Liu Wai Keung v Liu Wai Man
Court of Appeal
Civil Appeal No. 263 of 2013
Kwan, Barma and McWalters JJA
12 December 2014

Limitation of actions – trusts – claim by beneficiary – whether no limitation period applied pursuant to s.20(1)(b) – “trust property … in the possession of the trustee” under s.20(1)(b) did not require trustee to have actual physical possession or occupation of trust property – sufficient if trustee had power of control over property and in position to obtain possession – Limitation Ordinance (Cap. 347) s.20(1)(b)

P and D were brother and sister respectively. A property assigned to D as the purchaser in 1981 was paid for by P and intended by the parties to be his and used meanwhile as the family home, but D was registered as the owner to secure preferential terms for a mortgage. D last resided in the property in July 1992, while P lived in it between 1987 and 2012. On 4July 2011, P brought proceedings seeking a declaration that D held the property on constructive trust for him. The Judge gave judgment to P; and rejected D’s argument that the action was time-barred under s.20(2) of the Limitation Ordinance (Cap.347) (the “LO”) because, having regard to Hovenden v Lord Annesley, where the trustee held the legal estate, his possession was treated as that of the beneficiaries; and so the action was one “to recover from the trustee trust property … in the possession of the trustee” within s.20(1)(b). D appealed.

Held, dismissing the appeal, that:

  • On a proper construction of the phrase “trust property … in the possession of the trustee”, for the purpose of s.20(1)(b) of the LO, it was not necessary for the trustee to have actual physical possession or occupation of the trust property. It would suffice if the trustee had the power of control over the property and was in a position to obtain possession of it. This was satisfied here as, at the time of the writ, D was in a position to obtain possession of the property by virtue of the legal title vested in her.
  • Further, D’s criticism of the Judge deriving assistance from Hovenden v Lord Annesley was unwarranted. He had prayed in aid the statements therein – that the trustee’s possession was according to his title and the right of the beneficiary – to explain why the possession of a trustee or de facto trustee such as D, was not adverse to the possession of the beneficiary, with the result that time did not run in favour of the trustee against the beneficiary.
  • Viewed in the proper context of how the law had evolved, the legislative intent behind s.20(1)(b) was not to relieve a trustee or a de facto trustee from misapplication of the trust property where the trust property was lawfully vested in the trustee and his possession or right of possession was entirely consistent with and not adverse to the beneficiary’s interest. The Judge was right to hold that it would defeat the very purpose of constructive trusts if the trustee could raise a limitation defence against the beneficiary where the trustee still had the legal title but where the beneficiary had been in beneficial enjoyment of the trust property for over six years.

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