XCHRX MO CHI MAN v. YOUNG WAI YI

HCMP7402/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.7402 OF 1999

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J U D G M E N T

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The appeal

1. The plaintiff proceeded by way of Order 113 for an order for possession against the defendant. The master gave judgment for the plaintiff. The defendant now appeals against the decision.

Background

2. The background of this case is as follows. Chan Kai Ming, Johnny ("Chan") was the registered owner of the property known as Ground Floor, 10H, Hing Keng Shek, Lot No.254 in DD No.219, Sai Kung, New Territories, Hong Kong ("the Property"). On 13 March 1997, Chan entered into a provisional agreement ("the Head Provisional Agreement") with Eastern Deluxe Ltd ("Eastern Deluxe") to sell the Property to Eastern Deluxe. On 1 June 1997, Eastern Deluxe entered into a Sub-sale Provisional Agreement ("the Sub-sale Provisional Agreement) with the defendant in which Eastern Deluxe agreed to sell, as conformer, the Property to the defendant. The Head Provisional Agreement and the Sub-sale Provisional Agreement were not registered in the Land Office. There is evidence of a further sale by Eastern Deluxe before the defendant bought the Property. However, nothing turns on this transaction.

3. The purchase price of the Property was $2 million and the defendant had paid $600,000 as deposit. Since June 1997, the defendant had, with the consent of Eastern Deluxe, been in possession of the Property. She spent $550,000 in decorating the Property.

4. In June 1999, Eastern Deluxe's lawyer gave notice to the defendant's lawyer to complete the sale on or before 3 July 1999. Requisitions on title were raised by the defendant's solicitor. It is the defendant's case that Eastern Deluxe had failed to answer the requisitions on title. On 5 July 1999, Eastern Deluxe's lawyer stated that he no longer represented his client. He asked the defendant's lawyer to return the title deeds. This was complied with on 6 July 1999. In the letter accompanying the return of the title deeds, the defendant's lawyer stated that if Eastern Deluxe refused to answer the requisitions, the defendant shall terminate the Sub-sale Provisional Agreement and demand the return of all deposits paid with interest and costs.

5. On 6 July 1999, Chan and Eastern Deluxe also terminated the Head Provisional Agreement. On 5 August 1999, Chan sold the Property to the plaintiff. The assignment was registered on 31 August 1999.

6. On 9 August 1999, the defendant issued a writ in High Court Action No.12820 of 1999 against Chan and Eastern Deluxe, seeking the sum of $1.2 million, being an amount representing twice of the deposit paid by her to Eastern Deluxe in accordance with the terms of the Sub-sale Provisional Agreement and also the sum of $585,200, being her decoration cost and cost of investigating the title. The defendant also seeks a lien against the Property until the payment of the money.

Possession in the capacity as a purchaser

7. Order 113 provides a summary procedure in which order for possession can be ordered against a defendant who has no right to remain in the property. The defendant was allowed to enter into possession of the Property with the permission of Eastern Deluxe. After the termination of the Sub-sale Provisional Agreement, she had no right to remain in the Property. She is not seeking specific performance of the Sub-sale Provisional Agreement. It is her pleaded case in the High Court action that she had accepted the repudiation of the Sub-sale Provisional Agreement with Eastern Deluxe. In Williams on Vendor and Purchaser, 4th Ed., p.1009, it is stated that :

"... a purchaser, who had been so let into possession and elected to rescind for the vendor's breach of contract, would in equity be similarly liable to deliver up possession of the land ..."

8. In Green Wood v. Turner [1891] 2 Ch. 144, it is stated that if a purchaser of a property had entered into possession of the property but failed to pay the balance of the purchase price, the general rule is that if he continues in possession he must pay the purchase price. The defendant is obviously not interested in paying the balance of the purchase price because she does not want specific performance of the contract.

Right under the lien

9. The question in this case is whether by reason of the defendant's claim for lien of the Property, she is entitled to remain in possession of the Property. "A purchaser who rescinds the contract has an equitable lien on the land for the deposit or otherwise on account of the purchase-money, and interest thereon, and also, it seems, for his expenses incurred in pursuance of the contract. And this lien arises in every case of lawful rescission by the purchaser, including rescission under a power in that behalf expressly reserved to him by the contract. The purchaser's lien in these respects is a right exactly similar to and enforceable in the same manner as the vendor's lien for unpaid purchase-money." : Williams, p.1006. It is further stated at p.988 that :

" The vendor's lien for unpaid purchase-money, after execution of a conveyance to the purchaser, does not entitle him to resume possession of the land sold, nor does it authorise him to sell the land so charged. His only remedy to enforce the lien is to apply to the Court, under its equitable jurisdiction, for a declaration of charge and an order for sale to raise the amount due. If, however, the order for sale proves ineffectual, the property being unsaleable at any adequate price, the Court may then make an order directing the vendor to be again let into possession thereof."

10. The starting point is that the vendor's lien is non-possessory in nature, see also Hong Kong Conveyancing Law and Practice, Vol.1(A), para.166 by Sihombing and Wilkinson. Although there may be circumstances in which the vendor may be let into possession again, this cannot be applied to a purchaser's lien when the purchaser had actually accepted the repudiation of the agreement. As pointed out by Chitty J in Allgood v. Merrybent & Darlington Railway Co. [1886] 33 Ch. D. 571, the basis in which the vendor can be let into possession again is this :

"... Could not the vendor come and say, 'I cannot get my purchase-money, am I not entitled to rescind the contract-I ask the court to give me an order to rescind the contract.', the vendor would be entitled to ask for possession of his land."

11. In this case, the defendant is not interested in specific performance of the Sub-sale Provisional Agreement at all. In the circumstances, the defendant has no further right to remain in the Property.

Bona fide purchaser for value without notice

12. Mr Jeremy Cheung, counsel for the defendant, argued that the plaintiff is not a bona fide purchaser for value without notice. The plaintiff is the husband of Ms Chan Tsz Man, Galinar, a shareholder and director of Eastern Deluxe. He is also the brother of Ms Mo Sin Yi, the attorney of Chan. Ms Mo executed the assignment dated 5 August 1999 for and on behalf of Chan to the plaintiff. The plaintiff is also the owner or one of the owners of Express Property Development Consultant who introduced the defendant to purchase the Property. The plaintiff had participated and advised the defendant on the purchase price of the Property. It is the defendant's case that Chan, Eastern Deluxe and the plaintiff had conspired and had the Property assigned to the plaintiff on 5 August 1999.

13. In my view, there is a confusion on the issue. Whether the plaintiff is a bona fide purchaser for value without notice or not will only have relevance when it comes to the enforcement of the defendant's lien on the Property. If the plaintiff had notice of the interest of the defendant before the Property was assigned to him, then his interest in the Property should be subject to that lien. But this aspect has no relevance when it comes to the question of the defendant's right to remain in possession of the Property as against the registered owner. A claim to a lien will not assist her at all.

Discovery and cross-examination

14. The defendant had also sought discovery of documents from and cross-examination of the plaintiff on the same issue. In my view, she is not entitled to such documents or cross-examination because they are not relevant to the issue in this case.

Conclusion

15. Accordingly, the plaintiff is entitled to recover the Property from the defendant. The decision of the master is correct, and the appeal is accordingly dismissed. The defendant's applications are also dismissed.