By Paul Firmin, Partner
Yet again the Courts in Hong Kong have had to consider a case that involved an oft believed myth – ‘because we were married I thought half the house was mine, even though my name wasn’t on the title’.
This is one of those myths that has actually gained some strength in the last 14 years since the English Supreme Court’s decision in White –v – White that husband and wife must share marital property equally when divorcing. Hong Kong has followed White with the Court of Final Appeal’s 2010 decision in LKW –v – DD  6 HKC.
What happens though when a spouse sells the property before a divorce?. Very recently in Mo Ying –v- Brillex Development Limited and Chan Wai Tim [CACV 120/2014], the Court of Appeal were faced with a case brought by a wife whose Husband had sold the matrimonial home from under her feet, and gone on to lose most of the sale proceeds. She sued her husband and the purchaser alleging that the Husband held the property (when he owned it) on a ‘common intention constructive trust’ for himself and her jointly, and had sold the property without her knowledge and consent.
Not so said the trial judge and the Court of Appeal. To establish a common intention constructive trust, there must either be an express common intention or one to be inferred. The Husband’s excuse or reason for not changing the title from sole to joint, along the lines “it’s troublesome – will have to pay” even on the wife’s evidence were equivocal and did not lead her into believing that she had an interest in the property.
This led to the wife having to pursue the inference of a common intention. The approach to be adopted by the Court in considering whether there is to be inferred a common intention is to consider the overall circumstances from the conduct of the parties. As the Court of Appeal said though:
“The difficulty is the extent to which one should consider the setting of a married couple and their matrimonial home on this issue. Specifically, what weight should one put on a matrimonial relationship in the analysis which, after all, under the modern approach of fairness in the matrimonial regime, demands no discrimination in terms of the nature of contribution by a married couple.”
Whilst admitting that it was tempting to merge the matrimonial regime with the constructive trust approach, Cheung JA thought it wrong in principle. The matrimonial regime had been developed over many decades from statute and the common law before it reached the present status of using equal sharing as the starting point. On the other hand in the constructive trust approach, the matrimonial relationship was no more than one of the factors to be considered in the inference exercise.
Each case will of course turn on its own facts, but in Mo Ying it was not enough that there was a marriage, that the property had been acquired as the matrimonial home for the wife and children, that the wife had made monetary contributions through the pooled family resources, that the wife’s sister had lent part of the purchase price and the wife’s sister had lived in the property after the purchase.
Cheung JA thought the words of Fox LJ in Burns –v – Burns  Ch 317 particularly apposite:
‘There remains the question of housekeeping and domestic duties. So far as housekeeping expenses are concerned, I do not doubt that (the house being bought in the man’s name) if the woman goes out to work in order to provide money for the family expenses, as a result of which she spends her earnings on the housekeeping and the man is thus able to pay the mortgage instalments and other expenses out of his earnings, it can be inferred that there was a common intention that the woman should have an interest in the house – since she will have made an indirect contribution to the mortgage instalments. But that is not this case.
During the greater part of the period when the plaintiff and the defendant were living together she was not in employment or, if she was, she was not earning amounts of any consequence and provided no money towards the family expenses. Nor is it suggested that the defendant ever asked her to. He provided, and was always ready to provide, all the money that she wanted for housekeeping. The house was not bought in the contemplation that the plaintiff would, at some time, contribute to the cost of its acquisition. She worked to suit herself. And if towards the very end of the relationship she had money to spare she spent it entirely as she chose. It was in no sense ‘joint’ money. It was her own; she was not expected and was not asked to spend it on the household.’
The wife in Mo Ying failed to prove a common intention constructive trust and failed therefore to establish that she had an interest in the property before it was sold. On the facts of the case, the wife was also held to be precluded from setting aside the sale to the purchaser even if she could have established an interest in the property.
Mo Ying serves as a timely reminder that a spouse’s rights to equal sharing of property on divorce is a very different matter from the rights of a spouse before divorce. Marriage is not yet a legal partnership even when their marriage vows include “with all my goods I thee endow….for richer, for poorer…”!