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Hong Kong Court of Final Appeal Ordered Land to be Transferred and Clarified Principles on Proprietary Estoppel

17 Jun 2021

1. In a recent judgment of Cheung Lai Mui v Cheung Wai Shing & Ors. [2021] HKCFA 19 given by the Hong Kong Court of Final Appeal (the “CFA”) over a land dispute, Counsel William Wong SC, Alan Kwong, and Stephanie Wong successfully established beneficial interest over the disputed land for their client, namely the 3rd Defendant (“D3”).

2. In this case, the CFA resolved two legal issues of general public importance, namely:-

(1) Whether a proprietary estoppel can arise if the promisee only suffers reasonable detrimental reliance after the death of the promisor; (the “PE Question”); and

(2) Whether a court of equity will order a co-owner in sole occupation of land to account to the other co-owners for occupation rent even if there is no ouster when it is necessary to do so to do equity between the parties: Re Pavlou (A Bankrupt)  [1993] 1 WLR 1046 at 1050D (the “Rent Issue”)

A. The PE Question

3. On the PE Question, the CFA held that equity requires that a flexible approach be adopted:-

(a) Where no detrimental reliance was suffered prior to the death of the promisor, the promise will be taken to have lapsed;

(b) Where the subject land is co-owned, the “cut-off” date is that of the last survivor’s death;

(c) In considering whether sufficient reliance has been established prior to the “cut-off” date, the Court would look at all relevant circumstances, the context surrounding the promise, and the relationship between the parties;

(d) Where some reasonable detriments were suffered before the promisor’s death (such that the requirement of detrimental reliance is satisfied), the state of affairs subsequent to the “cut-off” point (i.e. the date of death) are relevant to the question of reliefs.

4. Applying the above principles to the facts, the CFA considered that in the context of this case concerning a traditional Chinese family living in the New Territories, the steps taken by D3, such as carrying out works to build stone walls to surround the disputed land, applying substantial physical effort to heighten the stone walls and installing underground electricity cables connected to the lights at the entrance gate etc., constituted sufficient detriments. Indeed, these were the acts of a young man preparing for an adult life in occupation of the improved disputed land. Since these acts were performed before the death of the promisors, the requisite requirement of detrimental reliance was satisfied.

5. On the question of relief, the CFA took into account that after the death of the promisors, D3 carried out very extensive works to build 2 houses (i.e. his home) on the disputed land. Even though these works took place after the “cut-off” date, they should be taken into account in considering what relief to grant. Pertinently, the Court also took into account D3’s emotional and sentimental attachment to the disputed land throughout the years.

6. Accordingly, the CFA declared that P is estopped from denying that D3 is beneficially entitled to the disputed land, and it would be appropriate to grant D3 beneficial interest over the disputed land.

B. The Rent Issue

7. On the Rent Issue, the Court of Final Appeal considered that on proper understanding, the authorities (including Re Pavlou (A Bankrupt) (supra)) reviewed did not support a free-standing “modern approach” on occupation rent.

8. The notion of “unity of possession” prevails. Therefore, in order for a claim by one co-owner against another co-owner in occupation for payment of occupation rent or for an account of rent to be successful, ouster (including “constructive exclusion” as in domestic violence cases) or an operative agreement rendering the co-owner in occupation an agent or bailiff has to be established.

Mr William Wong, SCMr Alan Kwong and Ms Stephanie Wong for the 1st to 3rd Defendants (Respondents)

Ms Audrey Eu, SCMr Anson Wong Yu Yat and Mr Jason Kung for the Plaintiff (Appellant)