Land and Property Law — The Court of Appeal re-affirms the finality of TL v ML procedure in resolving competing claims to beneficial interests in matrimonial property in ancillary relief proceedings

In WYM v LYM [2024] HKCA 499; [2024] 5 HKC 294, Anthony P.W. Cheung (with Lee Siu Him) successfully persuaded the Court of Appeal to allow an appeal by a licensed money lender’s (“Intervener”) against the Judge’s order that its beneficial interests in a matrimonial home (“Property”) under a mortgage created by the Husband in its favour, were acquired with constructive notice of the Wife’s beneficial interests that arose out of her spousal relationship and occupation of the property.  

The facts 

In 2015, the Husband entered into a loan agreement with the Intervener for a loan and executed a mortgage over the Property in favour of the Intervener as security, which was then duly registered. Later, the Wife presented a petition for divorce (“Matrimonial Proceedings”). 

In 2016, the Husband defaulted. The Intervener commenced an action to recover the monies due (“Action”). The Wife then joined in the Action, claiming beneficial interest in the Property. About a month later, the Intervener obtained a monetary judgment against the Husband, with its claim for possession adjourned pending the determination of the Wife’s claim for beneficial interest.

In 2017, the decree absolute was granted. Upon the Intervener’s application, the Judge ordered it be joined in the Matrimonial Proceedings, and that the issue of competing interest between the Intervener and the Wife be determined as a preliminary issue based on the procedure laid down in TL v ML [2006] 1 FLR 1263.  

The first instance judgment 

At first instance ([2022] HKFC 95; [2022] HKFLR 182), the Judge found that the Wife had no beneficial interests in the Property on the basis of common intention constructive trust, resulting trust and proprietary estoppel and dismissed her counterclaim. Yet, it held that such finding was not determinative or indicative of the Wife’s claim for beneficial interest (if any) over the Property within the matrimonial regime nor would such finding prejudice W’s position in her subsequent ancillary reliefs claim. 

The Judge further found that the Intervener failed to inspect the Property and made the usual enquiry with the Husband and ordered that the Intervener acquired its beneficial interests in the Property with constructive notice of the Wife’s beneficial interests under her spousal relationship and presence in occupation in the Property and ordered that the Intervener’s interests were subject to its constructive notice of the Wife’s beneficial interest.   

The appeal

The Court of Appeal allowed all grounds of appeal raised by the Intervener.  

First, it re-affirmed that, once it had been decided that the Wife had no interest in the Property, there was neither basis nor need to consider whether the Intervener’s interest in the Property was subject to the Wife’s interest. The question of notice, whether actual or constructive, would be irrelevant. It was of no consequence whether the Intervener had inspected the Property and/or made the usual enquiry. 

Second, the Wife’s entitlement to claim ancillary reliefs under the matrimonial regime could not give rise to any proprietary interest in the Property that ranked before the Intervener’s interest under the mortgage. This was because the encumbered part of the Property did not form part of the Husband’s asset and what would be available for distribution under the matrimonial regime was confined to the unencumbered value of the Property. 

Third, the Judge’s conclusion that the Wife had a beneficial interest in the Property based on her spousal relationship and occupation of the Property could not be supported as a matter of law because the Judge had rejected her constructive trust claim and there was no cross-appeal against this holding. 

Significance

The Court of Appeal has clarified that the resolution of competing claims to beneficial interest pursuant to the TL v ML procedure will be binding on the family court in subsequent stages of the ancillary relief proceedings and, insofar as the matrimonial property is held to be subject to third party interest, the encumbered part of the property would not form part of the available family assets for distribution under the matrimonial regime. Careful planning and preparation is therefore required in presenting the competing claim to beneficial interests in the matrimonial property under the TL v ML procedure. 

Anthony P.W. Cheung (with Lee Siu Him), instructed by Kwan & Chow, acted for the successful Intervener in the Court of Appeal. 

 

Lee Siu Him

Called to the Bar in 2007, Lee Siu Him predominantly engages in general civil practice as both sole counsel and led junior. His areas of expertise include commercial disputes, banking, land, employment, trust, intellectual property and probate.  

Siu Him has a track record of appearances in trials and appeals involving complex questions of law such as “contractual estoppel” in mis-selling claims (DBS Bank (HK) Ltd v Sit Pan Jit HCA 382/2009 (CFI); CACV 91/2015 (CA); FAMV 45/2016 (AC)), adverse possession of common parts of multi-storey building (The IO of Po Hang Building v Sam Woo Marine Works Ltd FAMV 21/2016 (AC)), and effect of severance notice on joint tenancy (Ho Kwok Wing v Chan Mei Mui [2018] HKCFI 1135 (CFI); [2020] 3 HKLRD 548 (CA)). 

Siu Him holds particular exposure in cases raising public law issues of great general or public importance, e.g. the first final appeal involving National Security Law (see HKSAR v Lai Chee Ying (2021) 24 HKCFAR 33) and the judicial review challenging constitutionality of “anti-mask” law (Leung Kwok Hung v Secretary for Justice [2020] 1 HKLRD 80 (CFI); [2020] 2 HKLRD 771 (CA); (2020) 23 HKCFAR 518 (CFA)). 

Siu Him has extensive experience as both trial and appellate advocate in courts and tribunals, including magistrates’ courts, the Lands Tribunal, the District Court, the Court of First Instance, the Court of Appeal and the Court of Final Appeal. He also has a wealth of experience in providing opinions on legal issues arising from listing applications to the SEHK. 

Find out more from Siu Him’s profile.

This article was first published on 4 November 2024.

Disclaimer: This article does not constitute legal advice and seeks to set out the general principles of the law. Detailed advice should therefore be sought from a legal professional relating to the individual merits and facts of a particular case. The photographs which appear in this article are included for decorative purposes only and should not be taken as a depiction of any matter to which the case is related. The views and opinions expressed in this article/material are solely those of the members authoring it and do not necessarily reflect the official policy or position of Denis Chang’s Chambers, or of any other member or members of Denis Chang’s Chambers.