The case of W,YC v T,WK and TWF [2024] HKFC 124 is about one family buying a property together, but could not resolve their differences when mutual trust broke down.
Background
All along, the husband’s mother (N) had wanted to buy a property for the husband’s younger brother (TWF), because he is visually impaired, and mother wanted to provide financial security for him when she could.
In around 2015, husband (TWK) and wife (WYC) wanted to buy a village house (the House) for their growing family, and convert 1/F and 2/F into one duplex apartment. While they had enough capital to buy 2/F, they did not have enough capital to buy 1/F. They brought this up during dinners with the husband’s family members. Husband and wife’s idea coincided with the mother’s wish. They started discussions about purchase of the House.
After discussions throughout 2015-2018, the 4 of them reached a mutual understanding to purchase the House together as a whole. In their minds, this is a mutually benefitting agreement:
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- G/F would be apportioned as 35% of the purchase price, 1/F 30%, and 2/F 35%.
- 2/F would become husband and wife’s home with their children;
- 1/F would belong to the younger brother. It would be rented out, and the rental income would be used towards the monthly mortgage repayment. Husband and wife would pay the balance of the monthly mortgage repayment;
- G/F would also belong to the younger brother. The rental income from G/F would be used to support his and mother’s living expenses;
- The wife would be the sole legal owner of the House, but hold G/F and 1/F on trust for the younger brother.
The purchase price is HK$10 million. Downpayment is $5 million and the mortgage is $5 million. The mother and younger brother paid $4.23 million to the purchase price (out of which HK$260,000 came from the younger brother), and the husband and wife paid the rest. A few years later, the wife filed for divorce. During the divorce proceedings, she denied the younger brother owns G/F and 1/F.
The Younger Brother’s Claim
The younger brother’s successful claim is based on a common intention constructive trust. He relies on the common understanding about the purchase of the House reached amongst the family members. He and his mother relied on this common understanding to paid HK$4.23 million towards the purchase price (out of which HK$260,000 came from the younger brother’s lifelong savings).
The court declared that the younger brother has 65% of the House (35% for G/F, and 30% for 1/F), but this interest is subject to 52% of the outstanding mortgage.
The court found that the whole family (including the wife, husband, younger brother, mother) had indeed reached the common understanding across 2015-2018. The younger brother and the mother had relied on this common understanding to pay HK$4.23 million towards the purchase price, including all of the younger brother’s savings – who is visually impaired and only earns HK$8,000 – HK$10,000 each month. It is clear that the younger brother had relied on the common understanding, and acted to his detriment. The court also found that, as such, it was unconscionable for the wife to claim that she is the sole legal and beneficial owner.
Key Observations
Firstly, if there is a common understanding within the family, the court is likely to give effect to it, even if it may not be legally enforceable. In this case, there is no DMC, the younger brother cannot be the legal owner of G/F and 1/F. Despite this, the court upheld the mutual understanding to represent the whole family’s common intention, and declared the younger brother as the beneficial owner of G/F and 1/F. However, while the lack of DMC does not affect the younger brother’s claim, this may entail a practical difficulty on enforcement later on.
Secondly, the WhatsApp messages exchanged within the family were crucial in confirming there was a common understanding. The court especially considered the wife’s message with the husband when they were discussing how to divide their assets during divorce – those messages demonstrated the wife’s awareness of the common understanding, and rejected the wife’s case.
Takeaway
It is possible for the relatives who paid towards the purchase of a property, who are not the legal owners, to have an interest in the property.
However, getting the judgement is one thing, asserting your rights is another. Due to the fact that the House is not partitioned (no DMC), asserting the beneficial interest becomes less straightforward for the younger brother. In the future, he may need to take further action(s) to enforce his interest.
If you have paid towards the purchase of any property (landed property or not landed, e.g. shares) and denied the rights of a beneficial owner, remedies may be available to you – you are suggested to seek independent legal advice.
If you require assistance or have any query related to matrimonial properties, please do not hesitate to contact our Family team.
This article is for information purposes only. Its contents do not constitute legal advice and readers should not regard this article as a substitute for detailed advice in individual instances.
This article is the first in a series discussing third party interests in matrimonial property. It is co-authored by Raphael Wong of Hugill & Ip, Enzo Chow of Droit Chambers, and Christie Lee of Pantheon Chambers.
