The city's top court has ruled that contributors to the purchase of a home ownership scheme (HOS) flat are eligible to share a part of the flat's accrued equity, even if they are not listed as the flat's owner.

Two very different situations involving two families raised the key question to be answered by the Court of Final Appeal in Tuesday's landmark ruling: is a person who has paid toward the price of an HOS flat qualified as a beneficiary to the flat, even if he is not the owner?

The matter was brought to the fore by a family feud. The mother of the Ling family bought an HOS flat for two family siblings in 1983. To increase chances of being selected on the ballot, two applications were submitted by the mother and the younger brother, Ling Shui-fai.

Shui-fai's bid succeeded. When ownership later came into dispute, his elder brother Billy Ling Wing-fai argued that while their mother settled the down payment, it was he who repaid the remaining mortgage loans until 1999. Billy initiated the proceeding two years after his sibling attempted to sell the flat in 1997.

Since HOS applicants are prohibited from reselling flats during a five-year prohibition period, it came into question if such a "beneficial interest" occurring between the Ling brothers before the end of the resale prohibition was forbidden and punishable by law.

Another family ran into a similar issue when the son and daughter-in-law paid the whole purchase price for a HOS flat in the name of their retired parents. The daughter-in-law claimed beneficial interest in the flat in 2010, after her husband died.

Two judges of the Court of First Instance in separate cases ruled that anyone who had made payments was entitled to a beneficial interest. The Court of Appeal reversed both cases on the grounds that the people who made the payments may have done so for speculative purposes.

The panel of five judges at the Court of Final Appeal unanimously restored the declarations made by the Court of First Instance.

Justice Patrick Chan pointed out that any alienation of the Housing Ordinance in question must be a transfer, which divests the owner's rights and interests in the flat. The situation of a "resulting trust" in the case of the Lings and the retired couple did not amount to an alienation of the daughter-in-law's beneficial interest.

The view was given further support by the disclosures of income and assets of both applicants and occupants, which showed that HOS "clearly anticipates" that the applicants may have to pool financial resources together to make the purchase.

Justice Lord Hoffmann believed that the denial of a remedy to a person who paid the purchase price on the understanding that he would acquire a beneficial interest, as ruled in the Court of Appeal, can be "very unjust".

And if the alienation sanction were to apply to trap the person who paid for the HOS flat on behalf of the listed owner, Hoffmann wrote, "he would have committed a criminal offense for doing something which, to most people in his position, would seem normal and even generous."

He concluded, it was in public interest that people with low income should be able to buy an HOS flat with assistance of their family or friends, on the basis that the person who makes payment on behalf of the owner will have beneficial interests that can be realized when the sanctions are lifted.

The Court of Appeal had expressed concerns about the issue of speculation in the ruling, but Hoffmann raised doubt, "whether paying the purchase price of an HOS flat would be an attractive form of commercial investment", because the cash is locked up for up to five years.

Hoffmann saw no sign of such abuse, adding that "the Housing Ordinance has been amended many times and if abuses should at some future date manifest themselves in ways presently unknown, the legislature can deal with the problem."

HOS flats will return to the market in 2016, following a decade of suspension. The Housing Authority decided in September that the revived HOS will adopt existing regulations.

kahon@chinadailyhk.com

(HK Edition 11/14/2012 page1)