LI TIN YAU v. LAU MAY YEE AND OTHERS

DCMP 1012/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 1012 OF 2011

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J U D G M E N T

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1.  This is the plaintiff’s claim arising out of a written agreement for the sale and purchase of Flat B on the 12^th Floor of Fasteem Mansion, 307-311 Jaffe Road, Hong Kong (“the Property”).  The agreement was dated 10 October 2005 (“the Agreement”) and entered into between the plaintiff (“Li”) as the purchaser and the 1^st Defendant (“Lau”) as the vendor.

2.  At the same time, the 2^nd Defendant (“Nip”) claims to have entered into a written agreement for the purchase of the Property from Lau even prior to the Agreement.  Therefore he has a prior interest in the Property than Li’s.

3.  For reasons that will be elaborated below, the claim against the 3^rd Defendant (“WA”) has been discontinued by now.

4.  Both Lau and Nip were absent from the hearing.  Pursuant to the previous directions of the court, the court documents were actually served on Lau by way of substituted service.  As to Nip, personal service was effected.  The affirmations of service show that notice of today’s hearing has been served.  I saw no reason why Li should be prevented from proceeding.

THE FACTS

5.  Known from the documents are the following facts.

6.  Prior to the Agreement, the Property was subject to a charging order absolute dated 4 March 2005 in DCMP 37/2005 in favour of one Hop Sze Properties Co (“Hop Sze”).  WA were then solicitors acting for Hop Sze.  Li admitted knowledge about the existence of the charging order absolute when he entered into the Agreement.  Actually his solicitors made enquires with WA about the outstanding debt; and the reply received indicated that the judgment debt and costs, etc amounted to just a little over HK$34,000.

7.  On 27 October 2005, Li registered the Agreement with the Lands Registry.  Apparently on the same day, Nip issued the writ in DCCJ 5314/2005 against Lau.  Nip caused the writ of summons to be registered on 4 November 2005; and therefore knew or ought to know the existence of the Agreement.

8.  The writ in DCCJ 5314/2005 was endorsed with the claim by Nip against Lau for a sum of HK$200,000 being initial deposit and part payment of purchase price for the Property pursuant to a Chinese written agreement between the parties on or about 1 November 2004; or for specific performance of the agreement.

9.  Nothing developed from the contracted sale and purchase of the Property between Lau and Li or that between Lau and Nip.  The Property was eventually sold to third party in 2006.

10.  Correspondence among the solicitors acting for Li, Nip, the subsequent purchaser and WA ensued in relation to how the balance of the proceeds of sale should be distributed.  Eventually the surplus of the proceeds of sale of the Property fell into the hands of WA, as the prior ranking of Hop Sze’s interest was not disputed.

11.  After deducting the amount for the discharge of the charging order mentioned above, WA refused to release the net surplus of the proceeds either to Li or Nip, in view of their competing claims to the Property.  WA was therefore joined as the 3^rd Defendant in the present proceedings.

12.  By consent, it was ordered on 7 June 2011 that WA did pay into court the net surplus proceeds of sale in the sum of HK$415,310.10 pending the judgment of the claim in these proceedings; and upon that, WA would be discharged from all liability herein.  The sum having been paid into court, Li did discontinue the claim against WA on 22 June 2011.

THE CLAIM AGAINST LAU

13.  The Agreement provided (clause 3 and the 3^rd Schedule) that completion should take place on or before 8 November 2005.  That did not happen.

14.  For his claim, Li referred to various provisions of the Agreement including:

Clause 14

“If the Vendor shall for any cause (other than the default of the Purchaser) fail to complete the said sale in accordance with the terms and conditions of the Agreement the said deposit shall be returned to the Purchaser……and it shall not be necessary for the Purchaser to tender an Assignment to the Vendor.”

Clause 23

“The Vendor hereby declares and confirms that no third party (whether related or otherwise) has any right or interest whatsoever, whether legal or equitable, in the Property. The Vendor further hereby declares and confirms that the Vendor is the sole legal and beneficial owner of the Property and the Vendor has the absolute right and interest in the Property and the Property was purchased with the Vendor’s own monies and the mortgage loan was repaid by the Vendor’s own monies. In the event of any valid third party claim to the Property which could not be settled on or before completion, this Agreement shall be rescinded and the Vendor shall forthwith return all moneys paid hereunder to the Purchaser and it shall not be necessary for the Purchaser to tender an Assignment to the Vendor for execution.”

15.  Li claims that Lau was in breach of the Agreement by failing to complete.  Pursuant to clause 14 of the Agreement, the same was rescinded and he is entitled to the return of the deposit paid.

16.  Alternatively, the fact that the sale and purchase agreement between Lau and Nip dated 1 November 2004 whereby Nip had paid deposit in the sum of HK$200,000 for the purchase of the Property, if true, means that Lau did not have at the time of the Agreement absolute interest in the Property.  Instead it was subject to third party interest, namely that of Nip.

17.  In any event, the fact that the writ in DCCJ 5314/2005 was registered just 4 days prior to the completion date and the stance of Nip in asserting his interest in the Property as stated by his solicitors in the correspondence in 2006 must mean that the claim by Nip to the Property was not settled on or before the completion date under the Agreement.

18.  In either case, Lau was in breach of clause 23.  Again the Agreement was rescinded and Li’s right to the return of the deposit arose.

19.  In view of the evidence and the absence of Lau to say to the contrary, I accept that the case against Lau, in particular under clause 23, is proved.

THE CLAIM AGAINST NIP

20.  Li’s claim against Nip concerns the priority of their respective interests in the Property.

21.  The following provisions of the Land Registration Ordinance, Cap.128 (“LRO”) are relevant:

Section 3

“(1) Subject to this Ordinance, all such deeds, conveyances, and other instruments in writing, and judgments, made, executed, or obtained, and registered in pursuance hereof, shall have priority of their respective dates of registration, which dates shall be determined in accordance with regulations made under this Ordinance.

(2) All such deeds, conveyances, and other instruments in writing, and judgments, as last aforesaid, which are not registered shall, as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same parcels of grounds, tenements, or premises, be absolutely null and void to all intents and purpose……”

Section 4

“No notice whatsoever, either actual or constructive, of any prior unregistered deed, conveyance, or other instrument in writing, or judgment, shall affect the priority of any such instrument as aforesaid as is duly registered.”

Section 5

“All deeds, conveyances, and other instruments in writing, and judgments, which are duly registered within the respective times next mentioned, that is to say, all deeds, conveyances, and other instruments in writing which are registered within one month after the time of execution thereof respectively, and all judgments which are registered within one month after the entering up or recording thereof, shall severally be in like manner entitled to priority, and shall take effect respectively by relation to the date thereof only in the same manner as if this Ordinance had not been passed.”

Section 5A

“Notwithstanding section 3 or section 5 a charging order or lis pendens which is duly registered shall have priority from the commencement of the day following the date of its registration.”

22.  As far as the written instruments are concerned, the Chinese written agreement between Lau and Nip, though dated prior to the Agreement, was never registered.  In the absence of Nip to say to the contrary, there is no question of lack of bona fide on the part of Li when entering into the Agreement.  By virtue of section 3 of the LRO, the agreement between Lau and Nip shall be absolutely null and void to all intents and purpose as against Li as a subsequent bona fide purchaser of the Property for value.  Pursuant to section 4 of the LRO, no notice of the prior unregistered agreement between Lau and Nip shall affect the priority of the Agreement.

23.  As far as the equity created by Nip’s payment of the deposit in the sum of HK$200,000 for the purpose of the Property is concerned, again in the absence of Nip to say to the contrary, there is no question of any notice on the part of Li who might otherwise have been considered to have agreed to purchase the Property subject to such equity.

24.  As far as the writ in DCCJ 5314/2005 is concerned, which was registered as a lis pendens on 4 November 2005, its priority from that day must rank behind that of the Agreement, which was registered within the same month of execution, namely, October 2005.

CONCLUSION

25.  As between Li and Lau, Li has proved his entitlement to the relief sought, namely, declaration that Lau was in breach of the Agreement; and order for the return of the deposit and part payment paid pursuant to the Agreement in the sum of HK$390,000.  In my discretion, Li should be entitled to interest on the sum but only since the date of commencement of these originating proceedings until full payment at the judgment rate.

26.  As between Li and Nip, I am satisfied that the rights and interests of Li in the Property ranks in priority over those of Nip in the Property; and that Li is entitled to and do have priority over Nip in the money representing the balance of the proceeds of sale of the Property which are now standing in court and to the extent of Li’s entitlement as mentioned above.

ORDER

27.  I give an order in the terms of the preceding 2 paragraphs.  Li shall have the costs of this action against Lau and Nip respectively.  Costs shall be taxed, if not agreed.  For clarity, I certify the engagement of counsel.