WIDE POWER CORPORATION LTD v. THE INCORPORATED OWNERS OF MANHATTAN COURT

HCA 1485/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

HIGH COURT ACTION NO 1485 OF 2013

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D E C I S I O N

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1. This is a summons by the plaintiff to vacate a registration of lis pendens under section 19 of Land Registration Ordinance Cap 128.

I.  Background

2. The plaintiff was the owner of a top-floor apartment in a development known as Manhattan Court and the claim against the Incorporated Owners of the Manhattan Court concerned various alleged failures causing, amongst others, water leakages into the apartment.

3. The defence and counterclaim alleged, amongst others, that the water-leakages were caused by illegal structures the plaintiff (or previous owners) erected on the roof of the apartment against the DMC.  The defendant sought, amongst others, an injunction against the plaintiff to remove the illegal structures and reinstate the condition of the roof.

4. Accordingly, the defendant registered a lis pendens against the apartment on 16 October 2013.

5. Around May and June 2014, the plaintiff took steps to remove various alleged illegal structures but the defendant did not vacate the registration.

6. The plaintiff took out this summons on 22 September 2014.

7. In opposing the plaintiff’s application, the defendant has exhibited an expert report stating, in essence, that the removal of illegal structures and reinstating roof condition were incomplete.

8.  In the meantime, before this hearing took place, the plaintiff has sold the apartment to a third party (completion date was 31 October 2014).  Paragraph 36 of the Agreement to Sale and Purchase reads (as translated to English): “…seller shall be responsible to vacate the registration Sealed Copy Defence and Counterclaim (Memorial No. 13101601110054) (that is, the lis pendens in question here), matters related to this registration has no relation with the purchaser, responsibility to vacate this registration and costs of such shall be borne by the seller.”

II.  The relevant ordinance

9. Section 1A of Land Registration Ordinance defines “lis pendens” as “(a) any action or proceedings pending in a court…that relates to land or any interest in or charge on land…”

10. Section 19 of the ordinance states “the court….may on the determination of the lis pendens, or during the pendency thereof, where the said court…is satisfied that the litigation is not prosecuted bona fide, or for other good cause, make an order for vacating of the registration…”

11. Section 20 of the ordinance concerns the “mode of making application” which “may be….by summons in chambers, and may be made by any person interested in the property against which the lis pendens has been registered, whether such person is a party to the lis pendens or not.”

III.  Arguments

12. One argument raised by the plaintiff was that “the litigation was not prosecuted bona fide” because the plaintiff had already remedied the breach but the defendant has not vacated the registration.  Further, the neighbouring apartments also appeared to have illegal structures but no action has been taken by the defendant.

13. I have pointed out that it is not the role of the court in the current application to find whether there are illegal structures still remaining, but since the defendant has expert support that there are, the counterclaim should be considered “bona fide”.  The fact that there may be other illegal structures in neighbouring apartments does not make the counterclaim not bone fide.

14. Mr Yim, counsel for the plaintiff, submitted that he would abandon this argument.  The plaintiff must therefore satisfy the court whether there are “other good cause” to vacate the registration.

15. The other argument was one concerning “locus standi”.

16. This argument was originally raised by the defendant as a preliminary point.  Mr Yeung, counsel for the defendant, submitted that since the plaintiff was no longer the owner of the apartment, it no longer has any interest in the property against which the lis pendens has been registered (section 20).  It was clear that the remedy sought in the counterclaim could no longer be enforced upon the plaintiff.  Thus this summons should be struck out for lack of “locus standi”.

17. However, my view is that section 20 is not drafted “restrictively”, it only stated that “summons…may be made by any person interested in the property against which the lis pendens has been registered…”.  I can envisage situations when, acting upon evidence that satisfied the requirement of section 19, the court may on its own motion order the vacation of a lis pendens.

18. This however raised a new argument, readily adopted by Mr Yim, which was whether, since the remedy of the counterclaim could no longer be enforced upon the plaintiff, this should be a “good cause” to vacate the lis pendens.

19. In deciding this, the court shall consider the purpose of registering a lis pendens.

20. Lis pendens is “any action…pending in a court….that relates to land or any interest or charge on land.”

21. In the current case, the defendant raised a defence and counterclaim, amongst others, alleged that various illegal structures on the roof of the apartment had caused the water-leakages thus the defendant was not responsible.

22. The relevant part of the defence and counterclaim that “relates to land affects an interest in the land” is the allegation of the breach in DMC regarding the illegal structures etc (Fairview Park Property Management Ltd v Top Express Development Ltd [1993] 3 HKC 625).

23. An important purpose of registering the lis pendens is: -

“to put any subsequent purchaser on notice of the actual breach of the DMC. This is the very purpose for which the registration is intended. A purchaser who buys the property with notice of the plaintiff’s claim to enforce its right pursuant to the DMC would have great difficulties in resisting the plaintiff’s claim for mandatory injunction pursuant to the terms of the DMC.”

(Fairview Park Property Management Ltd v Top Express Development Ltd [1993] 3 HKC 625).

24. Therefore, absent of any finding of prosecution being “not bona fide”, the only “good cause” I can think of to vacate the registration in this case is if the issue of the breach of DMC has been resolved: eg if the parties have come to a consensus that all the illegal structures have been removed and the roof has been totally reinstated to its original condition, or if the court, having assessed all evidence at the substantive hearing, found that there is no breach of the DMC.

25. It does not, therefore, matter if the remedy sought in the counterclaim cannot now be enforced upon the plaintiff.  The defendant can enforce its right pursuant to the DMC against the current owner or any subsequent owners and the “very” purpose of the lis pendens is to put them on alert.  So long as the issue of breach of DMC remains unsettled, there seems to be no good cause to vacate the registration.

26. As for paragraph 36 of the Agreement to Sale and Purchase, this is no more than a private agreement between the plaintiff and the purchaser and it cannot discharge the purchaser, the current owner of the apartment, from any liability incurred by a breach of the DMC.  At most, the purchaser may recover against the plaintiff for breach of this agreement.  I understand from Mr Yim that a sum of HK$500,000 is being held at present by the stakeholder pending the resolution of this issue.  Thus it appears that either way, the purchaser has some protection.

27. I will therefore give the following orders: -

(a) The summons be dismissed; and

(b) Cost of the summons be to the defendant to be taxed if not agreed with certificate to counsel.