DRAGON RISE FINANCE LTD v. HO LIK HANG AND ANOTHER

HCMP 486/2025

[2026] HKCFI 5336

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 486 OF 2025

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J U D G M E N T

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A. BACKGROUND

A1.  The Loan Agreement and the Legal Charge

1.  The Plaintiff is a registered money lender under the Money Lenders Ordinance, Cap.163.  Pursuant to a loan agreement with the 1st Defendant of 11th September 2023 (“the Loan Agreement”), the Plaintiff advanced $5m to the 1st Defendant.  Pursuant to the requirement under cl.9 of the Loan Agreement, the Plaintiff and the 1st Defendant entered into a legal charge on the same day (“the Legal Charge”), by which the 1st Defendant granted a legal charge over Section B of Lot No.1087 in Demarcation District No.82 (“Section B”) as security for the repayment of all monies due under the Loan Agreement.

2.  The Legal Charge was registered against Section B on 23rd September 2023.

A2.  The present proceedings

3.  The 1st Defendant defaulted on its repayment obligations under the Loan Agreement.  The present proceedings were commenced against him by an Originating Summons of 28th March 2025.  The 1st Defendant did not file any acknowledgment of service, and the Plaintiff obtained default judgment against him on 25th August 2025 in respect of the outstanding amount.

4.  The Plaintiff further sought possession of Section B.

5.  At this point, the (then intended) 2nd Defendant applied to be joined in the action to oppose the claim for possession, on the grounds that she was the true beneficial owner of the Land.  She said that on 23rd April 2010, she had entered into a written Chinese agreement with the 1st Defendant to develop Section B (“the Written Agreement”), which provided (inter alia) that:

5.1  the 2nd Defendant was to have full power and discretion to develop Lot No.1087 in Demarcation District No.82 (“the Lot”) (at this point in time, the Lot had not yet been subdivided) and to build a Small House (as defined in the Written Agreement) thereon, with the 2nd Defendant being responsible for paying all construction fees (cl.1);

5.2  the 2nd Defendant was to pay $160,000 to the 1st Defendant in stages (cl.2); and

5.3  the 2nd Defendant was to have all rights in the whole of the Small House and the Lot.  Upon issuance of the certificate of compliance in relation to the Small House, the 1st Defendant was to transfer the title and interest in the Small House and the Lot to the 2nd Defendant (cl.3).

6.  The Originating Summons was amended on 27 October 2025, joining the 2nd Defendant to the proceedings and seeking vacant possession of Section B against both defendants (“the Amended Originating Summons”).

A3.  Other relevant background

7.  The Written Agreement was not registered against the Lot or any part thereof.

8.  On 20th November 2010, the owner of the Lot subdivided the Lot into sections A, B (that is, Section B), C and RP.  Section B was assigned to the 1st Defendant on 28th December 2010.  The 2nd Defendant says that she paid the owner for the consideration thereunder.

9.  The 2nd Defendant says that she started building the Small House on Section B in 2018, that this was finished in late 2020, and that she has since been living in the Small House.

10.  On 30th July 2024, the 2nd Defendant commenced legal proceedings in HCA 1500/2024 against the 1st Defendant, seeking assignment of Section B and the Small House to her.  The 2nd Defendant complained, inter alia, that the 1st Defendant had refused to transfer the title of Section B and the Small House to her, in breach of the Written Agreement, and instead had demanded payment of additional sums for its performance.

B.  THE PARTIES’ CASES

11.  The Plaintiff says that even if the 2nd Defendant has a beneficial interest in Section B, the Plaintiff’s interest takes priority over it pursuant to the Land Registration Ordinance, Cap.128 (“the LRO”), as the Written Agreement was not registered.  Accordingly, the Plaintiff submits that this should be determined as a preliminary issue, and there is no need to proceed to trial to determine the issue of whether the 2nd Defendant has a beneficial interest as alleged.

12.  The 2nd Defendant says that determination of the preliminary issue would not be determinative of the Amended Originating Summons, as the Plaintiff has wrongly proceeded on the basis that the 2nd Defendant’s claim to a beneficial interest rests solely on the Written Agreement.  She says that the matter should continue as a contested writ action.

C.  ANALYSIS

13.  The 2nd Defendant says that whilst she sues the 1st Defendant for breach of the Written Agreement, she also claims that there is a trust of Section B in her favour, in three alternative ways:

13.1  a resulting trust, because she was the one who paid the consideration for the assignment of Section B to the 1st Defendant;

13.2  a common intention constructive trust,[1] as Section B was acquired in the 1st Defendant’s name as this was necessary for the performance of the Written Agreement;

13.3  a Quistclose trust, as Section B was acquired in the 1st Defendant’s name as this was necessary for the performance of the Written Agreement.

14.  The 2nd Defendant says that her interest under these trusts are unregistrable, so that the issue of priority under the LRO does not arise at all, and any interest which the Plaintiff may have in Section B is subject to the 2nd Defendant’s unless the Plaintiff can establish that it was a bona fide purchaser for value without notice of the 2nd Defendant’s interest.

15.  I do not agree.

16.  First, I have difficulties with the 2nd Defendant’s claim of trust.

16.1  Resulting trust: given the 2nd Defendant’s reliance on the Written Agreement in HCA 1500/2024, it must be her case that the agreed intention of herself and the 1st Defendant was expressed in the Written Agreement.  In other words, there is no room for the presumption of resulting trust to operate, since there is actual evidence of the parties’ (the 1st and 2nd Defendants’) intentions.  See Poon Loi Tak v Poon Loi Cheung Desmond [2024] 4 HKLRD 611at [31] (Chow JA); Liu Wai Keung v. Liu Wai Man [2013] 5 HKLRD 9 at [45] (G Lam J, as he then was).

16.2  Common intention constructive trust: according to the terms of the Written Agreement, the agreement between the 1st Defendant and the 2nd Defendant was not for there to be any division of the legal and equitable title between them (cf. Liu Wai Keung at [46]), but rather, for the 1st Defendant to transfer the entire interest in Section B to the 2nd Defendant (cf. Mui So Bing v Wan Chi Shing and others [2020] 1 HKC 85 at [1.3] (Lam VP, as he then was)).  The 2nd Defendant’s complaint in HCA 1500/2024 is that the 1st Defendant has failed to perform the Written Agreement by transferring the title of Section B to her.

16.3  Quistclose trust: there could not have been a Quistclose trust of Section B.[2]  A Quistclose trust arises where X pays money (or transfers property) to Y by way of loan or otherwise, with the parties objectively intending the money (or the property) to be applied for a specific purpose (and no other); if the purpose fails to be achieved, the funds (or the property) are held on trust for the payer: China Life Trustees Ltd v China Energy Reserve and Chemicals Group Overseas Co Ltd (2024) 27 HKCFAR 359 at [20] (Ribeiro PJ).  Here, the 2nd Defendant has not explained how there could be a Quistclose trust of Section B, it not being property that she transferred to the 1st Defendant.

17.  Second, in any event, the 2nd Defendant cannot claim reliance on some sort of unwritten equities in Section B by reason of having paid the consideration for its acquisition and the construction of the Small House when in fact she entered into the Written Agreement with the 1st Defendant governing the same.  The 2nd Defendant cannot, on the one hand, complain about non-performance of the Written Agreement and demand performance of the same (see HCA ASOC paragraphs 10 to 13), but on the other hand, say that the very same rights she relies on are in fact unwritten and unregistrable equities.  Cf. Mui So Bing v Wan Chi Shing and others at [7] and [28.3], where Yuen JA held that any unwritten equities which the plaintiff might have acquired by way of resulting trust (in having made payments for the purchase price of land and construction costs for building houses thereon) would have been subsumed by a subsequent written agreement between the plaintiff and the landowners.  Here, the Written Agreement preceded the payments by the 2nd Defendant for the acquisition of Section B and the construction of the Small House, but this makes no difference.  It is not suggested that the payments were made otherwise than pursuant to the Written Agreement.  Indeed, paragraph 7 of the ASOC says that the payments were the 2nd Defendant’s performance of the Written Agreement, and the 2nd Defendant’s evidence is that Section B was “acquired for the purpose of the Written Agreement”.

18.  The interest of the 2nd Defendant must stem from the Written Agreement.  Whilst it is the case that the Written Agreement predated the 1st Defendant’s acquisition of Section B, it is nevertheless the Written Agreement that confers the right[3] on the 2nd Defendant to call on the 1st Defendant to transfer Section B to her – as is plain from the 2nd Defendant’s claim in HCA 1500/2024 (see in particular paragraphs 3, 10, 13, 15).  I do not agree that there is an independent, unwritten right which arose at the time when the 1st Defendant acquired Section B.

19.  There is no dispute that (1) the Written Agreement was not registered, and (2) it is registrable, being an instrument in writing affecting land: s.2(1) LRO.  Since it was not registered, the registered Legal Charge takes priority over it: s.3(1) LRO.  Whether or not the Plaintiff had any notice, actual or constructive, of the Written Agreement does not affect the priority of the Legal Charge: s.4 LRO.

D.  DISPOSITION

20.  I therefore give judgment to the Plaintiff against the Defendants on the Amended Originating Summons for vacant possession of Section B.

21.  I will now hear the parties as to costs.