CHOW YUK YIN v. CHU CHIU LING and Another

1996, No. MP2878

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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R U L I N G

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1. I am grateful to counsel for their helpful submission. I feel able to give my decision now.

2. The facts giving rise to the present dispute is relatively simple. By an agreement dated 14 June 1996 the plaintiff agreed to purchase the suit premises from the defendant.

3. The suit premises were originally registered in the name of the first named defendant with CHU Chiu-ling as one of the two tenants in common. CHU Chiu-ling, by a deed of gift dated 30 January 1992, assigned his share in the suit premises to the second named defendant, CHU Fook-tung. CHU Chiu-ling passed away about 18 months later, or rather about two years later, on 22 November 1993.

4. There is no indication if any estate duty in respect of the suit premises was payable and if so whether such estate duty had been paid.

5. The plaintiff argued that by reason of section 6(1)(c) and section 18(1) of the Estate Duty Ordinance, the suit premises is subject to a first charge for the payment of estate duty in relation to the suit premises.

6. The plaintiff also argued that a good title had not been shown as the defendant had not adequately answered the requisition pertaining to the statutory charge under section 18(1) of the Estate Duty Ordinance in question.

7. The issue that I have to decide is whether there is any real risk of the plaintiff's right over the suit premises being affected by any encumbrances by reason of section 18(1) of the Estate Duty Ordinance, should the sale and purchase agreement in question goes ahead, accepting that the defendant have the obligation to show a good title and the obligation to answer all requisitions properly raised.

8. The duty to pay estate duty falls, of course, primarily on the estate of the deceased, or the executor, or the beneficiaries but section 18(1) of the Estate Duty Ordinance clearly creates a first charge against property over estate duty payable in respect of such property. But in my view, such charge could not affect the right of a bona fide purchaser for value if the charge has not been registered in accordance with the Land Registration Ordinance.

9. I am of the view that the wording of section 3 of the Land Registration Ordinance is clear enough to afford adequate protection to the plaintiff. In my view, the public is entitled to have the definite and certain knowledge in connection with encumbrances affecting land. Such definite and certain knowledge can only be obtained if the registration of encumbrances under the Land Registration Ordinance is to be taken to have overriding effect.

10. It would indeed be most undesirable for conveyancing that there should be or could be charges affecting the land lurking somewhere when such charge is not registered under the Land Registration Ordinance. In my view, all encumbrances based on existing liability affecting land must be registered to have any effect on the right of the registered owner, who acquire the property for valuable consideration without notice.

11. I am persuaded that in order to have the statutory charge under section 18 of the Estate Duty Ordinance enforceable against subsequent purchasers for value, it must have been registered under sub-section (2) and (3) of the ordinance.

12. I am aware that such decisions, as emphasised by Mr CHAN, may have adverse effect on the ability on the part of the commissioner to protect the public's purse in the collection of the estate duty. On the other hand, I am of the view that certainty in terms of the knowledge of the encumbrances affecting land in conveyancing is perhaps more important.

13. I drew comfort so far as my decision is concerned from the decision of Mr Justice Godfrey in the case of LEE Siu-man v CHU Chi-wing, reported in 1992 and 1993 of the Conveyancing and Property Report, page 439, when he said at page 442 that:

"If the commissioner had not registered the charge (being a subsisting charge capable of registration) before the completion of the purchase, it may be that in that case the purchaser would take free from the charge, even though he may have had actual notice of the facts giving rise to the charge."

14. I also drew comfort, of course, from the decision of Deputy Judge Patrick CHAN, as he then was, in the other case referred to by counsel of Ample Treasure v Eight Gain Investments, when he said at page 451 that:

"...,even if the plaintiff should have actual or constructive notice of such facts, the statutory charge is null and void under section 3(2) of the Land Registration Ordinance as against the plaintiff being a bona fide purchaser for valuable consideration."

15. I accept that both the decision of Mr Justice Godfrey and Deputy Judge CHAN, as he then was, in the aforesaid cases were both obiter, but I am satisfied that their views on the matter are correct and should be followed.

16. In my view, there is no risk that the plaintiff's right over the said property would be affected by any charge under section 18(1) of the Estate Duty Ordinance, if such charge is not registered before the completion of the purchase in question.

17. In the circumstances, I am of the view that the defendant has adequately answered the requisition raised by the plaintiff in this particular matter. The plaintiff's application has to be dismissed.

(W. YEUNG)

Judge of the High Court

I/we certify that to the best of my ability and skill, the foregoing is a true transcript of the tape recording taken of the above proceedings.

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Dated the 6th day of December 1996