TANG KWOK CHEUNG (鄧國昌) and TANG FUK WO (鄧福和) as Managers of TANG TSUNG FUK TSO (鄧宗福祖) v. CITY WAVE DEVELOPMENT LTD

HCMP 354/2021

[2021] HKCFI 2695

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 354 OF 2021

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REASONS FOR JUDGMENT

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A. INTRODUCTION

1.  The Plaintiff sought the following orders in the Originating Summons dated 17 March 2021:

(a)  An order that the Agreement for Sale and Purchase dated 12^th June 1998 made between, inter alia, TANG TSUNG FUK TSO (鄧宗福祖) with TANG KWOK CHEUNG (鄧國昌) and TANG FUK WO (鄧福和) as its Managers as vendor and CITY WAVE DEVELOPMENT LIMITED (廣濤發展有限公司) as purchaser for the sale and purchase of the Lands and registered in the Land Registry by Memorial No. 422753 (“the Agreement”) be vacated from the Land Registry;

(b)  A declaration that the Plaintiff has no obligation to perform the Agreement;

(c)  Alternatively, an order that a cancellation agreement be executed by the Registrar of the High Court or such person as the court consider appropriate; and

(d)  No order as to costs.

2.  The Defendant did not appear at the hearing.

B.     THE FACTS

3.  The two named individual plaintiffs are the current Managers of Tang Tsung Fuk Tso (“the Tso”), a customary trust, registered under section 15 of the New Territories Ordinance (Cap. 97).  The Tso with its Managers is the registered owner of the Lands.

4.  By the Agreement dated 12 June 1998, the Plaintiff agreed to sell and the Defendant agreed to buy the Lands at HK$2,151,864.00.  The Agreement was registered in the Land Registry on 17 July 1998.

5.  According to Schedule 5 of the Agreement, the Defendant shall pay HK$430,372.80 as deposit and part payment upon the execution of the Agreement, and HK$1,721,491.20 as balance of the purchase price on the Completion Date.  Schedule 6 of the Agreement defined the Complete Date as “On or before 31/10/1998 or within 30 days from the date of issue of consent to sell the Property by the District Officer, North whichever is the later between the hours of 9:00 a.m. and 5:00 p.m. if completion shall take place on a weekday and between the hours of 9:00 a.m. and 1:00 p.m. if completion shall take place on a Saturday.”  Clause 5 provided that “Time shall in every respect be of the essence of this Agreement.”

6.  Messrs. Ng, Tam, Ko & Chan were the solicitors acting for the Plaintiff whereas Messrs. Tong Chan & Co were the solicitors acting for the Defendant.

7.  On 12 June 1998, the Defendant paid the said deposit.  However, about one month later, the Plaintiff was told by its then solicitors that the Defendant would like to postpone completion of the sale because they needed more time to arrange the finance in view of the Asian financial crisis at that time.  The Plaintiff decided to wait and give the Defendant more time since there was no other potential buyer of the Lands.  Sometime after August 1999, the Plaintiff was informed by its then solicitors that the Defendant decided to rescind the Agreement because the property market was in a continuous downturn spiral.  As a result, the sale and purchase of the Lands under the Agreement had fallen through.

8.  The Plaintiff was informed by its then solicitors that a cancellation agreement would be executed between the parties.  Hence, it left the matter in the hands of the solicitors. However, in fact, no cancellation agreement was signed.

9.  In 2020, another buyer approached the Plaintiff to buy the Lands.  The Plaintiff then realized that the Agreement is still registered at the Land Registry.  It was unable to contact its former solicitors to ascertain what had happened as they had ceased practice.

10.  The Plaintiff discovered further that the Defendant had been dissolved by striking off on 22 November 2002.  Hence, the Plaintiff took out an application in HCMP1432/2020 to restore the Defendant to the Companies Register pursuant to section 767(1)(b) of the Companies Ordinance (Cap. 622).  On 18 November 2020, Ng J granted such an order.

C.     ANALYSIS

11.  Under section 2(1) of the Land Registration Ordinance (Cap. 128), an instrument affecting land may be registered at the Land Registry.  As Deputy Judge Cheung (as he then was) held in Wong Kum Chi v Lee Tit Ying [2003] 1 HKLRD 594 at 598-599, §16, the Court has the inherent jurisdiction to vacate the registration or purported registration of any instrument in the Land Registry which does not affect or no longer affects land, and to grant a declaration in relation to the registrability of an instrument which has been lodged for registration with the Land Registry.

12.  As the Privy Council pointed out in Anstalt Nybro v Hong Kong Resort Co Ltd [1980] HKLR 76 at 81, an instrument can be the subject of registration only if it creates, or may create, some interest legal or equitable in the land in question.

13.  There is no doubt that, at the time when the Agreement was registered, it was registrable because it was an instrument that affected the Lands.  It is trite that, upon the execution of a sale and purchase agreement of land, the purchaser would acquire an equitable interest in the land; and the vendor would become a special type of constructive trustee thereof.  The rationale is that, generally speaking, the court will grant specific performance of such an agreement.  It must follow that, if the agreement ceases to be capable of being specifically performed, or there is no real chance that the Court would grant specific performance, the agreement would become an instrument that “no longer affects land”.  In Hansun Investment Ltd v Sincere Union Development Ltd [2008] 4 HKLRD 442 at 451, §41, Deputy Judge Gill held that the protection of registration of a provisional agreement cannot last beyond the time when it ceases to be registrable; that is, when specific performance is no longer available.

14.  Returning to the facts of this case, the Completion Date of the Agreement had long passed; and the Defendant was dissolved many years ago.  It is clear that, for whatever reasons, the Defendant had abandoned the Agreement.  There is no real possibility at all that the Defendant (which has been restored for the present purpose only) would seek specific performance of the Agreement, or that the Court would grant such equitable relief.  I am satisfied that the Agreement no longer affects the Lands, and has ceased to be registrable.

15.  In the circumstances, it is appropriate for the Court to exercise its inherent jurisdiction to vacate the registration of the Agreement at the Land Registry, and to grant a declaration that it is no longer registrable.

16.  The Plaintiff sought an alternative remedy based on the following statement in Halsbury’s Laws of Hong Kong (2^nd ed., 2020), vol. 35, [230.409] at p 605 “If the parties do not effect a cancellation agreement and there is nothing to register, the owner shall approach the Court for an order directing the registrar to cancel the registration.”  It seems that the author is referring to an order directing the registrar of the Land Registry to cancel or vacate the registration rather than an order that a cancellation agreement be executed by the Registrar of the High Court or such person as the Court considers appropriate (as suggested by the Plaintiff).  In principle, I do not think the Court has the jurisdiction to, in effect, make a cancellation agreement for the parties.  In this case, there is no evidence that the parties had agreed to a legally enforceable cancellation agreement pending execution.  In any event, for reasons already stated, a cancellation agreement is unnecessary.

D.     CONCLUSION

17.  For these reasons, at the end of the hearing, I made an order in terms of paragraph (1) of the Originating Summons and a declaration that the Agreement is no longer registrable under the Land Registration Ordinance.  I made no order as to costs.