention constructive trust, proprietary estoppel and estoppel by silence. The ‘detrimental reliance’ relied on by the 3rd defendant such as moving into the Disputed Land or constructing the structures were matters of benefit or enjoyment (rather than detriment) to the 3rd defendant, see Kwan So Ling v Woo Kee Yiu Harry (unrep, HCA 1311/2011, 30 April 2015) at paragraph 53 and Chan Gordon v Lee Wai Hing [2011] 2 HKLRD 506 at paragraphs 48-49. Ms Eu emphasised that these legal principles which conferred a beneficial interest on the 3rd defendant are based on the fact that it was unconscionable for Party A to go back on the promise or representation and accordingly knowledge on Party A of the detrimental reliance by Party B is a necessary ingredient. She submitted that this is present in all the cases in this area although she could not identify any case which specifically deals with this point.
6.14 Ms Eu further submitted that the Common Understanding came to an end upon the death of the intended donors and there was no estoppel by silence.
6.15 After the hearing of the appeal was adjourned, the Court became aware of certain passages in Snell’s Equity 33rd Edition which discussed more fully the issue of knowledge and by letter dated 27 December 2019 invited the parties to lodge further submissions which they did.
6.16 In her further submissions Ms Eu submitted that the plaintiff is not arguing for any new or additional requirement of knowledge outside the well-established principles. She emphasised that the circumstances must give rise to unconscionability or some inequity which overrides the normal requirements that writing is needed for the passing of title. She submitted that knowledge cannot be discussed in vacuum but must be examined in context (eg knowledge of what; or the degree, type or extent of knowledge in different strands of estoppel or trust may be all different). The context is whether the circumstances of the case bind the conscience of the landowner such that it is inequitable to assert the strict legal position. She further submitted that the three elements of proprietary estoppel, namely, representation or assurance, reliance and detriment cannot be treated as sub-divided into separate watertight compartments but must be looked at ‘in the round’. And all three elements must be present to give rise to common intention constructive trust, proprietary estoppel and estoppel by standing by. She repeated that in this case, unlike any authority cited by either party, the landowners died before there was any reliance or substantial detriment (even assuming the building of structure A or B was a detriment rather than a benefit). At the time of death, the law of succession kicks in giving rise to third party rights. Since common intention constructive trust, proprietary estoppel and estoppel by standing by cannot be constituted by then, it is too late. She argued that if these causes of action were not constituted at the time of death of the three brothers and not binding on their successor, then whether the successor is bound will depend on the conduct of the successor.
6.17 In respect of common intention constructive trust, Ms Eu referred to Luo Xing Juan and the emphasis thereon the ‘conscience of the legal owner’. She argued that if there was no detriment prior to the death of the landowner, the conscience of the dead man could not have been affected.
6.18 In respect of proprietary estoppel she submitted that most authorities where knowledge is discussed make clear that it is not necessary to know of the precise or specific act of detriment, but factually there must be reliance and detriment and the circumstances must be sufficient to ‘raise an equity’. See for example paragraph 5 in Thorner v Major [2009] 1 WLR 776 per Lord Hoffmann; Goo & Lee, Land Law in Hong Kong (4th edn, 2015) at paragraph 3.39. The type or degree of knowledge required must depend on the circumstances in each case: Crabb v Arun District Council [1976] Ch 179.
(ii) The defendants’ arguments
6.19 Mr Wong SC (together with Mr Kwong and Ms Wong) for the defendants submitted that the point now raised by Ms Eu on the lack of knowledge of the three brothers is a new point that had not been taken in the Court below. When the 3rd defendant started carrying out extensive works on the Disputed Land in 1992, the three elders were still alive. In the circumstances, the parties could have adduced detailed evidence in relation to the state of knowledge on the part of the three elders. However, no such opportunity was given and this point was not put to the witnesses. As such, the plaintiff should be barred from raising the new point now: Flywin Company Limited v. Strong & Associates Limited (2002) 5 HKCFAR 356 at paragraphs 37 to 46; Phipson on Evidence , (19th Ed), at paragraph 12-12; Nina Kung v. Wang Din Shin (2005) 8 HKCFAR 387 at page 428G-I; Browne v. Dunn (1893) 6 R 67 (HL) at 70-71 per Lord Herschell LC.
6.20 Mr Wong further submitted that the plaintiff had not cited any authorities in support of the knowledge requirement. On the contrary, on the basis that the promise had been made and the promisee had relied upon it to his detriment, then the necessary element of the estoppel is established :Thorner and Taylors Fashions Ltd v. Liverpool Victoria Trustees Co Ltd [1982] QB 133.
6.21 Mr Wong further submitted that the Common Understanding is binding on the plaintiff, being the personal representatives of the estates of Kau and Fuk, who had full knowledge of the extensive work carried out by the 3rd defendant. In the premises, it is clearly unconscionable for the plaintiff (acting in her capacity as the personal representative of the estate of Kau and Fuk) to renege from the Common Understanding.
6.22 Mr Wong submitted that the idea that the Common Understanding would come to an end upon the death of the three brothers is unknown in law and does not make sense.
6.23 Further submissions on knowledge were also lodged by Mr Wong which I will deal with later on.
3) My view
(i) Is the point open to the plaintiff?
6.24 As apparent from the closing submission of the plaintiff’s counsel at the trial, the focus of the arguments below was on the existence of the Common Understanding. But the formation of the Common Understanding is only one aspect of common intention constructive trust, namely, the express way in which the common intention is formed. At the same time it is also necessary to show that the claimant had relied on the express common intention to his substantial detriment so as to affect the conscience of the other party to the common intention. All these elements must be present in order to perfect an imperfect gift on land which does not comply with the formalities of being in writing. The same consideration applies to proprietary estoppel and estoppel by silence.
6.25 Whilst in this case the plaintiff had not questioned the defendants about the knowledge of the three brothers of the work carried out by the 3rd defendant on the Disputed Land, I do not agree that the plaintiff is not entitled to raise the matter now. This is clearly a matter that can be raised based on the existing findings of fact by the Judge. The evidence of the 3rd defendant relating to the work done during the lifetime of the three brothers is that in 1991/1992, he had built an iron gate at the eastern side of the Disputed Land. He also built fence walls and increased the height of the fence to ensure that people would not enter the Disputed Land. In 1998 he blocked the east side entrance. In order to reach the Disputed Land people must go through the gate that was installed in 1976 at the Disputed Land. It was pleaded that from 1992 to 2002 he had maintained the trees, flowers, plants and storage houses in the Disputed Land. However, the substantial work by way of the construction of the two structures only occurred in 2002 and 2003 when the three brothers had all died. The Judge did not make any finding that the works done by the 3rd defendant before the substantial construction of the two structures constituted detriment of a substantial nature.
6.26 Mr Wong argued the Judge did not make specific finding on whether each of the works carried out itself constituted sufficient detriment only because the plaintiff did not take the point at trial. Had the point been taken, the 3rd defendant could have elaborated on the harshness of his physical labour in 1991/1992; further, he could have elaborated on the actual knowledge of Fuk/Kau prior to their death. The 3rd defendant was deprived of such opportunity.
6.27 My concern is that viewing the judgment below broadly there really is no analysis why the causes of action had been properly constituted. In my view the fact that the point was not raised below is not the same as it had been abandoned. The raising of this argument may involve additional findings in a retrial but this cannot be the sole reason why the point cannot be raised now. I am satisfied that the plaintiff is entitled to rely on the knowledge argument.
6.28 On reflection, in my view, the focus of this appeal should be on whether the proprietary estoppel had been properly constituted by the time of the death of the three brothers by reference to the three essential elements particularly the element of substantial detriment. The question of knowledge is only a subsidiary question. I will, therefore, first deal with the plaintiff’s argument that the causes of action were not properly constituted at the time of the death of the three brothers.
(ii) Common Understanding ends with death?
6.29 I will begin with the issue whether the Common Understanding came to an end at the time of the death of the three brothers?
6.30 Ms Eu argued that in the case of Fuk who died intestate, his share of the Disputed Land became part of his ‘residuary estate’ upon his death. As such, his share of the Disputed Land shall be distributed in accordance with the rules of intestate succession laid down by the Intestates’ Estates Ordinance (Cap. 73). Any Common Understanding on the part of Fuk prior to his death, without any sufficient detrimental reliance binding on his conscience, cannot override the statute. In the case of Kau and Wan who died testate, their last wills dated 27 February 1993 and 5 August 1999 respectively shall be construed to speak and take effect as if they had been executed immediately before their death since there is no evidence of any contrary intention appearing from their wills: see section 19 of the Wills Ordinance (Cap. 30). Therefore, any Common Understanding formed prior to Kau’s and Wan’s death, without sufficient detrimental reliance binding on their conscience, were superseded by their last wills which spoke and took effect immediately before their death.
6.31 Mr Wong’s response is threefold : First, the plaintiff is unable to cite any authority in support of her (very bold) proposition. The plaintiff’s suggestion is simply unknown to the law. Second, her argument is plainly wrong as a matter of law. A personal representative does step into the shoes of her predecessors-in-title and she is bound by the common intention constructive trust and proprietary estoppel. Third, her argument makes no sense. There is no logical reason why a personal representative is at liberty to renege from the promises made by her predecessor-in-title. This would be most unfair to the promisee, and this defeats the rationale underpinning the doctrines of common intention constructive trust and proprietary estoppel (i.e. to protect the promisee against unconscionable behaviours).
6.32 Mr Wong referred to Gillet v Holt [2001] Ch 210 at 232 where Robert Walker LJ stated :
‘ The issue of detriment must be judged at the moment when the person who has given the assurance seeks to go back on it.’
6.33 Mr Wong submitted that by this statement, the question to ask is whether the 3rd defendant suffered sufficient detriment as of the time when the plaintiff (acting as personal representatives of Fuk/Kau) sought to resile from the Common Understanding. The relevant point of time should be 7 March 2013 (when the plaintiff sued the 3rd defendant in this action) or 5 April 2012 (when the plaintiff issued a demand letter to the 1st defendant/2nd defendant). As of 2012 and 2013, the 3rd defendant had already suffered substantial detriments. As such, the requisite requirement is satisfied.
6.34 With respect, Mr Wong’s formulated question begs the question as to when the detriment occurred. Lam VP referred to the judgment of Robert Walker LJ in Gillett at p[233D] which for the ease of reading I will repeat here :
‘ If in a situation like that in Inwards v Baker , a man is encouraged to build a bungalow on his father’s land and does so, the question of detriment is, so long as no dispute arises, equivocal If and when the father (or his personal representative) decides to go back on the assurance and assert an adverse claim
6.35 I respectfully agree with this passage. But, unlike the present case, there is no contentious issue in Gillett that detriment had already occurred during the lifetime of the deceased promisor. This is also the situation with Inwards . The distinguishing feature of this case is, threefold, first, there is no plea that the plaintiff is a party to the Common Understanding, second, the interposition of the law on devolution of the deceased’s estate on death with or without a will, and third, the contentious issue here whether substantial detriment had taken place during the lifetime of the three brothers. Hence in discussing this topic, a distinction must be drawn on whether, on the one hand, proprietary estoppel had already been established during the lifetime of the brothers and, on the other hand, whether it had not yet been established on their death. In my view, based on Robert Walker LJ’s statement, the relevant time for assessment should first be at the time of the death of the three brothers. In Powell v. Benney [2007] EWCA Civ 1283 the first instance judge HHJ Levy QC at paragraph 61 of his judgment (which is repeated in paragraph 14 of the judgment of the Court of Appeal), interpreted Robert Walker LJ’s statement, in the context of that case, as the moment of death of the deceased when it was found he had died testate and when the claimant had already enjoyed the property and spent money on it. Sir Peter Gibson whose judgment was agreed by the other members of the Court of Appeal did not disagree with the judge’s view. In my view, Powell is an illustration of the principle enunciated in Gillett . It makes sense to regard the time of death of the three brothers as the relevant moment for the purpose of ascertaining whether detriment had occurred so as to bind their conscience because that moment is their last chance to go back on their promise or representation. As of the respective dates of death of the three brothers, the structures had not been built. As discussed earlier, the Judge had not made findings whether the steps undertaken by the 3rd defendant prior to the building of these two structures is sufficient to constitute substantial detriment so as to bind the conscience of the three brothers. In my view this requires specific findings and a further hearing on this issue is inevitable.
6.36 If the conscience of the three brothers were already bound by the time of their death or, to put it in another way, equity had by then established, then the plaintiff is likewise bound as the personal representatives of Kau and Fuk. Guo and Lee , ‘Land Law in Hong Kong ’ (4th Ed.) at paragraph 3.72 stated that the equity which is binding on the legal owner whose assurance was acted upon can be binding on a third party, and can bind the legal owner’s personal representatives, citing Inwards v Baker [1965] 2 QB 29 at 37F. The rationale is explained by Browne-Wilkinson J in Swiss Bank Corpn v Lloyds Bank Ltd [1979] Ch 548, 565-566 :
‘…… Once an equitable interest in property is established, thereafter any third party taking that property from the original contracting party or the original trustee only takes it, in the eyes of equity shorn of, or subject to, the equitable interest. But as the right and the remedy is equitable only, the courts of equity would not enforce the equitable interest against the third party unless it was inequitable for him not to give effect to the prior equitable interest. It is on this ground that a subsequent purchaser for value of a legal interest without notice takes free of prior equitable interests.’
6.37 This passage was approved by the Court of Appeal in Mountney v Treharne [2003] Ch 135 per Jonathan Parker LJ.
6.38 The discussion so far is on the position under proprietary estoppel. While recognizing the conceptual difference between it and common intention constructive trust, my view is that what I have discussed above applies equally to whether common intention constructive trust has been established as well.
6.39 However, the inquiry does not end here. If equity had not come into operation by the death of the three brothers, it does not mean that invariably the plaintiff would not be affected notwithstanding the absence of plea by the defendants that she was a party to the Common understanding. As Thorner shows, in order to establish proprietary estoppel (by representation), the Court would look at the words of the promisor objectively to see whether the promisee would form a reasonable view that the promisor was giving him an assurance that he was to receive the benefit and that he could rely on it. If the promisee did rely upon it to his detriment then the necessary element is established. As the Judge had not considered the issue in this context, there ought to be a further inquiry on this issue.
6.40 In addition, if the plaintiff had knowledge of the construction of the structures and yet had stood by and done nothing to stop the defendants from carrying on with work on the Disputed Land well knowing Kau and Fuk had a common share there, then estoppel by silence or acquiescence may well come into play and preclude her from asserting the interest of Kau and Fuk.
6.41 Mr Wong submitted that in the judgment below under heading ‘Alternatively, Estoppel by Standing By’ the Judge had held that ‘100. By now, there is no dispute that the plaintiff was fully aware of the works carried out by the 3rd defendant on the Disputed Land ......’ and ‘103. ..... The plaintiff had clearly stood by and is now estopped from complaining.’ But the Judge had not addressed the point that Ms Eu has argued, namely, the plaintiff was not entitled to take any action until she obtained grant of probate in respect of Kau’s estate in 1998 or grant of letters of administration in respect of Fuk’s estate in 2006. There is also the additional matter that the plaintiff has explained, as the 1st and 2nd defendants are part owners and the 3rd defendant their son, she has no right to object to the use of a part owner. She only commenced these proceedings when Structure A was being expanded and built higher and might cause danger. This is pleaded both in the Statement of Claim and in the Reply and submitted by counsel in both the opening and closing submission. Again this is a matter which will require further findings. Lam VP has also said in his judgment that the form of relief must also be remitted. I respectfully agree.
(iii) Benefit and not detriment?
6.42 As to the plaintiff’s argument that the 3rd defendant did not suffer detriment but had rather gained benefit, this did not appear expressly in the Notice of Appeal. As such, I would not allow this point to be raised now. In any event, this is not a point of substance. Snell’s at 12-043 stated :
‘ ... “[t]he issue of detriment must be judged at the moment when the person who has given the assurance seeks to go back on it”.
...
It has been emphasised that detriment is “not a narrow or technical concept. The detriment need not consist of the expenditure of money or other quantifiable financial detriment, so long as it is something substantial”. In testing for detriment, therefore, a court does not undertake an exercise in forensic accounting, but is engaged in a “classic evaluative exercise” and must “stand back and look at the matter to the round”....’
6.43 In assessing whether the requirement of detriment has been met, any countervailing benefits acquired by claimant as a result of his reliance must be taken into account.
6.44 In this case the 3rd defendant had carried out substantial work on the Disputed Land at a cost of about HK$2 million. By all accounts, the detriment of the 3rd defendant is a substantial one certainly by the time the structures were built.
(iv) Knowledge
a) The classification
6.45 I will now return to the issue of knowledge. Snell’s at [12-033] stated there are three distinct strands that comprise proprietary estoppel, namely
(a) acquiescence-based [12-034];
(b) representation-based [12-035]; and
(c) promise-based [12-036].
6.46 At [12-044] the authors stated that unconscionability has a narrow and broad sense. The narrow sense refers to state of mind of the person to be estopped (‘A’) at a particular point, while the broad sense refers to the general, overarching question of whether the position of the parties is such that the Court is justified in intervening. A’s state of mind (i.e. the narrow aspect of unconscionability) is a necessary feature in acquiescence-based proprietary estoppel but not of representation-based or promise-based proprietary estoppel :
‘ (d) The role of unconscionability . A distinction can be made between narrow and broad senses of the term “unconscionability”. In the narrow sense, it refers only to A’s state of mind at a particular point. In that sense, unconscionability is a necessary feature of the acquiescence-based strand of proprietary estoppel, as B must show that A failed to assert A’s right at a time when A knew that B was relying, or about to rely, on a mistaken belief, and A knew that the belief was mistaken. It is not, however, required in either the representation or promise-based strands. A wholly innocent representation can suffice for the former; in the latter, a claim can arise even if A made a promise honestly intending to keep it, and then died believing that the promise has indeed been kept.
The broad concept of unconscionability does not refer simply to the specific issue of A’s state of mind; it is rather directed to the general, overarching question of whether the position of the parties is such that the court is now justified in intervening. As noted at para. 12-037, it cannot be used as a substitute for the specific requirements of proprietary estoppel. It may however have a “very important part” to play in proprietary estoppel, by
“unifying and confirming, as it were, the other elements. If the other elements appear to be present but the result does not shock the conscience of the court, the analysis needs to be looked at again.”
Unconscionability in this broad sense does not refer simply to the specific issue of A’s state of mind; it is rather directed to the general, overarching question of whether the position of the parties is such that the court is now justified in intervening. In this way, the concept usefully allows a court to take account of factors that may mean, despite B’s apparent satisfaction of the three main elements of a claimed proprietary estoppel (viz acquiescence, representation, or promise; reliance; and the prospect of detriment), there are nonetheless grounds for denying B’s claim, or, in the acquiescence and promise-based strands, reducing A’s liability.
In the promise-based strand, for example, the broad concept of unconscionability may therefore, for example, allow a court to take account of a significant change of circumstances that has occurred since the making of A’s promise, as it cannot be expected that A should have to honour a promise “in radically different circumstances than were ever envisaged”. It may also allow a court to take account of the circumstances in which A’s promise was made and whether, for example, it was procured by any misrepresentation or misconduct of B. The concept can thus perform the role played, in the realm of contract law, by doctrines such as frustration, or those recognising vitiating factors such as misrepresentation. There is an argument that, as a promise can give rise to a prima facie proprietary estoppel more easily than to a contractual claim (given the former does not require, for example, intention to make a legally binding agreement or consideration), so should it be easier for A to show that the prima facie claim is, in fact, displaced.’
6.47 There are also discussions on this topic in the textbooks referred to by Mr Wong, namely, ‘McFarlane , The Law of Proprietary Estoppel’ at paragraphs 5.46 and 5.54-5.57 and in Handley, Estoppel by Conduct & Election 2nd Ed), paragraph 1-027.
b) Narrow aspect: The state of mind
6.48 The discussion in these textbooks by reference to the authorities on the state of mind of the person to be estopped really depends on their context. Very often it is not so much whether A has knowledge of the actual reliance by the other party (‘B’) but rather, whether A honestly believes that his statement is correct or where A encouraged B to rely on a belief as to its future actions when knowing that it would not, in fact, act in that way.
6.49 The cases referred to by Mr Wong should be viewed with this caution in mind. It is necessary to refer to the facts of Thorner as summarised in the headnotes in order to fully understand the case. Peter and the father of David, the claimant were first cousi ns who each had a farm. Throughout his life David lived at his parents’ home and helped his father, and subsequently Peter, when he became a widower with no children of his own, farm their respective land. From 1986, after David’s father gave up farming, David worked full time on Peter’s farm until Peter’s death in 2005. Over the years the farm varied in size as Peter bought additional land to farm or sold parcels of land for development. At no time was David ever paid for his work and his only income was pocket money from his father. However, various oblique remarks were made by Peter which led David at first to hope and later to expect that he would inherit the farm on Peter’s death. On one occasion in 1990 Peter handed David an insurance bonus notice, relating to two policies on his life and said: ‘That’s for my death duties.’ In 1997 Peter made a will in which he left pecuniary legacies totalling £225,000 and the whole of his residuary estate to David, who was also named as sole executor, but having fallen out with one of the pecuniary legatees, he subsequently destroyed the will. He never made a new will and died intestate. David sought a declaration that the defendants, Peter’s personal representatives, held his estate on trust for him. The trial Judge found for David but the Court of Appeal allowed the appeal on the ground that the Judge had not found that the assurance was intended to be relied upon and that there was no material upon which he could have made such a finding. The Judge had found that David had relied upon the assurance by not pursuing other opportunities but not, according to the Court of Appeal Lloyd LJ, that Peter had known about these opportunities or intended to discourage David from pursuing them.
6.50 On further appeal, Lord Hoffmann held :
‘ 5. At that point, it seems to me, the Court of Appeal departed from their previously objective examination of the meaning which Peter’s words and acts would reasonably have conveyed and required proof of his subjective understanding of the effect which those words would have upon David. In my opinion it did not matter whether Peter knew of any specific alternatives which David might be contemplating. It was enough that the meaning he conveyed would reasonably have been understood as intended to be taken seriously as an assurance which could be relied upon. If David did then rely upon it to his detriment, the necessary element of the estoppel is in my opinion established. It is not necessary that Peter should have known or foreseen the particular act of reliance.
6. The Judge found, at paragraph 98, not only that it was reasonable for David to have understood Peter’s words and acts to mean that “he would be Peter’s successor to [the farm]” but that it was reasonable for him to rely upon them. These findings of fact were in my opinion sufficient to support the Judge’s decision.’ (emphasis added)
6.51 As is apparent from the case, the knowledge that Lord Hoffmann held was not necessary was the subjective knowledge of Peter of the specific alternative opportunities that David might be thinking of. It is not an authority for saying that knowledge of the detrimental reliance is not necessary at all. Hence Thorner is not an authority which categorically states that the promisor’s knowledge of the actual reliance is not necessary.
6.52 Mr Wong also referred to Taylors Fashions Limited where Oliver J at 151-152 held that :
‘ The principle of proprietary estoppel ‘requires a very much broader approach which is directed rather at ascertaining whether, in particular individual circumstances, it would be unconscionable for a party to be permitted to deny that which, knowingly, or unknowingly, he has allowed or encouraged another to assume to his detriment than to inquiring whether the circumstances can be fitted within the confines of some preconceived formula serving as a universal yardstick for every form of unconscionable behaviour.’
6.53 This statement does not wholly support the argument of Mr Wong because Oliver J continued to hold in the next passage that :
‘ So regarded, knowledge of the true position by the party alleged to be estopped, becomes merely one of the relevant factors— it may even be a determining factor in certain cases — in the overall inquiry.’
6.54 As observed in the latter case of Martin Joyce v Epsom and Ewell Borough Council [2012] EWCA Civ 1398 (Judgment dated 30 October 2012) what one can say about Taylor Fashions Limited is that it adopted a more flexible approach on the issue of knowledge which I will deal with later.
6.55 Ms Eu referred to The Law of Waiver, Variation, and Estoppel by Wilken and Ghaly which stated that :
‘ 11.38. Knowledge of C’s acts in reliance The traditional view is that proprietary estoppel may only be established against a party who either: (i) intended C to act in reliance on the assurance; or (ii) knew of C’s acts in reliance or C’s intention to act in reliance. These are not dual requirements but alternatives: in passive acquiescence cases it is highly unrealistic to say that P indicates an intention that C should act in reliance―the requirement is fulfilled by P’s knowledge of C’s acts.’
6.56 She also referred to Elements of Land Law 5th Ed by Gray and Gray which stated that :
‘ 9.2.54 In order that a proprietary estoppel be raised, it must be shown that the representor gave the relevant assurance of entitlement, whether actively or passively, with the intention that it should be relied on to another’s detriment. It must be proved, moreover, that the representor knew or ought to have known that the representee was likely to undertake detrimental action in the belief that he was acquiring some entitlement on the strength of the assurance. If there is no actual or constructive knowledge of the representee’s intention to rely on the assurance given, the claim of proprietary estoppel must fail.’
6.57 Again one must bear in mind the three distinct strands of proprietary estoppel when these passages are considered.
6.58 The closest authority on this topic is Martin Joyce which the English Court of Appeal held that it was irrelevant as to whether the promisor had knowledge of the detriments actually undertaken by the promisee in cases involving encouragement. This was because the promisor must have known that the promisee would act in reliance of the encouragement. Davis LJ held :
‘ 39. ..... I do not think that the alleged lack of knowledge on the part of the Council of the precise works actually undertaken by Mr Holborn can have the crucial significance the judge seems to have ascribed to it. As the judge had himself found, this was a case of encouragement, on which there was in fact detrimental reliance. It was known what Mr Holborn intended to do. It is not an invariable requirement in a case of this particular kind – indeed it is contrary to the flexible approach which the more recent authorities establish – that the person encouraging necessarily must know just what the person encouraged may have actually done in reliance on the encouragement: see, for example, Crabb v Arun District Council [1976] 1 Ch. 179 at p.189 D-E (per Lord Denning MR) and at pp. 197H-198E (per Scarman LJ); and Taylors Fashions at p.151 (per Oliver J). Mr Green himself very fairly accepted in argument that this could be so; he acknowledged that cases of encouragement are capable, depending on the circumstances, of standing in this respect on a different footing from cases based on acquiescence. But ultimately, of course, all depends on the particular facts of the individual case.’
6.59 I find Martin Joyce to be the most relevant authority on the issue of knowledge in the context of this case. If in the case of encouragement, knowledge of the person who did the encouragement about the actual reliance by the person encouragement is not an invariable requirement for proprietary estoppel, all the more the same reasoning must apply in case of the representation-based and promise-based estoppels. The present case clearly falls within the ambit of these two types of estoppel.
6.60 Drawing all these threads together, if common intention constructive trust and proprietary estoppel were properly constituted by the death of the three brothers then their knowledge of the actual reliance and detriment is not a necessary requirement under the narrow aspect of unconscionability. If these causes of action were not properly constituted by then, the issue of knowledge on their part is not engaged. In such a situation, the knowledge of the plaintiff herself becomes relevant for the issue of estoppel by silence.
c) Broad aspect: The overarching consideration
6.61 As to the broad aspect of unconscionability, Mr Wong referred to Lord Walker in Cobbe v Yeoman’s Row Management Ltd [2008] 1 WLR 1752 that :
‘ 92. ... Here it is being used (as in my opinion it should always be used) as an objective value judgment on behaviour (regardless of the state of mind of the individual in question). As such it does in my opinion play a very important part in the doctrine of equitable estoppel, in unifying and confirming, as it were, the other elements. If the other elements appear to be present but the result does not shock the conscience of the court, the analysis needs to be looked at again.’
6.62 Having considered the way I have analysed the narrow aspect of unconscionability, I do not regard the wider aspect of this concept will have any additional impact on the outcome of the case.
4) Estoppel by silence
6.63 I have already addressed this point in the previous topic.
5) Adverse possession
6.64 The Judge had also made an alternative finding that the 3rd defendant is the beneficial owner of the Disputed Land by reason of adverse possession. This is challenged by Ms Eu who submitted that it is trite law that possession cannot be adverse unless it is without the licence or consent of the registered owner: see Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd (No 5) [2007] 5 HKC 122 at paragraph 65. Further, the burden of proving the lack of licence or consent rests with the squatter who must discharge his burden by adducing compelling evidence: Wu Yee Pak v Un Fong Leung (2004) 7 HKCFAR 498 at paragraph 5. In the present case, a finding of adverse possession is factually inconsistent with a case based on common intention constructive trust, proprietary estoppel and estoppel by standing by where possession of land was not adverse to the registered owners but by virtue of a promise of a gift, licence and permission by the registered owners. This is factually inconsistent with the 3rd defendant’s case as to the Common Understanding and detrimental reliance.
6.65 Mr Wong’s response is that the defendants’ claim for adverse possession is an alternative claim and the Judge’s decision is also an alternative finding only.
6.66 In my view, one may ask alternative to what? If, as the Judge had found, the common understanding existed, then the 3rd defendant’s entry to the Disputed Land must be with the consent of the three brothers and not adverse to their interest. This is so notwithstanding the possibility that the defendants may not be able to establish the common intention constructive trust, proprietary estoppel and estoppel by silence. In my view the finding of adverse possession is wrong in view of the finding of the Common Understanding in the 3rd defendant’s favour.
VI. Ground 5 : Account
7.1 Ms Eu argued that the Judge erred in ordering an account and enquiry as to one-third of the rental income arising from the 1st and 2nd floors of House 774 and one-third of the mesne profits in respect of the ground floor of House 774 as from 1997 onwards and ordering the plaintiff to pay them, in that it is well settled that co-owners are not agents or fiduciaries for one another and a co-owner out of occupation has remedies in law in two situations: (1) damages for occupation rent for ouster, or (b) an account if the other co-owner has rendered himself liable as agent or bailiff (Chen Yu Tsui v Tong Kui Kwong [2006] 1 HKC 23 at paragraphs 87-105, cited with approval by the Court of Appeal in Tang Tak Sum v Tang Kai Fong [2015] 1 HKLRD 286). None of the two situations arise on the facts of this case and the Judge expressly found in paragraphs 112 to 113 of the judgment that there was no ouster. Further, any claims more than six years before the issue of the writ herein dated 11 September 2012 are time barred.
7.2 Mr Wong submitted that it is now recognised that a co-owner may claim occupation rent from another co-owner where it is ‘fair’, ‘just’ or ‘in order to do equity between the parties’: Gray and Gray, Elements of Land Law (5th ed) at paragraph 7.4.45. In Re Pavlou (A Bankrupt) [1993] 1 WLR 1046, per Millett J (as he then was), at 1050D held :
‘ [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.’
7.3 In Re Byford (deceased) [2004] 1 P & CR 12 159, per Collins J (as he then was), held at 168 :
‘ [W]hat the court is endeavouring to do is broad justice or equity as between co-owners.’
7.4 Mr Wong submitted that whether occupational rent would be charged on the facts of each case is ‘ultimately a matter of discretion’ : French v. Barcham and another [2009]1 WLR 1124, per Blackburne J at paragraph 43. See also Leung Siu Man & Ors. v. Leung Yiu Tai (HCA 713/2014, unrep., 16/8/2019) at paragraph 63.
7.5 The Judge did not articulate the reasons why he considered there should be an account from 1997 onwards apart from the fact that the 1st and the 2nd defendants have always asserted that they are co-owners of House 774 and they had demanded the plaintiff to pay a share of the rent.
7.6 In my view this is not satisfactory. The 1st and 2nd defendants and the plaintiff are co-owners of other pieces of land which they have acquired by succession. Clearly there are other relevant considerations, such as but not limited to the following: the state of these other pieces of land, are they rented and are the rents being shared? Why are the 1st and 2nd defendants not liable similarly for an account in respect of the use of the Disputed Land which is being used by the 3rd defendant and as a result the issue of set-off may be raised in respect of the two sets of account? The fact that the 3rd defendant is asserting his beneficial interest in the Disputed Land may not provide a complete answer because there remains the question of when he became the beneficial owner? The limitation period should be considered if the Court is ordering an account on the basis of broad justice and why are expenses incurred by the plaintiff not being deducted first before the rents are accounted for? This is more so when the 1st and 2nd defendants had expressly pleaded that they were entitled to receive rent from 1997 ‘or such period as the Court sees fit’ (para 24 of Re-Re Amended Defence of the 1st and 2nd defendants and Counterclaim). Some of these matters might not have been canvassed before but if the Judge was to order the account on the basis of equity then my view is that he should be properly apprised of these matters before he made the order. This is an issue which requires further findings. In my view, if the matter is to be remitted, then the Judge should give directions requiring the parties to formulate their positions for and against the taking of account and to consider whether further evidence is required.
VII. Conclusion
8. I respectfully agree with the orders to be made by Lam VP save as to the scope of the taking of accounts.
Hon Au JA :
9. I have the benefit of reading the respective judgments of Lam VP and Cheung JA in draft. I respectfully agree with the judgment of Cheung JA, save insofar as those parts that Lam VP has differed from. In respect of those, I will respectfully agree with the judgment of Lam VP, and the ways of disposing of this appeal as proposed by Lam VP at [1.44].
Hon Lam VP:
10. For the above reasons, the appeal is allowed to a limited extent. The Court (unanimously except in respect of the scope of remittance on the order for account, which is ordered by majority) makes an order in terms of paragraph 1.44 above. As regard costs, the following would be our costs order nisi . We would not disturb the order for costs below. As for the costs of the appeal, though the judgment is set aside, the plaintiff is not wholly successful. Since the ultimate result is not known and some of the points are only taken for the first time in the appeal, we order costs of the appeal be in the cause of the remitted trial.
(M H Lam)
(Peter Cheung)
(Thomas Au)
Vice-President
Justice of Appeal
Justice of Appeal
Ms Audrey Eu SC and Mr Anson Wong Yu Yat, instructed by Chan & Chan, for the plaintiff
Mr William Wong SC, Mr Alan Kwong and Ms Stephanie Wong, instructed by Tung, Ng, Tse & Lam, for the 1st to 3rd defendants