HUNDRED GAIN INTERNATIONAL HOLDING LTD v. CHENG MEI HOLDINGS LTD (RECEIVERS AND MANAGERS APPOINTED) AND OTHERS

HCA 502/2023

[2023] HKCFI 2705

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 502 OF 2023

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D E C I S I O N

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A. INTRODUCTION

1.  This application concerns the registrability of the Writ of Summons dated 3 April 2023 in this Action (“Writ”), and of the underlying agreement (“the Agreement”) on which the plaintiff (“HGIL”) is suing in this Action,at the Land Registry (“Registry”) under the Land Registration Ordinance.[1]

2.  The 3^rd defendant (“Smart Edge”), which as at the date of the Writ was the registered owner of a property known as Goldin Financial Global Centre at Kai Cheung Road in Kowloon (“the Property”), says that the Writ and the Agreement are not so registrable, and by Summons dated 11 April 2023 applies for declarations to that effect as well as consequential reliefs.  HGIL opposes the application.  This is my decision on the said Summons.

3.  At all material times, the 1^st and the 2^nd defendants were and are the registered shareholders of Smart Edge, holding 60% and 40% of the issued shares thereof respectively.

4.  On 13 July 2020, Mr Cosimo Borrelli and Mr Ma Siu Ming Simon were appointed receivers and managers of all the shares (“Shares”) in, and certain loans (“Loans”) owed by, Smart Edge.  They were also appointed receivers and managers of all the assets and undertaking of Smart Edge, including the Property.  Messrs Borrelli and Ma, together with another person, were also appointed directors of Smart Edge on the same date.  They remain so appointed.

B.  THE AGREEMENT AND THE ACTION

5.  The Agreement, which is the subject matter of this Action, is an agreement dated 25 February 2022, made between the 1^st and the 2^nd defendants (as “the Vendor”),[2] Messrs Borrelli and Ma, and HGIL (as “the Purchaser”).   Its full title is “Agreement for the Sale and Purchase relating to the entire issued shares of and related loan owing by Smart Edge Limited (Receivers and Managers Appointed)”.  Smart Edge is referred to as “the Company” therein.  

6.  On the title page of the Agreement, “the Receivers” are stated to be

“Mr Cosimo Borrelli and Mr Ma Siu Ming Simon as joint and several receivers and managers”.

On the first page of the Agreement, it is stated that Messrs Borrelli and Ma are parties to the Agreement

“as joint and several receivers and managers and agents of the Vendor, without personal liability”.

7.  Clause 20 of the Agreement states:

“The exclusions mentioned in Schedule 9 shall apply to and form an integral part of this Agreement. The Receivers act as agent of the Vendor and without personal liability and join in this Agreement in their personal capacity solely to take the benefit of the exclusions of liabilities under this Agreement”.

8.  Further, Schedule 9 to the Agreement states:

“the Receivers act only as agents of the Vendor and have not given or entered into any collateral understandings, representations, warranties or agreements as principal” (paragraph 4(c));

“The Receivers have joined in as parties to this Agreement solely for the purpose of obtaining the benefit of the provisions of this Agreement and each other provision of this Agreement in their favour” (paragraph 10);

“The Receivers are the agents of the Vendor and shall incur no personal liability from acting in the capacity of agent, nor shall any claim arise otherwise than against the Vendor as principal” (paragraph 13);

“The Receivers shall incur no personal liability as a result of acting in the name and on behalf of the Vendor” (paragraph 14).

9.  “The Company Receivers” are separately defined in clause 1.1 of the Agreement as

“Cosimo Borrelli and Ma Siu Ming Simon in their capacities as the receivers and managers of the assets and undertaking of the Company”.

Thus, at, for example, clause 7.1(b)(i)(3), both the “the Receivers” and “the Company Receivers” are mentioned. 

10.  The Recitals to the Agreement set out the history of the dealings between the parties leading to the Agreement, which leading counsel for HGIL and for Smart Edge before me agree to be accurate (which I therefore adopt as facts):

“(A) The Vendor is the legal and beneficial owner of the entire issued shares of Smart Edge Limited (賜譽有限公司) (Receivers and Managers Appointed) (the ‘Company’) comprising 1,000,000 ordinary shares, which are fully paid up or credited as fully paid up. Basic information concerning the Company is set out in Schedule 1.

(B) The Company is the sole and legal beneficial owner of the Property (as defined below) and the principal business of the Company is holding and managing the Property.

(C) By a Security Agreement over Shares dated 10 April 2019, entered into between the Vendor and DB Trustees (Hong Kong) Limited (the ‘Security Trustee’), the Sale Shares were charged to the Security Trustee upon such terms and conditions therein mentioned.

(D) By the Deed of Appointment of Receivers (as defined below), the Receivers were appointed joint and several receivers and managers over, inter alia, the Sale Shares upon such terms and conditions therein mentioned.

(E) By a Security Agreement over Intercompany Loans dated 10 April 2019, entered into between, amongst other parties, the Vendor and the Security Trustee, the Vendor created a security interest over all the Vendor’s right, title and interest in and to the Sale Loan upon such terms and conditions therein mentioned.

(F) By the Deed of Appointment of Receivers, the Receivers were appointed joint and several receivers and managers over, inter alia, the Sale Loan upon such terms and conditions therein mentioned

(G) The Vendor and the Purchaser entered into a Sale and Purchase Agreement dated 22 December 2020 (the ‘First SPA’), pursuant to which the Vendor agreed to sell, and the Purchaser agreed to purchase, the Sale Shares and the Sale Loan (as defined in the First SPA) upon the terms and conditions set out in the First SPA. Pursuant to clause 3.1(c)(ii) of the First SPA, the Purchaser was obliged to pay a sum of Hong Kong Dollars seven hundred and fifteen million (HK$715,000,000.00) to the Vendor on or before 19 February 2021. The Purchaser failed to pay such amount by 5.00pm on 19 February 2021, and, as a consequence, the First SPA terminated with immediate effect on that date in accordance with its terms, and a deposit of Hong Kong Dollars seven hundred million (HK$700,000,000.00) was forfeited by the Purchaser to the Vendor. Following the termination of the First SPA, the Vendor also continued to hold a refundable deposit in the amount of Hong Kong Dollars fifteen million (HK$15,000,000.00) (the ‘Prior Refundable Deposit’).

(H) After the termination of the First SPA, the Vendor and the Purchaser entered into a sale and purchase agreement dated 12 May 2021 (the ‘Second SPA’). Pursuant to the Second SPA, the Purchaser was required to pay a deposit of Hong Kong Dollars seven hundred and thirty million (HK$730,000,000.00) (‘Second SPA Deposit’). The Purchaser paid the Second SPA Deposit by way of two further payments of Hong Kong Dollars four hundred and fifteen million (HK$415,000,000.00) on 12 May 2021 and Hong Kong Dollars three hundred million (HK$300,000,000.00) on 9 June 2021, and by authorising and directing the Vendor to release and apply the Prior Refundable Deposit in part-payment of the Second SPA Deposit on 12 May 2021. The scheduled date of completion under the Second SPA was 31 August 2021.

(I) The Purchaser was unable to complete the transaction under the Second SPA on or before 31 August 2021, giving the Vendor the right to terminate the Second SPA and to the forfeiture by the Purchaser of the Second SPA Deposit. The right of termination was not exercised and the Purchaser sought an extension of the completion date.

(J) On 10 September 2021, the Vendor and the Purchaser entered into the Amended and Restated Sale and Purchase Agreement to amend and restate the Second SPA (the ‘Amended Second SPA’). Pursuant to the Amended Second SPA, the Purchaser paid a further non-refundable deposit of Hong Kong Dollars one hundred million (HK$100,000,000.00) on or around 10 September 2021 (the ‘Amended Second SPA Deposit’). The date of completion of the transaction under the Amended Second SPA was 29 October 2021.

(K) On 13 October 2021, the Vendor notified the Purchaser of the Vendor’s right to terminate the Amended Second SPA due to the Purchaser’s breaches of clauses 5.1(b), 5.1(c)(ii) and 5.1(c)(iii) of the Amended Second SPA. Prior to 29 October 2021, the Purchaser advised the Vendor that it would not be in a position to complete the transaction under the Amended SPA by 29 October 2021, and requested an extension for completion to 28 January 2022.

(L) On 29 October 2021, the Vendor and the Purchaser entered into the Deed of Amendment (the ‘Amendment Deed’), which provided for certain amendments to be made to the Amended Second SPA, including an extension of the date for completion to 28 January 2022 on the condition that the Purchaser pay a further deposit of Hong Kong Dollars three hundred million (HK$300,000,000.00) on or before 5 November 2021. Also pursuant to the Amendment Deed, and with effect from 29 October 2021, the Purchaser acknowledged and agreed that those amounts comprising the Second SPA Deposit and the Amended Second SPA Deposit were not refundable to the Purchaser under any circumstances, and were fully and unconditionally released to the Vendor for the Vendor’s immediate benefit and use, howsoever it may see fit.

(M) The Purchaser failed to pay the further deposit as required by 5 November 2021, and, consequently, the amendments to the Amended Second SPA were not made and the Amended Second SPA immediately terminated without notice.

(N) Following further renewed negotiations, the Vendor (acting through the Receivers in exercise of their rights and powers in receivership) and the Purchaser have agreed to enter into this Agreement pursuant to which the Vendor agrees to sell and the Purchaser agrees to purchase the Sale Shares (as defined below) representing the entire issued shares of the Company and the Sale Loan (as defined below) upon the terms and conditions set out in this Agreement”.

11.  Thus, under the earlier agreements referred to in the Recitals, a total of HK$1,530,000,000 had been paid by HGIL.  According to banking documents produced by HGIL, three sums totalling HK$700,000,000 were paid into the account of Smart Edge on 22 December 2020 and 6 January 2021.  The other payments were paid into the account of Borrelli Walsh Limited, i.e. the firm with which Messrs Borrelli and Ma were and are associated.  A further HK$500,000,000 was paid by HGIL into the account of Borelli Walsh Limited under the Agreement, making a total of HK$2,030,000,000.

12.  The relevant clauses in the Agreement and its Schedules are set out in the Annex hereto. The stated “Consideration” is HK$14,300,000,000.

13.  According to HGIL, it had expressed interest to purchase the Property in late 2020, resulting in the entering into of the two earlier agreements dated 22 December 2020 and 12 May 2021, as referred to in the Recitals to the Agreement.  These agreements, and the Agreement, are said by HGIL to be all related to the sale and purchase of the Property, which it refers to as “the Transaction” in the Statement of Claim herein.  In the Indorsement of Claim in this Action, HGIL defines “the Transaction” as

“the sale and purchase transaction between the Plaintiff and the Defendants … with respect to the title, ownership, and proprietary interest in [the Property]”.

14.  In the Indorsement of Claim, HGIL refers to the Agreement as one of a series of agreements and/or common understandings from late 2020 to early 2022, as part of the Transaction, between HGIL and the defendants

“for the purchase of the title, ownership, and proprietary interests in the Property, including but not limited to the Agreement for Sale and Purchase for the sale shares and related sale loan of the 3^rd Defendant in order to facilitate the acquisition of interests in the Property dated 25 February 2022”.

15.  After referring to the Transaction, the terms of the Agreement, and the payments of the earlier deposits (which is called “the Payment”), HGIL pleads in the Statement of Claim herein:

“10. By reason of the aforesaid, the Plaintiff avers that it has acquired equitable interests in and/or an equitable or purchaser’s lien over the Property, to the extent of inter alia the sum of the Payment with interest thereon. It is further averred that the Defendants owed and still owe the Plaintiff an equitable duty and/or obligation to the Plaintiff not to take any steps or acts to destroy and/or diminish the value of the security or equitable interests held by the Plaintiff.

29. Moreover, the Plaintiff avers that it has acquired equitable interests in or an equitable and/or purchaser’s lien over the Property, to the extent of the Payment, as well as the Plaintiff’s claim for damages, interests, and costs herein …”.

16.  On 16 April 2022, the Vendor gave a notice purporting[3] to terminate the Agreement.  It is HGIL’s case that the purported termination is invalid.  Proceedings were instituted by HGIL against the Vendor,[4] which were settled on 22 September 2022 by reason, HGIL alleges, of misrepresentations made by the defendants. 

17.  Smart Edge then entered into an agreement dated 25 November 2022 to sell the Property to Goldstone Asset (HKSAR) Limited (“Goldstone”) for HK$5,600,000,000, which HGIL alleges to be at a substantial undervalue.  Despite the fact that the Writ in this Action, commenced on 3 April 2023, was lodged for registration at the Registry on 4 April 2023 and has remained in the “Deeds Pending Registration” section (“the pending section”) since, as the Registry declined to register the same, the sale was completed on 29 June 2023.  According to Mr Borrelli, a sum of HK$280,000,000 remained unpaid by Goldstone, and Smart Edge therefore, says Mr Borrelli, has a vendor’s lien over, and thus retains an interest in, the Property.

18.  In the Statement of Claim in this Action, HGIL seeks various reliefs, including:

(1)  A declaration that the Agreement and/or the Transaction remain valid, effective and binding, and the vendor’s purported termination is invalid;

(2)  A declaration that

“the Plaintiff has acquired equitable interests in the Property (including to the extent of the Payment and/or for damages, interest, and costs), by way of an equitable and/or purchaser’s lien or otherwise in equity”;

(3)  An injunction restraining the defendants from disposing the Property;

(4)  The setting aside of the disposition of the Property to Goldstone by reason of section 60 of the Conveyancing and Property Ordinance.[5]

C.  PREVIOUS ATTEMPTS TO REGISTER INSTRUMENTS AGAINST THE PROPERTY

19.  This is not the first time that an attempt was made to register an instrument against the Property at the Registry.  I set out the history herein:

(1)  The Writ in the Previous Action (“the Previous Writ”) was issued by HGIL on 16 May 2022 against the Vendor.  In the Indorsement of Claim, it is alleged that the Vendor had wrongly purported to terminate the Agreement, which is said to be whereby

“[HGIL] agreed to purchase [the Property] through the acquisition of the sale shares and related sale loan of [Smart Edge], being the sole and legal beneficial owner of the Property”.

(2)  On 17 May 2022, solicitors then acting for HGIL lodged a copy of the Previous Writ at the Registry for registration.

(3)  On 27 May 2022, the Registry confirmed that the Previous Writ had been withheld from registration.

(4)  On 30 June 2022, Smart Edge commenced proceedings[6] seeking the removal of the Previous Writ from the Registry on the ground that it was not registrable, the Previous Action not being a lis pendens for the purposes of the LRO.[7]

(5)  On 5 July 2022, solicitors for HGIL wrote to the Registry to withdraw the attempted registration of the Previous Writ.

(6)  However, on 15 July 2022, through new solicitors, HGIL again lodged a copy of the Previous Writ at the Registry for registration. 

(7)  On 8 September 2022, Smart Edge was granted leave to amend the First Removal Proceedings to cover the second attempt to register.

(8)  The Previous Action and the First Removal Proceedings were settled on 20 September 2022 (which HGIL alleges was caused by misrepresentations made by the defendants). [8]  On the same date, solicitors for HGIL wrote to the Registry to acknowledge that the Previous Writ was not an instrument registrable as against the Property, and to withdraw the attempted registration.

(9)  The Previous Action was discontinued by a Notice of Discontinuance filed on 20 September 2022.

(10)  In relation to the Previous Writ, on 21 September 2022, DHCJ Jonathan Chang SC made orders in the First Removal Proceedings by consent inter alia that:

“1. there be a declaration that the Writ of Summons under HCA 576 of 2022 filed on 16 May 2022 by the [plaintiff herein] against each of [the Vendor herein], as recorded in the Land Registry register of the Property with Memorial No. 22071500070017 (‘Writ’), is not a lis pendens affecting [the Property];

2. there be a declaration that the Writ is not an instrument registrable on the land register of the Property under the Land Registration Ordinance (Cap. 128);

3. the attempted registration of the Writ be cancelled and forthwith removed from the land register of the Property at the Land Registry, including any references to it as a ‘deed pending registration’;

4. the [plaintiff herein] be restrained from registering or causing to be registered on the land register of the Property any further instruments in respect of the proceeding commenced by the Writ (‘HG Application’) or the subject matter of the HG Application”.

(11) On 22 September 2022, the Vendor, Messrs Borrelli and Ma, and HG Property Investment HK Limited (“HG Property”), which Mr Borrelli alleges is affiliated with HGIL but which HGIL denies,[9] executed a sale and purchase agreement for the sale and purchase of the Shares and the Loans (“the HG Property Agreement”).[10]

(12) On 1 November 2022, the Vendor purported to terminate the HG Property Agreement on the ground that the latter had failed to provide evidence that it had the necessary funding to complete the transaction.

(13) On 3 November 2022, HG Property filed a Writ of Summons (“the HG Property Writ”) against the Vendor.[11] In the Indorsement of Claim, it is alleged that the Vendor had wrongly purported to terminate the HG Property Agreement, which is said to be whereby

“[HG Property] agreed to purchase [the Property] through the acquisition of the sale shares and related sale loan of [Smart Edge], being the sole and legal beneficial owner of the Property”.

An equitable lien over the Property was also claimed.

(14) On the same date, a copy of the HG Property Writ was lodged at the Registry for registration against the Property. After solicitors then acting for HG Property wrote to solicitors for the Vendor on 24 November 2022 enclosing a copy of a letter to the Registry with instructions to cancel the application for registration of the HG Property Writ, on 28 November 2022, a different firm of solicitors acting for HG Property again lodged a copy of the HG Property Writ, as well as a copy of the HG Property Agreement, at the Registry for registration.

(15) On 16 December 2022, Smart Edge commenced proceedings[12] seeking the removal of the HG Property Writ and the HG Property Agreement from the Registry on the ground that they were not registrable, the HG Property Action not being a lis pendens.

(16) On 27 January 2023, an Amended Writ in the HG Property Action (“the Amended HG Property Writ”), with Smart Edge added as a defendant there, was lodged at the Registry for registration.

(17) On 20 February 2023, Smart Edge was granted leave to amend the Second Removal Proceedings to cover the attempt to register the Amended HG Property Writ.

(18) By a judgment dated 27 April 2023 in the Second Removal Proceedings,[13] Cheng J allowed the application by Smart Edge.[14] Her Ladyship said:[15]

“I grant the relief sought at paragraphs 1 to 5 of the Amended Originating Summons, which essentially declare that the Agreement, Writ and Amended Writ are not registrable on the Land Register of the Property under the Land Registration Ordinance, require HG to procure the removal of references to the same from the Land Register of the Property, and restrain HG from delivering the Agreement, the Writ and the Amended Writ to the Land Registry for registration against the Land Register of the Property”.

D.  THE LAND REGISTRATION ORDINANCE

20. The following are the relevant provisions of the LRO:

“lis pendens (待決案件) means—

(a)  Any action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land; and

(b)   bankruptcy petition” (section 1A).

“The Land Registry shall be a public office for the registration of deeds, conveyances, and other instruments in writing, and judgments; and all deeds, conveyances, and other instruments in writing, and all judgments, by which deeds, conveyances, and other instruments in writing, and judgments, any parcels of ground, tenements, or premises in Hong Kong may be affected, may be entered and registered in the said office in the prescribed manner” (section 2(1)).

“The provisions of this Ordinance relating to judgments (subject to the provisions hereinafter contained) shall extend to lites pendentes” (section 14).

“The court or judge before whom any property sought to be bound is in litigation, may on the determination of the lis pendens, or during the pendency thereof, where the said court or judge is satisfied that the litigation is not prosecuted bona fide, or for other good cause shown, make an order for the vacating of the registration in the Land Registry of such lis pendens without the consent of the party who registered it, and may direct the party on whose behalf the registration was made to pay all the costs and expenses occasioned by the registration or the vacating thereof, including the costs of the application to vacate, or may make such other order as to such costs or any of them as to the said court or judge may seem just” (section 19).

21.  Thus, under section 2(1), for an instrument to be registrable at the Registry under the LRO, it has to “affect” land or some interest therein.  Further, for a pending action to be a lis pendens, so that the writ or other originating document therefor is registrable thereunder, the action concerned has to “relate to” land or some interest therein (section 1A[16]), or is an action in which the land or some interest therein is “in litigation” (section 19). It is common ground that those terms do not lay down different tests or requirements in relation to the requisite connection between the instrument and the land for the former to be registrable in respect of the latter.

22.  Although words such as “in relation to” and “relating to” are of the widest ambit,[17] I agree with Megarry J (as he then was) in Calgary and Edmonton Land Co Ltd v Dobinson[18] that some restrictions must be placed on what would otherwise be the great width of the words, by reference to context and purpose.  As stated by L Chan J in Wide Power Corp Ltd v Incorporated Owners of Manhattan Court,[19] the correct meaning of the words “relates to”

“should be ascertained by reference to the meaning and effect of the sections in the [LRO] that I have considered above”.

Guidance on what these words of wide ambit connotes in the context of the LRO is to be found in the authorities which I consider below.

23.  The Writ was delivered to the Registry for registration against the Property on 4 April 2023.   I understand that no registration is made and the Writ remains at the pending section of the Registry.   However, the effect of the Writ, albeit not registered, remaining there does have a real and substantial effect on the Property.  As I said previously:[20]

“I have been informed by the parties that the Land Registry did not register the OS but returned the same to dBL. However, notwithstanding this, there is still a record of the OS being a ‘deed pending registration’, but with the registration withheld, at the Land Registry. Such a record still has the effect of informing potential buyers, or the actual purchaser in this case, that someone was trying or had tried to register a notice against the Properties, and had the effect of putting them off: see Sun Ngai International Investment Ltd v Zhang Su Hua [2009] 1 HKLRD 48 at §7 per Deputy High Court Judge Carlson. The effect of a deed pending registration is practically the same as that of a registered deed. See Wong Kum Chi v Lee Tit Ying [2003] 1 HKLRD 594 at §§4 – 5 per Deputy High Court Judge A Cheung (as he then was), Tai Yip Dyeing Factory Ltd v Kong Hoi Sang [2007] 1 HKLRD 608 at §34 per Saunders J, and Crowning Success Ltd v Brightland Corp Ltd [2008] 4 HKC 305 at §8(d) per Master J Wong”.

E.  REGISTRABILITY OF THE AGREEMENT

E1.  Interest in land

24.  In Anstalt Nybro v Hong Kong Resort Co Ltd,[21] Lord Lane[22] said:[23]

“it is only where the agreement may create some interest legal or equitable in the parcel of ground that the instrument can be the subject of registration under the Ordinance”.

25.  The version of section 2(1) of the LRO[24] considered by the Privy Council in Anstalt Nybro is materially the same as the current section 2(1). 

26.  Mr Benjamin Yu SC,[25] leading counsel for HGIL, argues that what was said by Lord Lane quoted above is not binding on me as that did not form part of the ratio decidendi of the case.  With respect, I disagree:

(1)  Lord Lane[26] identified the two issues in the case as:

“(1) Is the agreement void for uncertainty, so as to render its registration ineffectual?

(2) Is the agreement one which in all the circumstances is properly the subject of registration under the relevant Ordinance?”

(2)  It may be that the second question would fall away if the agreement was found to be uncertain.  But it was not so found. Thus the second question arose and had to be answered.

(3)  Having made the statement quoted above, Lord Lane then said that the question turned on whether there was any likelihood that specific performance of the agreement would be ordered.  If not, then the appellant would have no sufficient interest affecting the land and the agreement was not registrable.[27] Since specific performance of the option agreement would not be ordered in the circumstances of that case, the registration of the agreement was rightly ordered to be vacated by the courts below.

(4)  Thus, in my judgment, the quote from Lord Lane is actually the test he set out and applied to the facts in answering the second question.  The requirement he set out was the ratio decidendi of the case and is absolutely binding on me.

27.  Mr Yu SC does not dispute that an agreement which merely provides for the sale and purchase of shares in a company is not registrable in the Registry as such, even though the company happens to own real property. He argues, however, that the Agreement does not relate only to the Shares.  Rather, referring to various clauses in the Agreement,[28] he argues that the Agreement

“itself imposes express obligations on the parties with respect to the Property itself (including as to the delivery of vacant possession of the Property) …”.[29]

28.  Therefore, Mr Yu SC argues:

“The inescapable conclusion from the express clauses is the [Agreement] imposes obligations on the Vendor with respect to the Property itself, including as to the delivery of vacant possession of the Property to P. Possession is of course an essential right and interest in the Property. Moreover, the express provisions of the [Agreement] also require ‘something to be done’ to the Property. It must not be forgotten that the Receivers were not only the Receivers and Managers of the shares in D3, but also of the Property. D3 cannot possibly argue that the SPA does not ‘relate to’ or ‘affect’ the Property or the interest therein”.[30]

29.  The main emphasis by HGIL is therefore on the delivery of vacant possession of the Property in its state on completion of the sale and purchase thereof (clauses 9.1, 9.3, 9.11, 10 and 12).   Mr Yu SC, however, also refers to and relies on the clauses in the Agreement which provide that the title deeds of the Property are to be given to HGIL at completion (clause 7.1(b)(i)(3)), and that the risk of the Property passes to HGIL upon signing of the Agreement (clause 14).  He argues, therefore, this is not an agreement purely for the sale of the shares of a property holding company as such, but since it deals with various important aspects of the Property itself, it is an agreement which, in terms of section 2(1) of the LRO, affects the Property and is therefore registrable.

30.  However, the argument, in so far as it relates to vacant possession, was raised by HG Property in the Second Removal Proceedings, and rejected by Cheng J in the Removal Judgment, on contractual provisions in the HG Property Agreement, which is also concerned with the sale of the Shares by the Vendor, identical to those now relied on by HGIL.  In doing so, Cheng J applied what Lord Lane said in Anstalt Nybro.Although there is no issue estoppel arising out of the Removal Judgment in the present Action as HGIL is not a party thereto,[31] I respectfully agree with and adopt the reasons therein and apply the same to the Agreement:[32]

“36. However, and as reformulated by [leading counsel for HG] in his supplemental skeleton and oral submissions, the case for HG is that the [HG] Agreement is not merely a simple agreement for the sale and purchase of shares in Smart Edge; it is an agreement pursuant to which HG was to acquire an interest in the Property, and is therefore registrable. Specifically, under cl.11 of the [HG] Agreement, interpreted in the light of certain other clauses which were only referred to in oral submissions, the [HG] Agreement bound the Shareholders to deliver possession of the Property to HG.

37. [Leading counsel for HG] disputes that HG is affiliated to HGIL, and submits that in any event, this issue can at most go to costs; either the Agreement and the Writ/Amended Writ are registrable, or they are not – what position HGIL and its solicitors may have taken in the past does not bear on this issue. I agree that for present purposes, it is not necessary to consider the positions taken by HGIL and its solicitors.

E. THE AGREEMENT

38. [Leading counsel for HG’s] argument hinged on cl.11 of the Agreement, which provided that:

[Clause 11 of the HG Agreement, which is identical to clause 12 of the Agreement, was set out]

39. The submission was that read in conjunction with certain other clauses of the [HG] Agreement, the Shareholders were bound to deliver possession, which was ‘tantamount to an assignment’ since no reservation was being made by the Shareholders. The other clauses relied on were:

[Clauses 8.1, 8.3, 8.10 and 8.11 of the HG Agreement, which are identical to clauses 9.1, 9.3, 9.10 and 9.11 of the Agreement, were set out]

40. It was said that cl.11, when understood in the light of these other clauses, showed that the Shareholders had an obligation to deliver vacant possession of the Property to HG, in other words, some right or interest in the Property.

41. I do not agree.

41.1 The subject matter of the sale and purchase is the Shares and the Loan, which is dealt with in cl.2 of the [HG] Agreement.

41.2 Sale of the Shares would of course mean that HG would become the owner of Smart Edge. Smart Edge owned various items of property, including the Property. Read in context, cll.8 and 11 of the [HG] Agreement simply provided for the features of the Property as at the time of Completion, and which HG was to accept.

41.2.1 Cl.8 (in particular the parts relied on by HG) dealt with the situation as to tenancies which might or might not be existing at the time of Completion, various aspects thereof, and the Shareholders’ rights in relation thereto, and provided that HG was not to make complaint about these matters.

41.2.2 Cl.11[33] provided that the Property would be subject to various rights and liabilities at the time of Completion. Again, this was the state of affairs which HG was to accept.

41.2.3 Indeed, the entirety of cll.8 to 11 (that is, including cll.9 and 10) generally identified various features of the Property and that HG was to accept the same.

41.3 In this regard, I note that cll.8 and 11 of the [HG] Agreement refer in the passive voice to vacant possession of the Property being delivered to HG (and without reference as to who was to carry out the delivery), rather than any positive obligation on the part of the Shareholders to deliver vacant possession. This may be contrasted with cl.2.1, which provided that the Shareholders ‘shall sell’ the Shares and ‘shall assign’ the Loan.

41.4 Furthermore, cl.6, which prescribed in detail the parties’ obligations to be performed on completion, and which in cl.6.1(b)(i) itemised the things to be delivered by the Shareholder to HG on completion, did not refer to any obligation on the part of the Shareholders to deliver vacant possession of the Property.

41.5 The owner of the Property, namely, Smart Edge, is not even party to the Agreement. On what basis could the Shareholders confer on HG an interest in the Property when they themselves had no such interest?

41.6 I therefore do not agree that cl.11 of the Agreement, when read in conjunction with the parts of cl.8 highlighted by [leading counsel for HG],[34] imposed an obligation on the Shareholders to deliver vacant possession of the Property such that an interest in land was conferred on HG.

[…]

45. I therefore do not agree that the [HG] Agreement creates any legal or equitable interest in the Property on the part of HG, or that it is registrable under s.2(1) LRO.

F. THE ACTION

46. It follows that the Action does not properly assert any claim to, or proprietary interest in, the Property, so as to make it registrable as a lis pendens”.

31.  It is not in dispute that Smart Edge was, as at the date of the Agreement, the sole legal and beneficial owner of the Property.  It is not alleged that Smart Edge was holding the Property on trust for anyone, or that the Vendor had any interest therein.[35] As queried by Cheng J, in an agreement to which Smart Edge is not even a party, how can any right or interest in the Property, whether in relation to vacant possession or otherwise, be created thereby? 

32.  Since, for the reasons given by Cheng J, which I agree, the Vendor is under no obligation under the Agreement to deliver vacant possession of the Property to HGIL, the fact that the Vendor is in a position to compel Smart Edge to do so is irrelevant.

33.  As for the provision in the Agreement for delivery of the title deeds, unlike the provisions on vacant possession which Cheng J discussed in the Removal Judgment, clause 7.1(b)(i)(3) does impose the obligation to deliver the title deeds on the Vendor. However, that clause only requires the delivery of such title deeds at completion “which are still in the possession or control of the Vendor but not further or otherwise”.  Thus, in my judgment, clause 7.1(b)(i)(3) is no more than a provision governing, as between the Vendor and HGIL, which party is entitled to the title deeds then in the possession or control of the Vendor after completion, and quite rightly it is HGIL as the new owner of Smart Edge.  This right to possess the title deeds, as between the Vendor and HGIL, in the possession or control of the Vendor is not, in my judgment, an interest in the land itself.

34.  Nor does clause 13.5 add anything.  Reading it together with clause 7.1(b)(i)(3), it sets the limits of what the Vendor has to deliver on completion, but always subject to the requirement that the documents would have to be in the possession or control of the Vendor.

35.  As for the risk of the Property under clause 14, in my judgment it is no more than an allocation between the Vendor and HGIL as to the risk after signing of the Agreement and before completion.  More specifically, as per clause 14.3, completion is to take place even if anything is to happen to the Property in the meantime. 

36.  Neither the provisions on title deeds nor on risk create any interest in the Property on the part of HGIL.  The same can be said of the other provisions mentioned by Mr Yu SC, dealing with delivery of the Property on completion subject to and with the benefit of service and maintenance contracts (clause 15.1), admission of identity of the Property on title deeds (clause 11.1), and the showing and review of title (clause 6.1).

37.  Thus, ultimately, despite the fact that, from a commercial point of view, all along what HGIL has been seeking to purchase, under the Agreement as well as the previous agreements, is the Property, the Agreement is in both legal form and substance the sale of the Shares (and the Loans) only, and none of the provisions relied on by HGIL turns the Agreement, to which the sole legal and beneficial owner of the Property is not a party, and will remain so after completion, into one of the sale of the Property itself, or by which any interest in the Property is created in favour of HGIL.  Even if the Agreement is specifically enforced, HGIL would not have obtained any proprietary interest in the Property, as the Vendor would not be compelled to transfer or procure the transfer of the Property, or any vacant possession thereof. The parties have always, from the very first agreement, sought to achieve the said commercial objective by adopting a legal mechanism, which no one suggests is a sham, of selling all the Shares of the company which wholly owns the Property, rather than the Property itself, and there is no reason for the Court to disregard that.  This is not to prefer form over substance, but is to give effect to both the form and the substance.  As stated by Woo J (as he then was) in Good Profit Development Ltd v Leung Hoi:[36]

“The incorporation or acquisition of a private limited company to hold a landed property is nothing out of the ordinary, and if I may say so, a very common practice in Hong Kong. The mere fact that the shareholders in litigation have absolute control of the company which has no other business activity than dealing in and with the landed property being its sole asset does not ipso facto justify the court to depart from the general principles enunciated in Salomon v. Salomon”.

38.  In this respect, I do not accept the argument of Mr Yu SC that Messrs Borrelli and Ma, being the receivers and managers of the assets (including the Property) of Smart Edge, and having the authority to deal with the Property, are parties to the Agreement in that capacity, or that Smart Edge is bound by reason of Messrs Borrelli and Ma contracting.  Clearly, by reason of clause 20 of, and the provisions I refer to above in Schedule 9 to, the Agreement, they did not enter into the Agreement in their capacity as the receivers and managers of the assets of Smart Edge, nor did they purport to deal with the Property in any manner in that capacity or otherwise on behalf of Smart Edge.

39.  For these reasons, in my judgment, the Agreement is not a registrable instrument under the LRO, nor is, therefore, the Writ registrable in so far as any claims in this Action arise out of the Agreement. [37] In so far as the Writ makes any claims based on the Agreement, it should be removed from the pending section of the Registry in the exercise of my inherent jurisdiction.

E2.  “Something to be done” to the Property

40.  Relying on my earlier judgment in Shineland, where I said:

“63. For the OS to be registrable, it must ‘relate to’ and ‘affect’ the Properties.

64. As stated, correctly in my view, in Sihombing and Wilkinson, Hong Kong Conveyancing: Law and Practice (2017), Vol 1B, at §XIV[275]:

‘ The lis pendens being registered must relate to a dispute concerning land where the registering party claims some interest in the land or a right to have something done to the land.’

An example of the latter situation is Re Ching Yue Chong (deceased) [1997] 3 HKC 548, where a claim of trespass which required something to be done to the land in question was held by Le Pichon J (as she then was) to be registrable as a lis pendens”,

Mr Yu SC argues that the Agreement does require something to be done to the Property, relying on the same three matters, namely vacant possession, title deeds and risk.

41.  What I said in Shineland was in the context of the registrability of an Originating Summons at the Registry, i.e. whether the underlying proceedings were a lis pendens.  The same is true of the other cases I refer to in this section.  However, it seems that Mr Yu SC is relying on that judgment in the context of the registrability of the Agreement itself, as well as the Writ: see the quote from his submissions at [28] above. I can deal with both together.

42.  One must read what I said in Shineland in context.  As I said at [63] of that judgment, the issue remains whether the relevant instrument “relate to” or “affect”the land in question.  The reference to “something to be done” to the land cannot be read as substituting or creating a new criterion, but is an explanation that a certain category of instruments may well fall within the registrability requirements of the LRO. 

43.  In Re Ching Yue Chong (deceased),[38] to which I referred in Shineland, Le Pichon J (as she then was)[39] relied primarily on the judgment of Chan J (as he then was) in Chow Chiu-tai v Chan Tak-ming,[40] which stated as follows:[41]

“One of the main purposes of the Ordinance is to confer priority on an interest in land over another interest in the same piece of land by means of a system of registration at the Land Office of the documents affecting these respective interests. Under s.16, a registrable lis pendens which is not registered ‘shall not bind any purchaser or mortgagee of the estate intended to be thereby affected’. In my view, the consideration formulated by Stamp, L.J. in the Whittingham’s case and followed by Browne-Wilkinson, J. in the Greenhi’s case is equally appropriate in the Hong Kong context. A lis pendens, to be registrable, must be one which affects an interest in land so that if it is not registered or registered in time, the interest affected by it may lose priority to some other interest in the same land if the document relating to that other interest is registered. In other words, the question to be answered is: will the interest which is to be affected by the action or proceeding be adversely affected by or deferred to some other interest in the land if the action or proceeding is not registered or registered in time? An action which claims some proprietary right in land, as referred to by Megarry, J., would be registrable as such a lis pendens because in the absence of registration, a subsequent purchaser or mortgagee bona fide and without notice of the action will certainly take free from the proprietary right under claim even if at the end of the day such a claim is upheld by the court. Similarly an action for the reinstatement of an easement support of land or the maintenance thereof, as in Browne-Wilkinson, J.’s case, will also be registrable under the Ordinance, because if the action is not registered or registered in time, any subsequent purchaser in title of this land will not be affected by any judgment which may be given in the action.

Little or no difficulty will arise in an action which makes a claim for a proprietary interest or an easement in land. However, there may be actions in which there are no direct or expressed claims for an interest in land and yet the judgment or order to be given may affect the land in question. This type of actions should also be registrable because if they are not registered, they are not binding on any purchaser or mortgagee of the land intended to be affected. And if the purchaser or mortgagee is to be bound, it is only fair that he can have notice of the pending action (i.e. the lis pendens) if the same is registered. On the other hand, there are cases which although they can be said to be in one way or another relating to land, are not registrable because whatever their outcome, the subsequent purchaser or mortgagee of the land in question will not be affected by the registration, or lack of it, of the action at the Land Office. The material consideration is therefore that set out by Stamp, L.J. and Browne-Wilkinson, J., i.e. whether any subsequent purchaser or mortgagee will take a free title in the land or lose priority if the action is not registered”.

44.  Le Pichon J then said in Ching Yue Chong:[42]

“It is clear from the judgment in Chow Chiu Tai that an action may nevertheless qualify as a lis pendens without there being any direct or express claim to a proprietary interest in land. The critical issue is whether the judgment or order to be given affects the land in question. What the learned judge appeared to have in mind were situations where the complaint can only be properly addressed through something being done to the land against which the action is registered particularly where a mandatory injunction is sought. It is implicit from the judgment that registration in those circumstances would be proper. On the facts of that case, the nuisance had already been addressed and so the registration could no longer be sustained. In the present, the cause of action is trespass. But if the trespass can only be removed by work being carried out to the land in question, it falls squarely within the parameters set out in Chow Chiu Tai. Here the complaint has not been satisfactorily addressed in as much as the staircase has yet to be removed. Applying the principles set out in Chow Chiu Tai (with which I agree), both the Writ and the Order are registrable and I so hold”.

45.  In Fairview Park Property Management Ltd v Top Express Development Ltd,[43] Cheung J (as he then was) said:[44]

“The meaning of lis pendens had been extensively considered by Patrick Chan J (as he then was) in Chow Chiu Tai v Chan Tak Ming [1994] 1 HKLR 274 and by Le Pichon J in Re Ching Yue Chong (Deceased) [1997] CPR 237. It is not necessary for me to tread the same grounds that had been extensively covered by the learned judges. I respectfully adopt their approach. In my view, the test to be applied is this: Does the present action which obviously relates to land affects an interest in the land? The requirement as suggested in cases such as Yu Jing Jenn v Wong Pe Wun & Ors[1986] HKC 624 that some propriety right must be asserted is not the only basis in which a writ can be registered as a lis pendens.

In the present case, the answer to the question I have formulated must be ‘yes’. The plaintiff is seeking an order in the nature of a mandatory injunction requiring the defendant to remove the unauthorised structures and to reinstate the property to its original state. This obviously affects an interest in the land”.

46.  Thus, according to these cases, which are all cases at first instance but all the judges in those cases (except me) command the greatest respect, in a case where there is a claim which alleges that an unlawful act has been committed which requires something to be done to the land in question so as to address the issue properly, the claim may well be a lis pendens, as the claim is still one which affects the land, although no interest in the land is being claimed.   As was said by Chan J in Chow Chiu-tai,[45] the question is:

“will the interest which is to be affected by the action or proceeding be adversely affected by or deferred to some other interest in the land if the action or proceeding is not registered or registered in time?”

47.  Or, as stated by Stamp LJ[46] in Whittingham v Whittingham:[47]

“whether in the absence of registration a purchaser or mortgagee might obtain a title to the land as a bona fide purchaser without notice of, and so defeat, the plaintiff’s claim”.

48.  In Chow Chiu-tai (a nuisance action), Ching Yue Chong (a trespass action), and Fairview Park (a breach of deed of mutual covenant action), which all concern the registrability of the writ in a pending action, the owner of the relevant land was a defendant to the action, and the action claiming a relief requiring something to be done to the land to address the complaint was founded to be a lis pendens which could be registered,[48] because:

“I can see that there may be cases where the nuisances complained of may require certain improvement to be carried out on to the land to abate such nuisances. In such cases, it would be in the interest of the subsequent purchaser or mortgagee to have notice of the relevant court action, otherwise his interest in the land after the purchase or mortgage may be affected and he may not be able to take a free title”.[49]

49.  Thus, for the “something to be done” principle (if it can be so described) to apply, or more generally for an action in which no interest to or a transfer of the land is being claimed to constitute a lis pendens, the thing that is required to be done, or the relief claimed in the action, must be something which would otherwise bind or affect a subsequent purchaser or mortgagee, so that registration or otherwise may affect whether the latter takes free therefrom.  That means that the matter must be (depending on registration) capable of binding the subsequent purchaser or mortgagee in the first place.

50.  It is difficult to see how, as in here, where the sole legal and beneficial owner of the land in question is not a party to an agreement and is therefore not bound thereby, no matter how and in what way the agreement then purports to deal with any aspects of the land, any subsequent purchasers or mortgagees would be affected in any way by the agreement, or by whatever judgment is to be given in an action based on the agreement, or that the plaintiff, suing on the agreement, ought to be protected against such purchasers or mortgagees by way of registration, or that it is in the interests of such purchasers or mortgagees to have notice of the agreement, or any court proceedings thereon, so that they ought to be given notice by way of registration.  

51.  The fact that the Vendor here, being the only shareholders of the owner of the Property, can procure the latter to do whatever acts with the Property does not mean that the Agreement thereby creates or confers or transfers anything in favour of HGIL which may (depending on registration) bind a purchaser or mortgagee of the Property from Smart Edge, thus requiring registration, as the Agreement does not in terms require the Vendor to procure Smart Edge to do anything which will have the effect of creating or conferring an interest in the Property in favour of HGIL.  Any rights of HGIL under the Agreement are personal contractual rights of HGIL as against the Vendor.  Such rights do not bind subsequent purchasers or mortgagees and are not their concerns, whether the Agreement or the Writ are registered or not.  No rights vis-à-vis the Property are created or conferred or transferred to HGIL as against Smart Edge itself. 

52.  This “something to be done” principle, and the line of cases from Chow Chiu-tai, do not assist HGIL.

53.  As stated, the line of cases discussed above are on the registrability of a writ in a pending action, where a claim to a proprietary interest in the land as such is considered not necessary.   On the other hand, the statement in Anstalt Nybro, made in the context of the registrability of an agreement (although the registrability of the writ there was also in issue), appears to require that a proprietary interest (Lord Lane referred to “some interest legal or equitable in the parcel of ground”) be involved, and are binding on all the judges in those cases.   It is not necessary for me, given my decision that that line of cases does not assist HGIL in any event, to decide if those cases are reconcilable with Anstalt Nybro.[50]

F.  LIS PENDENS

F1.  What is a lis pendens for the purposes of the LRO?

54.  In Thian’s Plastics Industrial Co Ltd v Tins’ Chemical Industrial Co Ltd,[51] Blair-Kerr J said:

“So far as registration under the provisions of the Land Registration Ordinance is concerned, a lis pendens is an action, information, or proceeding pending in court relating to land or any interest in or charge on land”.

Even though the definition of “lis pendens” in section 1A of the LRO (which I set out at [20] above) was only inserted into the LRO in 1992, after this judgment was handed down, since the statutory definition is in the same terms as how Blair-Kerr J described it (and was thus most probably taken therefrom), what was said in that case by Blair-Kerr J, and by the Full Court on appeal, is still applicable.[52]

55.  The issue in Thian’s was the registrability of the writ in an action concerning

“the inner working and relationship of the first and second plaintiffs and the conduct of the second defendant”.[53]

The writ was registered against the properties of the first and second plaintiffs and an application was made to remove it.

56.  Blair-Kerr J said:

“Before a plaintiff registers an action as a lis pendens, it is his bounden duty to ensure that it is an action in which a claim to land or some interest in land is asserted; that there is a claim of right or a claim to charge some specific property. In other words that the landed property mentioned in the memorial is (in the words of s. 19) ‘in litigation’”.[54]

“The object of this action is not to assert title to specific landed property belonging to [the first and second plaintiffs] … But the object of the action is not to assert title to specific landed property belonging to [the first and second plaintiffs]. It is not an action in which there is a claim to land or some interest in land. The 3^rd plaintiff’s complaint is not one concerning the title to the properties. His complaint is as to the manner in which the 2^nd defendant has performed his duties as managing director in relation to those properties”. [55]

57.  The finding that the writ was not registrable was affirmed by the Full Court on appeal, which had these to say:

“[Referring to 526-527 of the judgment of Blair-Kerr J quoted above:] I do not think that the above quotation from the learned Judge’s judgment in the court below is wrong. The expression ‘affects’ is not a term of art. It can have a very wide meaning. In one sense any judgment given against a person who owns land may affect that land. For the successful litigant may only be able to recover any damages awarded to him by the sale of such land. However it has not been suggested that any proposed action can be registered as a lis pendens simply because the intended defendant owns landed property. Various authorities were quoted from other branches of the law in an effort to arrive at a more exact definition of the word ‘affects’ but I did not derive any help therefrom”.[56]

“None of these paragraphs affect the ownership of the land. There is no claim to any land or to any interest in land, nor is there a claim to charge some specific property”.[57]

“Two questions have to be answered, (1) whether the action registered was registrable under the provisions of the Land Registration Ordinance and (2) if it was not so registrable whether the Court had an inherent jurisdiction to vacate the lis pendens. I do not understand the learned judge in the court below to have construed s. 14 in the light of s. 19, which was enacted many years later: what he said was that a lis does not ‘affect’ land within the meaning of s. 14 unless that land is ‘in litigation’ within the meaning of s. 19. That is a very different thing and in my view it is right. No doubt the word ‘affect’ can, and does, have ‘a large meaning’. It needs the citation of no authority to satisfy me as to that. The important point to notice is that the land must be affected by the lis itself. My Lord has set out those remedies sought by the plaintiffs which are relied upon as showing that the land is affected. The title to the land is not in dispute. What is in dispute is whether the second defendant has acted in a manner which makes it equitable that he be restrained from exercising legal powers which have admittedly been given to him. Those powers are not dependent upon the title to the land, although as the land is owned by the first or second plaintiffs and the second defendant is the authorised agent of those companies the existence of those powers would enable him to deal with the land. But how can it be right to prevent the companies, who have an unchallenged right to deal with the land, to act through such agent as they think fit? What the third plaintiff is endeavouring to do is to regulate the internal affairs of the companies. If he succeeds in the action the judgment will affect the persons who are entitled to deal with the properties on behalf of the companies, but it will not affect the properties themselves. A preservation order is distinguishable because by its very nature it is intended in effect to ‘freeze’ the title to the land”.[58]

58.  Given the issue before the Court in Thian’s, in my judgment, what was said by Blair-Kerr J and the Full Court which I quoted above constituted the ratio decidendi thereof, and is binding on me.  They are not affected by the subsequent enactment of a statutory definition of “lis pendens” in 1992.  That is, for a writ to be registrable, the action must make “a claim to land or some interest in land”.

59.  I would add that there are authorities saying that the claim to an interest in the land does not have to be on the basis that the claimant has a current, existing interest.  If the claim is that the ownership of, or some interest in, the land should for some reason be transferred to the claimant who does not, before any transfer as ordered by the court in the action itself, have any interest therein, the claim would constitute a lis pendens. 

60.  Thus, in Whittingham,[59] it was held by Stamp LJ that a wife’s claim in divorce proceedings that land owned solely by the husband be transferred to her was a pending land action.  I respectfully agree as such a claim clearly affects land, and can be said to be a claim to a future interest in land.  It is not inconsistent with Thian’s.

61.  A similar conclusion was reached by DHCJ Carlson in Sun Ngai International Investment Ltd v Zhang Su Hua,[60] where in matrimonial proceedings the wife claimed a transfer of properties held by companies alleged to be beneficially owned by the husband.  Although the companies themselves were not parties, it was held that that was not necessary.  However, I see nothing in that judgment to say that a claim to an existing proprietary interest, or to a transfer of proprietary interest, in the land concerned is not necessary for the action to constitute a lis pendens.

62.  But these cases do not assist HGIL here, as there is no claim to any transfer of the Property or any interest therein as such in this Action.[61]  The Agreement remains one on the sale of the Shares and not the Property. (I shall deal with the claims based on equitable lien and section 60 of the CPO below.)

63.  For reasons stated in section E2 above, it is not necessary for me to decide if the line of cases starting with Chow Chiu-tai, in so far as they do not require a claim to a proprietary interest in land to be made for the writ to be registrable, is reconcilable with Thian’s, which is binding on all of the judges in those cases.  They do not assist HGIL in any event.

F2.  Removal for good cause and balance of justice

64.  Apart from relying on the provisions in the Agreement to support his case that the Writ is registrable in so far as the claims in the Action are based on the terms of the Agreement, which I have dealt with in section E  above, HGIL refers to two claims in this Action which it says relate to the Property, i.e. its claim to an equitable lien and its claim under section 60 of the CPO to set aside the sale to Goldstone.[62] Before considering those two matters, it is necessary to consider the approach to be taken where the underlying action is said to be a lis pendens.

65.  The first question is to consider whether the action on its face is a lis pendens as defined by section 1A of the LRO, in line with the judgments in Thian’s (or, if they are not inconsistent with Thian’s, the Chow Chiu-tai line of cases). If it is not, for example, where it is purely a dispute on the shares or management of a company without in any way touching upon the land owned by the company, then that is the end of the matter, and any registered writ, and any writ in the pending section of the Registry, must be vacated or removed under the Court’s inherent jurisdiction (and not under section 19 of the LRO),[63] and a declaration to the effect that the writ is not registrable should be made if sought.

66.  If, however, the action is on its face a lis pendens and is therefore prima facie registrable, then, if the writ is registered, the matter falls within section 19 of the LRO, which confers jurisdiction on the Court to order the vacation of the registered writ if it is satisfied that the litigation is not prosecuted bona fide, or “for other good cause shown”.   One of such good causes is where the action is not arguable.  As Bokhary J (as he then was) said in Ho Yau-kong v Ho Cheng Kwai-ying:[64]  

“certainly the absence of an arguable case is a very good ground for vacating”.

67.  Thus, if the underlying claims in the lis pendens are not arguable, then the registration of the registrable writ ought to be vacated under section 19 of the LRO.  For the same reason, if the prima facie registrable writ is not yet registered but is pending registration, the Court ought to exercise its inherent jurisdiction to order its removal from the pending section if the claims are unarguable.  

68.  I do not think the foregoing is seriously disputed.  What Mr Yu SC and Mr Manzoni SC disagree is where the action is on its face a lis pendens and is found to be arguable, whether the Court should or can then undertake a balance of justice exercise in considering whether any writ registered or pending registration ought to be vacated or removed (or to make any appropriate declaration), similar to an application for interlocutory injunction.  Relying on authorities in the United Kingdom on the registration system there,[65] Mr Manzoni SC submits that the answer is yes.   Mr Yu SC says no: on the basis that the underlying action is a lis pendens, he submits that since the LRO has its own provision for removal in section 19, one should not go beyond that provision and to follow the overseas authorities which were based on the inherent jurisdiction of the Court.

69.  While I agree with Mr Yu SC that where one has a lis pendens and the writ is registered, one should go to section 19 of the LRO to consider the question of removal, in my judgment, under section 19, the balance of justice is a factor which the Court can and should take into account in deciding whether to vacate the registration. 

70.  This is because the existence of good cause to remove under section 19 is not confined to where the underlying lis pendens is not arguable.  Thus, while in an application under section 19 to vacate the Court should consider the arguability of the lis pendens, even if it is arguable the Court may still vacate if a good cause is shown.  What constitutes good cause is unrestricted by the LRO and whether a good cause to remove is shown must depend, in my view, on all the circumstances of the case, primarily the respective positions and consequences of the registered writ being removed or otherwise. In Ho Yau-kong, Bokhary J said:[66]

“If the case of a plaintiff is weak, and the harm that would be done to a defendant if a registration is maintained on the basis of such case only to be ultimately defeated after a long delay is great, then the court must consider very carefully what is the right thing to do.

The formula ‘other good cause shown’ in s. 19 is unrestricted by any words of the statute. It seems to me that the courts may, and should, approach it by reference to what they normally do when dealing with interlocutory injunctive relief, subject to this. The position of somebody with a lis penden which he or she can register is stronger than that of someone seeking or seeking to maintain such relief. First of all, the registration may be made without reference to a court and without the burden of having first to make out a case. Secondly, I think it is right to be even more reluctant to vacate a registration than to refuse or discharge an injunction which would have similar effect. That is my approach here”.

71.  Subject to the two matters referred to by his Lordship, it is clear that Bokhary J adopted the interlocutory injunction approach which considers not just the merits of the lis pendens but also all the circumstances of a pending action so as to decide “what is the right thing to do”,[67] and to see what “the justice of the case requires”.[68]  This is very much a balance of justice approach.

72.  A similar approach was taken recently by Cheng J in Wong Ching Hoi v Chan Sau Man.[69]  There, in an application to vacate under section 19 of the LRO, her Ladyship, after citing Ho Yau-kong, found that no good cause had been shown to vacate the registration by considering factors for and against vacation, balancing the protection afforded by the registration, and the harm which might be caused if the registration was maintained.[70]   Again, this is very much a balance of justice approach.

73.  In my judgment, while the two matters stated by Bokhary J must always be borne in mind when one is considering an application under section 19 of the LRO, the approach advocated by his Lordship, and applied for example by Cheng J, is in substance the same approach when one is considering an interlocutory injunction application, as Bokhary J himself suggested.  That includes the consideration of the balance of justice when the injunction is or is not granted, or, under the LRO, whether the registration is vacated or not. It is now accepted that in an interlocutory injunction application, what the Court is looking for is a course which will carry the lower risk of injustice.[71] This is very much the approach of Bokhary J in Ho Yau-kong.

74.  The same approach of considering the balance of justice in my judgment (with the two matters referred to by Bokhary J borne in mind) applies where a registrable writ is pending registration and the Court is considering removal outside section 19 but under its inherent jurisdiction, where the underlying claim is arguable.  It seems to me a truism that whenever a Court is exercising its inherent jurisdiction, it always has to take into account all relevant factors and decide what is the right order to be made as a matter of justice.

F3.  Equitable lien

75.  In so far as the reliance by HGIL of the payments made by it, which it says give rise to an equitable lien overthe Property which constitutes an interest in land, I agree with Mr Yu SC that, as a matter of principle, a purchaser’s equitable lien, arising from a payment of deposit or purchase price for the land, is a proprietary interest in that land, and thus an action based on such a lien is a lis pendens.

76.  In Snell’s Equity,[72] the learned editors said:

“… as with the vendor, the purchaser also has an equitable lien over the land itself in the hands of the vendor for any deposit or instalment of his purchase-money which the purchaser has paid to the vendor …

As with the vendor’s equitable lien, the purchaser’s equitable lien is of a proprietary nature, capable of binding third parties”.

77.  Mr Yu SC also refers to Combe v Lord Swaythling,[73] in which Wynn-Parry J said:[74]

“The basis of the undoubted right of a purchaser, who has paid a deposit to a vendor, to a lien for his deposit if the contract goes off otherwise than through the purchaser’s default is, in my judgment, that the purchaser is to be regarded, in respect of that deposit, as a secured creditor”.

78.  The position of a purchaser having an equitable lien over the land is often likened to that of a mortgagee. Referring inter alia to Combe, DHCJ Kaye QC said in Cabra Estates plc v Glendower Investments Ltd:[75]

“Thus it seems to me that the principle is founded on justice and the expression of that justice is the right of the innocent purchaser who has paid his deposit to the vendor to a lien on the property in the hands of the vendor just as if (an assumption if not a fact) the vendor had executed an equitable mortgage in favour of the purchaser for the amount of his deposit, interest and costs. The justice is imposed to remedy an obvious injustice”.

79.  Thus, it has been said that:[76]

“The purchaser may assert a proprietary claim not only against the land, but should the vendor sell it to some third party in breach of contract, to the proceeds of that sale as well”.

80.  Mr Manzoni SC submits that a purchaser’s equitable lien is not a proprietary interest in land, citing the judgment of To J in LY Group Development Ltd v East Canton Ltd,[77] where his Lordship said:[78]

“The claim to the lien in respect of the deposits was not a claim to a proprietary interest in land. What the plaintiff seeks to do by registering the lis pendens was to restrain the 2^nd defendant from exercising its powers of disposition as owner, which is what the authorities say it cannot do. The registration of the lis pendens has to be vacated”.

81.  As Mr Yu SC points out, in that case the plaintiff entered into a contract with the 1^st defendant to purchase the shares of a company, which held all the shares in the 2^nd defendant, which held the property in question.  The deposit paid by the plaintiff did not have anything to do with the property or the 2^nd defendant, and any claim of a lien over the property was of course not sustainable.

82.  It is in that factual context that To J made the quoted statement. He was saying that on the facts of that case, the claim to a lien could not be a claim to a proprietary interest in the property, as the deposit was not paid for, and had nothing to do with, the property. 

83.  If and in so far as it is suggested that this statement by To J supports the proposition that a purchaser’s equitable lien over land is not a proprietary interest in that land, that is to read the statement out of context, and the proposition is itself wrong.  The authorities cited above suggest clearly that a purchaser paying a deposit or purchase money for land has an equitable lien for the return of the money paid if the contract goes off without the purchaser’s fault,[79] and is akin to a mortgagee or secured creditor, meaning he does have a proprietary security interest over the land.  Indeed, by its nature a lien is a right over something which justice requires the creditor to have for his protection,[80] so it must be a security interest over something – and that thing can only be the land the subject of the sale and purchase.  

84.  However, in my judgment this claim to an equitable lien over the Property, albeit a claim to a proprietary interest in the Property on its face, is not arguable. I say so for the following reasons.

85.  Mr Yu SC relies on the various payments made so far by HGIL (see [11] above) which, according to the Statement of Claim, were paid

“to the 3^rd Defendant and/or the Receivers, by way of part payment for the acquisition of the Property”.

86.  However, the evidence of payments produced by HGIL shows that only the first three payments[81] were paid into the bank account of Smart Edge.  The rest were paid into the bank account of Borrelli Walsh Limited.  Since Messrs Borrelli and Walsh were (and still are) also the receivers of the Shares, as well as of the Property, the very fact of payments into the bank account of Borrelli Walsh Limited alone does not tell one whether they related to the Shares or the Property, as Messrs Borrelli and Ma were receivers of both at the time.  However, given that the agreements under which the latter sums were paid were for the sale of the Shares rather than the Property, there is no basis to suggest that they were paid other than as deposits or payments for the purchase of the Shares, and they therefore cannot be payments for, and giving rise to any purchaser’s equitable lien over, the Property.  Any claim for equitable lien over the Property based on any such sum is obviously unsustainable.[82]

87.  The position is less clear for payments made directly to Smart Edge or, in so far as any payments made to Borrelli Walsh Limited were, contrary to my views above, made to Messrs Borrelli and Ma as the receivers of the Property, then for those payments as well, because while the payments were made to the owners of the Property or the receivers thereof, the position remains that as a matter of legal substance there was no sale of the Property at all at any time as between the Vendor and HGIL, but only the Shares, and they were the only matter to be paid for. 

88.  However, in any event, whatever was the purpose of any of the payments does not matter, because for all the payments, paid into the account of Smart Edge or Borrelli Walsh Limited, whatever was their intended beneficiary and purpose, they had been overtaken by events.

89.  As stated in the Recitals to the Agreement which are accepted as true, the first three payments, totalling HK$700,000,000, were paid under what was called “the First SPA” but was forfeited.  The other payments totalling HK$830,000,000 were also, according to the Recitals, forfeited on termination of the subsequent agreements (and amended agreements).  Despite a claim in this Action that the Vendor is not entitled to forfeit the total payments of HK$2,030,000,000, there is no allegation that the forfeitures under the earlier agreements were improper, and no actions have been commenced in relation thereto.  Rather, the termination of the earlier agreements and the forfeiture of the deposits paid are recorded as facts in the Agreement without caveats or reservations.  Whatever lien HGIL might have as against the Property by reason of the payments must therefore be extinguished by the forfeiture.

90.  As for the additional HK$500,000,000 paid under the Agreement, for reasons stated at [86] above, that must be a payment in respect of the purchase of the Shares from the Vendor, and not of the Property, and cannot give rise to any lien as against the Property, in rather similar circumstances as why no lien arose in LY Group.

91.  When the Agreement was made, it was agreed that the hitherto forfeited sums totalling HK$1,530,000,000 (including the said HK$700,000,000 paid to Smart Edge directly) is deemed to be applied by the Vendor in part payment of the consideration on completion (see clause 4.1).  But that is if and when completion takes place.  Before that, the sums remain forfeited sums in relation to which no lien as against the Property could have been maintained, even if it had ever existed before.  Putting it the other way, if for any reason completion does not take place, HGIL has no basis to have the HK$1,530,000,000 returned.  It therefore does not have a lien over the Property for its return.

92.  In my judgment, the claim for an equitable lien over the Property, although such a claim is a claim to an interest in land and is thus a lis pendens, as the same is not arguable in the circumstances of this case, in so far as the Action is making such a claim, the Writ shall be removed from the pending section of the Registry under the inherent jurisdiction of the Court (as section 19 of the LRO is not applicable, the Writ not having been registered).

F4.  Section 60 of the CPO

93.  Mr Yu SC further refers to and relies on the claim under section 60 of the CPO in relation to the sale of the Property to Goldstone in this Action, and argues that this Action is one which relates to the Property, and thus a lis pendens.

94.  Section 60 of the CPO is in the following terms:

“(1) Subject to subsections (2) and (3), every disposition of property made, whether before or after the commencement of this section, with intent to defraud creditors, shall be voidable, at the instance of any person thereby prejudiced.

(2) This section does not affect the law of bankruptcy for the time being in force.

(3) This section does not extend to any estate or interest in property disposed of for valuable consideration and in good faith or upon good consideration and in good faith to any person not having, at the time of the disposition, notice of the intent to defraud creditors”.

95.  The first question is whether the section 60 claim is a lis pendens.  

96.  Mr Manzoni SC, relying primarily on Thian’s, argues that as the section 60 claim, even if successful, will not create or confer any interest in the Property to HGIL, it is not a lis pendens.

97.  Mr Yu SC, on the other hand, submits that this is too narrow a reading of the definition of “lis pendens” in the LRO.  He submits that the term “in relation to” is of a wide ambit.  Further, relying on the judgment of Sir Robert Megarry VC in Selim Ltd v Bickenhall Engineering Ltd,[83] Mr Yu SC submits that an action which seeks to destroy an interest in land is also a lis pendens.  

98.  Selim was a case concerning whether an action, considered to be the preliminary stage in forfeiture proceedings, was an action “relating to land”.   The Vice-Chancellor said:[84]

“I propose to take the matter by stages. First, if the proceedings were direct proceedings for forfeiture, would they be registrable as a pending action? Plainly they would not be proceedings which claim some proprietary right in the land, in any ordinary sense of the words. What they would seek would be to destroy an estate in the land. Yet I think that one must consider the effect of such a distinction. If the immediate reversioner on a lease purchases that lease, the normal result will be that the lease will perish by surrender, and the reversion will become an interest in possession; and if the reversioner sues to enforce the agreement, that plainly would fall within the authorities as being a pending land action. If instead the reversioner sues for forfeiture, the result, if he succeeds, will be much the same: the lease will disappear and the reversion will become an interest in possession. Thus although the forfeiture is in one sense an act of destruction, from another aspect it may be regarded as an act of acquisition; for it augments the reversioner's interest in the land.

Even if I am wrong in this view, I have to remember that what I am primarily concerned with is the phrase ‘relating to land’; and on any ordinary reading of those words, proceedings for the forfeiture of a lease of land seem to me to fall within that expression. I do not think that there is anything in the authorities which precludes me from giving effect to this view. The cases which speak in terms of a claim to specific property, or the recovery or assertion of title to specific property, or a claim to some proprietary right in land (see the Calgary case [1974] Ch. 102, 107) do not seem to me to connote that proceedings to destroy an interest in land cannot be a pending land action. After all, the statutory words ‘relate to’ are very general in their meaning, and although there must be some limit to this meaning, I would have thought that proceedings for the destruction of an interest in land ‘relate to’ the land as much as proceedings for the acquisition of an interest in the land. In each case the proceedings directly affect an estate or interest in the land; and without aspiring to any definition, exhaustive or otherwise, I would regard such an approach as providing a helpful guide to proceedings which fall within the statutory definition.

There is a further consideration. In the Whittingham case [1979] Fam. 9, 23, and in the Greenhi case [1979] 1 W.L.R. 156, 159, there is some discussion of it being material to take into account whether, if the action is not registered, a third party, acquiring the land before judgment in the action and without notice, will take free from the plaintiff's claim. In the case of leaseholds, it seems to me to be important that a purchaser should, by searching, be able to discover pending proceedings for forfeiture, for otherwise he might be purchasing something which, on service of the proceedings for forfeiture, had ceased to exist. Nearly a year ago I had such a case (Pips (Leisure Productions) Ltd. v. Walton (unreported), May 23, 1980); and it was a striking warning to purchasers of leaseholds. It seems to me that this consideration supports the view that proceedings which, if successful, will destroy an interest in land ought, on any fair reading of the words, to be regarded as proceedings which ‘relate to’ that land”.

99.  Applying this case, Mr Yu SC submits that the effect of the section 60 claim, if successful, will destroy whatever interest Goldstone has in the Property.  The section 60 claim therefore relates to land or an interest in land and is a lis pendens.

100.  I agree that, in principle, if the effect of a successful claim in an action is that an interest in land will be destroyed, or taken away from someone, the action is one which is in relation to land or an interest in land, and thus a lis pendens.  I do not think that Thian’s stands in the way.   To claim, or to destroy or take away, an interest in land are different sides of the same coin.   If someone’s interest in land of whatever nature is destroyed or taken away, someone else’s interest in the land must have arisen, or augmented to some extent.  Thus, to seek to destroy or take away an interest in land can be said to be making a claim to the corresponding interest in the land. Thus, for example, where an application to set aside a sale of land under section 60 of the CPO is successful, with the result that the interest of the transferee (as a party to the action and is bound thereby) is destroyed, and that the title to the land “reverts” back to the transferor, the claim can be said to be both a claim to destroy an interest in land (if one looks at it from the point of view of the transferee), and a claim of an interest in land (if one looks at it from the point of view of the transferor).

101.  Thus, in a simple case where a section 60 claim is made as between the transferor and the transferee, I have no doubt that the claim is a lis pendens, irrespective of who is the plaintiff.   It may be that such a claim as between the transferor and the transferee, which is based on an allegation of an intention to defraud creditors, would be unusual,[85] and it is usually made by third parties prejudiced by the transfer, typically (but does not necessarily have to be) creditors of the transferor.   However, Mr Manzoni SC does posit the scenario where the application is made by a liquidator of the transferor company seeking to recover the property. Such a claim by the liquidator would also, in my judgment, constitute a lis pendens.

102.  There are two possible arguments against the present section 60 claim being a lis pendens:

(1)  The transferee, Goldstone, is not a party to this Action and so it is not bound by any judgment allowing the section 60 claim (if it does eventually happen).  Its title to the Property is not affected by the judgment, and is not divested or “destroyed”.   In this sense, one may say that the section 60 claim does not seek to claim or destroy any interest in the land, and is not a claim in relation thereto. As Mr Manzoni SC points put in his skeleton, the claim for the order to set aside the disposition to Goldstone, [86] is  

“particularly questionable in circumstances where Goldstone is not even a party in the Action”.

(2)  The fact that, even if the section 60 claim succeeds and the title or interest of Goldstone in the Property is “destroyed”, no interest in the Property will be transferred to or vest in HGIL.  In this sense, one may say that there is no “claim” to any interest in land.   Mr Manzoni SC contrasts this case with the example that he gives of the liquidator claiming under section 60 of the CPO against the transferee, which he says, if the claim succeeds, will result in the land being reverted back to the company.

103.  I can deal with the second point first.  As I said above, in my view where an action is between the transferor (or its liquidator) and the transferee of the land in a transaction said to be a fraudulent conveyance under section 60 of the CPO, so that if the claim is successful then the title to or interest in the land will revert back from one party to the action to another, the action is a lis pendens, and the writ is registrable at the Registry.  This is because the action is one which is, in the words of section 1A, an action pending in court that relates to land or any interest in or charge on land, and this is consistent with Thian’s.  The nature of the action remains the same even if the plaintiff is not the transferor or the liquidator, but a third party who is prejudiced by the transfer. 

104.  In the premises, it seems to me to be wrong to say that whether the section 60 claim is or is not a lis pendens depends on who the plaintiff is: in either case the title to or interest in the land of the transferee is being attacked, and if the attack is successful the ownership of the title or interest, vested in the transferee, will be affected.

105.  There is nothing in the definition of “lis pendens” in section 1A of the LRO, or in Thian’s, which expressly states that it is a necessary requirement that there must be an assertion to or claim of title to or an interest in the land by the plaintiff in the sense that if the plaintiff is successful then he will get the title or interest, although I surmise that that would be the case in a vast majority of situations.   Rather, reading together with the phrase “in litigation” in section 19 of the LRO, in my judgment it is sufficient if the action does raise an issue in relation to the title to or interest in the land in the sense that the judgment in the action may affect which person or entity should have, or should not have, such title or interest.  As long as the title to or an interest in the land is, or can be, affected by the judgment in the action, there is a “claim” to the title or interest, by the plaintiff, if not for himself, then, effectively, for another person or entity to whom the title or interest will vest or revert.

106.  Regarding the first point, i.e. the fact that Goldstone, the transferee under the allegedly fraudulent conveyance, is not a party, that is more problematic.  Mr Yu SC submits that the non-joinder of Goldstone does not affect the Action as between the existing parties, citing Order 15, rule 6, of the Rules of the High Court.[87] While this is true, it does not answer the question how, in an action which does not involve the current owner of the Property the transfer to which is intended to be set aside, the title to or any interest in the Property can be affected, thereby rendering the section 60 claim a lis pendens.  The matter, as far as I can see, and notwithstanding the reliefs sought in the Writ and the Statement of Claim, remains an action between the existing parties, with personal remedies being sought, and does not and cannot be an action in relation to the Property, or that any judgment renders therein affects the Property or any interest therein, or any subsequent purchasers or mortgagees.

107.  I do note that in Sun Ngai International, it was held that the matrimonial proceedings were lis pendens although the landowners, i.e. the companies said to be controlled by the husband, were not parties to the proceedings. But, on the basis that the husband did control the landowners, an order could be made compelling the husband to procure the transfer of the properties by the landowners to the wife.  In the present case, there is no basis to suggest that Goldstone was or is under the control of any of the defendants so that any order which may at least indirectly affect the owner of the Property, i.e. Goldstone, can be made.

108.  For these reasons, in my judgment the present section 60 claim is not a lis pendens given that the transferee, Goldstone, is not a party.   The Writ, in so far as it relates to the section 60 claim, should be removed in the exercise of my inherent jurisdiction.

109.  In light of the foregoing, it is not necessary for me to decide on the submissions of Mr Manzoni SC that the section 60 claim is unarguable.   I shall state briefly that in my judgment the section 60 claim is arguable given the matters identified by Mr Yu SC, namely:

(1)  Smart Edge is insolvent or would be rendered so by the disposition of the Property;

(2)  The consideration of HK$5,600,000,000 is a gross undervalue, in light of the fact that the price of the entire share capital of Smart Edge under the Agreement was HK$14,300,000,000, and by reference to expert valuation reports adduced on behalf of HGIL;

(3)  The sale to Goldstone, and completion thereof on 29 June 2023, were made even though the defendants and Messrs Borrelli and Ma knew of the claims of HGIL and HG Property.

(4)  The “highly unusual” timing of the sale to Goldstone and the representations made to HGIL in or around September 2022.

110.  Smart Edge argues that the claim under section 60 of the CPO does not assist HGIL, because it is “nonsensical” for HGIL to suggest that the sale of the Property to Goldstone was undertaken with the intent to defraud creditors of HGIL, since:

(1)  Smart Edge’s accounts with its trade creditors are up to date and have routinely paid as and when due, its monthly income meets or exceeds its monthly expenditure (other than amounts owed to the Secured Creditors), and the only other creditors of Smart Edge are the Secured Creditors (to which Smart Edge owes more than HK$5,600,000,000) who appointed receivers and managers thereto;

(2)  The sale of the Property to Goldstone was by Messrs Borelli and Ma as receivers to a third party for valuable consideration and with the full knowledge, and for the benefit, of the Secured Creditors;

(3)  The proceeds of sale of the Property have in fact been applied in reduction of the debt owing to the Secured Creditors.

111.  The evidence for the aforesaid response from the defendants is primarily the assertion of Mr Borrelli in his affidavits without underlying documents. However, it is Mr Borrelli’s own evidence that the amounts owed to the Secured Creditors exceed the sale price of the Property to Goldstone, thus leaving other, unsecured, creditors of Smart Edge unprotected, including HGIL should it establish its claims here.  The sale of the Property was at a price, against which there is at least some arguable basis to say was below its market value, which is not sufficient to pay off even the Secured Creditors, in light of the existing, and rather long-running saga, between the defendants and HGIL (and HG Property), with completion done even though Goldstone did not pay the full price.  All these suggest to me that the section 60 claim is arguable, and whatever answers Smart Edge or Mr Borrelli can now give, as summarised above, only suggest that there are genuine triable issues.

112.  Mr Manzoni SC also argues that HGIL is not a creditor of Smart Edge.   However, I agree with Mr Yu SC that HGIL does not need to be a creditor of Smart Edge to make a challenge under section 60 of the CPO.  Section 60 allows a claim thereunder to be made by “persons thereby prejudiced”, and Mr Yu SC cites the decision of DHCJ To in Chau Yuet Ching Brenda v Chan Bo Man William[88] as follows:

“Cadogan v Cadogan identified two classes of ‘persons thereby prejudiced’ who have the right to under section 172 of the Law of Property Act, which is equivalent to section 60 of CPO, to impeach a conveyance with the requisite intent, namely:

(1) persons who were creditors of the disponer at the date of the conveyance and whose debts remain wholly or partially undischarged at the date of the court hearing; and

(2) persons who became creditors of the disponer after the date of the conveyance and whose debts remain wholly or partially undischarged at the date of the hearing.

In that case, Buckley LJ went further and explained that ‘the use of the word “person” in section 172 was intended to make the protection of the section available to persons who were prejudiced, although they were not properly to be described as creditors and were not prejudiced in the capacity of creditors’”.

113.  In any event, Mr Yu SC submits, and I agree, that HGIL is a potential and/or future creditor of Smart Edge given its claim against the latter for conspiracy and for a return of deposit, as well as an unjust enrichment claim.

114.  Mr Yu SC also submits, and I agree, that HGIL is clearly a person prejudiced by the disposition of the Property, given the Property was the only significant asset of Smart Edge and, indirectly, of the Vendor.  HGIL is rendered without any meaningful recourse against the defendants even if it succeeds in this Action against them.

F5.  Balance of justice

115.  Given my rulings above that the Writ is not registrable as the Action is not a lis pendens, or, for the claim for an equitable lien, the same is not arguable, there is no need to undertake the balance of justice exercise.  I would state briefly that if this exercise is relevant, on the basis that the Writ is registrable and the claims (or some of them) are arguable, the balance of justice favours retaining the status of the Writ at the Registry, because while the effect of not removing the Writ from the pending section of the Registry would have the effect of freezing the Property,[89] completion of the sale to Goldstone took place notwithstanding the fact that the Writ was issued, lodged for registration, and remained in the pending section of the Registry.   Thus, as between the parties to this Action, the lodging of the Writ for registration and its existence at the pending section does not seem to cause any harm or prejudice (and there is no evidence that Goldstone withheld part of the price for this reason), whereas the removal would have, or is likely to cause, damage to HGIL if it succeeds at the trial of this Action, given that, with the financial position of Smart Edge, it may not be good for damages (and no undertaking as to damages is offered). 

G.  LACK OF GOOD FAITH AND ABUSE

116.  Referring to the previous attempts to register various instruments in the Registry, and the statements made by those acting for HGIL that some such instruments were not registrable ([19] above), Smart Edge argues that the latest attempt to register is not made in good faith, and is an abuse of the land registration system.

117.  I do not think that there is sufficient basis for me to make that finding.  True that there were previous attempts to register various instruments (agreements and writs) which were rejected or withdrawn or where the instruments were judicially stated to be not registrable (in the consent order of DHCJ Jonathan Chang SC) and the Removal Judgment (which I note did not involve HGIL but was on an agreement materially the same as the Agreement).   But the claim based on section 60 of the CPO is a “new” claim not considered or raised before, and although HGIL’s reliance thereon to support registration is not successful I do not think that one can infer or find a lack of good faith or abuse for HGIL to seek to do so.

H.  DISPOSITION

118.  For the above reasons, I allow the application and order that the Writ be removed from the pending section of the Registry in the exercise of my inherent jurisdiction.  I also declare that the Agreement and the Writ, except in so far as a claim is made for an equitable lien, to be not registrable. In so far as the Writ relates to a claim for an equitable lien, it is a lis pendens but the same is not arguable and it should be removed.

119.  The parties are to agree the terms of the Order to be made by me within 14 days of this Decision, and in default of agreement there is liberty to apply.

120.  I make an order nisi that Smart Edge is to have the costs of this application, with a certificate for one leading counsel and one junior counsel, to be taxed (on a party to party basis) if not agreed.

121.  I thank counsel for their assistance.

ANNEX

(1)  Clause 1.1 (“Definitions”):

(2)  Clause 2.1 (“Sale and Purchase of the Sale Shares and the Sale Loan”):

“Subject to the terms and conditions of this Agreement, the Vendor:

(a)  shall sell as legal and beneficial owner and the Purchaser shall purchase the Sale Shares, free from all charges, liens, Encumbrances and other adverse claims whatsoever; and

(b)  shall assign as legal and beneficial owner and the Purchaser shall take the assignment of the benefit of the Sale Loan, free from all charges, liens, Encumbrances and other adverse claims whatsoever,

in each case, with effect on and from Completion”.

(3)  Clause 3 (“Deposit”):

“3.1 The Purchaser shall be liable to pay the Further Deposit to the Vendor in immediately available and unencumbered funds on or before the date of this Agreement. For the purpose of the Purchaser satisfying this obligation, the Vendor acknowledges that Hong Kong Dollars five hundred million (HK$500,000,000.00), comprising the whole of the Further Deposit, has been deposited in the Receivers’ Account before the date of this Agreement, and the Purchaser acknowledges and agrees that such amount shall constitute the Further Deposit for the purpose of this Agreement.

3.2 The Purchaser acknowledges and agrees that, upon execution of this Agreement, no part of the Further Deposit received by the Vendor is refundable to the Purchaser under any circumstances, and shall be fully and unconditionally released to the Vendor on the date of this Agreement for the Vendor’s immediate benefit and use, howsoever it may see fit.  This Clause 3.2 may be pleaded by the Vendor or any third party as a bar to any action or proceeding brought by the Purchaser for the return of all or any part of the Further Deposit, in any forum or jurisdiction.

3.3 The Vendor and Purchaser agree that, upon Completion, the Forfeited Deposit shall be deemed to have been applied by the Vendor in part-payment of the Consideration.  Otherwise, in the event of termination of this Agreement, for any reason whatsoever, the Forfeited Deposit remains released and forfeited pursuant to the First SPA and the Deed of Amendment, and the Purchaser disclaims any right to seek the return of all or any part of the Forfeited Deposit.  This Clause 3.3 may be pleaded by the Vendor or any third party as a bar to any action or proceeding brought by the Purchaser for the return of all or any part of the Forfeited Deposit, in any forum or jurisdiction

[…]”.

(4)  Clause 4 (“Consideration”):

“4.1 The aggregate consideration for the purchase of the Sale Shares and the Sale Loan shall be the sum of Hong Kong Dollars fourteen billion, three hundred million (HK$14,300,000,000.00), comprising:

(a)  the Further Deposit, which the Purchaser and the Vendor acknowledges and agree has been deposited into the Receivers’ Account prior to the date of this Agreement;

(b)  the Forfeited Deposit, to be deemed applied by the Vendor in part payment of the Consideration on Completion, in accordance with Clause 3.3; and

(c)  the Balance of Consideration, which shall be paid by the Purchaser to the Vendor upon Completion, in accordance with Clause 4.2.

[…]

4.3 For the avoidance of doubt, the consideration for the sale and purchase of the Sale Loan shall be the face value of the amount of the Sale Loan as at Completion and the consideration for the sale and purchase of the Sale Shares shall be the Consideration less the said consideration for the Sale Loan

[…]”.

(5)  Clause 6 (“Interval Between Contract and Completion”):

“6.1 The Vendor hereby covenants with the Purchaser that prior to Completion and in the absence of the prior written consent of the Purchaser:

(a)  the Vendor shall procure the Company and the directors of the Company shall not and shall not offeror agree to:

(i)  sell, transfer, lease, licence or in any other way dispose of, or grant any option or right of pre-emption in respect of any part of its assets (other than the Property or any part thereof pursuant to the terms and conditions of this Agreement), business or undertaking (or any interest therein) or contract to do so;

[…]

(v)  create any fixed or floating charge, lien or other Encumbrance over the whole or any part of the undertaking, property or assets of the Company (including the Property) or grant or issue any mortgages, charges, debentures or other securities for money or redeem any such securities or create, give or assume any guarantees or indemnities for or otherwise secure the liabilities or obligations of any person or corporation;

[…]

6.3 The Purchaser has completed (whether by itself or its advisors) its review of the title deeds and documents of the Property prior to signing of this Agreement and is satisfied in all respects with the result thereof and the Vendor having shown and procured the Company to give good title of the Property in accordance with Sections 13 and 13A of CPO.  The Purchaser agrees that no further objection or requisition shall be raised on the title deeds and documents of the Property and that no request for further title deeds and documents of the Property shall be made”.

(6)  Clause 7.1 (“Completion”):

“Subject to the satisfaction of the conditions referred to in Clause 5.1, Completion shall take place at or before 1:00pm on the Completion Date at the office of the Vendor’s Solicitors or such other place or in such manner as the parties may agree in writing, whereby all of the following businesses shall be transacted:

[…]

(b)  the Vendor shall upon receipt of the Balance of Consideration:

(i)  deliver to the Purchaser at Completion:

[…]

(3)  insofar as the same have not been delivered to the Purchaser, all accounting records, books, Audited Accounts, documents and instruments which are in the possession of the Receivers or the Company Receivers in relation to the affairs of the Company and the Property, including ... the title deeds and documents relating to the Property which are still in the possession or control of the Vendor but not further or otherwise;

[…]

(11)   the originals of each lease document as mentioned in Schedule 7 in the Receivers’ possession;

(ii) procure the immediate discharge or release of all charges, liens, mortgages, security and Encumbrances over the Sale Shares, the Property, the Sale Loan, and any assets and undertaking of the Company whether created under the Security Agreement or otherwise;

[…]”.

(7)  Clause 9 (“Tenancies”):

“9.1 The Property shall be delivered to the Purchaser subject to the existing tenancies and any lettings, tenancies and licences granted or to be granted or modified by the Vendor in accordance with Clause 9.10 hereof (collectively referred to as the Tenancies, and individually the Tenancy).

9.2 The Purchaser hereby acknowledges that copies of the tenancy agreements in respect of the Tenancies have already been produced to the Purchaser and the Purchaser has been independently advised and is fully aware of the terms thereof.  The Purchaser shall take the Property subject to the rights of the tenants and licensees as provided in the Tenancies (collectively, the Tenants and each, the Tenant) or by reason thereof.  The Purchaser agrees to take the Property subject to the Tenants’ rights to any right to rent-free period(s) and/or right of early termination and/or renewal option as stated in the respective Tenancies.  No representation or warranty is given as to whether any of the aforesaid rights have been or will be exercised by the Tenants.

9.3 Subject to Clause 9.10 hereof, if the Property or any part(s) thereof shall be surrendered by any of the Tenants before Completion or if any of the Tenancies terminates for any reason before Completion, the Property or such part(s) thereof (as the case may be) shall be delivered with vacant possession on Completion and the Purchaser shall not raise any requisition or objection in relation thereto.  In such event, the Purchaser shall accept vacant possession of the Property or such part(s) thereof so surrendered by the Tenant(s) and shall also accept such state and condition of the Property or such part(s) thereof so surrendered by the Tenant on ‘as is’ basis.  The Vendor is not required to remove any fittings, fixtures, equipment, furniture, chattels, goods, garbage, or rubbish, if any, in the Property or such part(s) thereof as surrendered by the Tenant(s) and the Purchaser shall at his own costs and expenses lawfully remove such items.

9.4 The Vendor hereby expressly reserves and excepts unto the Vendor the right, before and after Completion, to collect any arrears of rent(s) or mesne profit(s) and any other moneys due and payable by the Tenants to the Company under the Tenancies up to and inclusive of the Completion Date (the Arrears) and all damages in respect of any breach of the Tenancies up to and inclusive of the Completion Date.  The Purchaser shall, if requested by the Vendor or the Vendor’s Solicitors, assist the Vendor to recover any Arrears and damages from any of the Tenants, and for such purpose, the Vendor shall be entitled to commence legal proceedings in the name of the Company against such Tenant(s) and/or to join the Company as party to the litigation for the recovery of the Arrears and damages or any part thereof provided that the Vendor shall indemnify the Purchaser in respect of all costs and expenses arising from the Vendor’s recovery of such Arrears and damages and/or commencing legal proceedings in the name of the Company as a party to the litigation as aforesaid.  The Purchaser hereby agrees to the Vendor’s use of the Company’s name to commence and pursue any legal proceedings against any of the Tenants and the Purchaser further agrees to procure the Company to perform, do, sign and execute all or any acts, deeds, things and instrument so as to enable and facilitate the Vendor’s recovery of such Arrears and damages upon the reasonable request of the Vendor.  Without prejudice to the foregoing, the Purchaser shall, upon demand of the Vendor, procure the Company to assign the rights of recovery of the Arrears to the Vendor by execution of an assignment of debt or arrears in favour of the Vendor in such form as to be provided by the Vendor.

9.5 For the avoidance of doubt, the Purchaser agrees that the Vendor shall have the right but shall not be under any obligation to take legal action and proceedings against the Tenants who have been or shall be in breach of the Tenancies.

9.6 Notwithstanding any provisions herein contained or any rule of law or equity to the contrary, it is expressly agreed that the Vendor shall have the full right and liberty (but under no obligation) without reference to the Purchaser or any other party who may be interested in any way whatsoever and without the necessity of making the Purchaser or any other party a party to take such legal action, enforce the landlord’s rights under the Tenancies as the Vendor may be in its absolute discretion deem fit and exercise its rights over the Rental Deposits, if any, including the right of deduction and/or forfeiture in the event of any breach by the Tenants of any terms and conditions of the Tenancies on or before Completion.

9.7 The Vendor gives no warranty as to the amounts of rent lawfully recoverable from the Tenants, as to the effect of any legislation in relation to the Tenancies or as to compliance with any legislation affecting the same.  The Vendor gives no warranty as to the accuracy or correctness of the information provided in the Schedule 6.  The Purchaser shall make his own investigation and enquiry in respect of the same and the Vendor shall not be liable in any way to the Purchaser in respect thereof. In particular, the Vendor gives no warranty and makes no representation as to whether the Tenancies or any of them or any provisions therein is/are or will be subsisting on and after the Completion Date or whether there is any existing breach or non-performance or there will be any breach or non-performance of the terms of any of the Tenancies by the Tenants.

9.8 Subject and without prejudice to Clauses 9.3 and 9.10, if any of the Tenancies terminates for any reason before Completion, the Vendor shall inform the Purchaser and, on being fully indemnified by the Purchaser against all legal costs and expenses which shall have been properly and reasonably incurred by the Vendor and all consequential loss, expenditure or liability, shall act as the Purchaser reasonably directs.  All such legal costs and expenses shall be paid by the Purchaser upon Completion.

9.9 The Vendor does not warrant:

(a)  that the Tenancies will be duly determined on such expiry dates of the Tenancies. The Purchaser shall not be entitled to claim against the Vendor for any failure by the Vendor or his agents to duly determine the Tenancies on the said expiry dates; or

(b)  that the Tenants will deliver vacant possession of the Property or any part thereof on the expiry dates of the relevant Tenancies.  In the event that any Tenant shall fail to deliver vacant possession of the Property or any part thereof notwithstanding termination or expiration of the relevant Tenancies, the Purchaser shall accept the affected part or parts of the Property subject to the Tenants’ occupation and shall not raise any objection thereto or claim any compensation in relation thereto.

9.10 The Vendor hereby expressly reserves its right and it is hereby declared that the Vendor shall be entitled to cause the Company to exercise any of the following rights in respect of the Property or any part or parts thereof (the Rights) and to take all actions to perform, enforce or perfect any of the Rights at any time on or before Completion:

(a)  subject to clause 9.12, to renew, vary, modify or terminate the existing lettings or tenancies;

(b)  to accept surrender of any existing lettings or tenancies;

(c)  to grant new lettings, tenancies or licences; and

(d)  to make binding offer in relation to the above,

at such rent for such period and/or on such terms and conditions as determined by the Vendor, but without prejudice to the Purchaser’s rights under this Clause.  Particulars of the Rights that the Vendor intends to cause the Company to exercise shall be given by notice in writing to the Purchaser and any of the Rights shall be exercisable by the Company unless written notice is received from the Purchaser within seven (7) Business Days of such notification by the Vendor to the Purchaser as aforesaid, directing the Vendor not to do so provided that the Purchaser shall act reasonably in giving such direction.  If the Rights are not exercised as a result of such direction given by the Purchaser, the Purchaser shall indemnify and compensate the Vendor in full against all loss, including but without limitation, any financial loss or loss of rental income, any expenditure, liability and/or costs or damages arising therefrom suffered incurred or sustained by the Vendor.  The Purchaser agrees to accept the Property subject to the Rights so exercised by the Vendor and/or the Company and the Purchaser shall not raise any objection thereto.

9.11 (a) Such part of portion of the Property which continues to be subject to the Tenancies on the Completion Date or of which the Tenants fail to deliver vacant possession to the Vendor notwithstanding the termination or expiration of the Tenancies prior to Completion are hereafter referred to as the Leased Premises.

(b)  Vacant possession of such part or portion of the Property (other than the Leased Premises) shall be delivered to the Purchaser on Completion.  For the avoidance of doubt, the Vendor shall be entitled to remove or leave behind such fixtures, fittings, furniture, electrical appliances and/or chattels on or in the Property (the Tenants’ Chattels) on Completion, and the Purchaser shall not make any objection or claim any compensation in relation thereto.  Vacant possession of the Property (other than the Leased Premises) shall be deemed to have been given by the Vendor to the Purchaser notwithstanding the existence of the Tenants’ Chattels.

(c)  The Purchaser shall be deemed to have obtained vacant possession of such part or portion of the Property other than the Leased Premises on Completion upon the Vendor’s delivery to the Purchaser of the key(s) thereof and the Vendor’s obligation hereunder to deliver vacant possession thereof shall be deemed to be discharged accordingly.

9.12 The Vendor shall not take any step to terminate or procure the termination of, vary or modify to reduce the rental, or refuse or refrain from renewing on reasonable terms any existing lettings or tenancies of the Property without the prior written consent of the Purchaser.

[…]”.

(8)  Clause 10 (“Condition of the Property”):

“10.1 The Purchaser, having fully inspected or deemed to have duly inspected, is fully aware of and fully satisfied with and accepts in all respects the Property and the existing physical state, condition and finishes of the Property and the Fixtures and Equipment and shall not make any objection or requisition thereto or in connection therewith.  If the Purchaser has not actually inspected the Property he is deemed to have waived his right to do so and is deemed to be fully satisfied with and to fully accept in all respects the existing physical state, condition and finishes of the Property and the Fixtures and Equipment and to take the same as they stand.

10.2 The Property will be delivered to the Purchaser on Completion on an ‘as is’ basis in its present state and condition as at the date of this Agreement (fair wear and tear excepted) and the Purchaser shall not raise any requisition or objection in connection therewith. The Vendor gives no representation or warranty (express or implied) in respect of any of the following matters:

(a)  the physical state and condition of the Property or the Fixtures and Equipment;

(b)  the quality or fitness of the fixtures, fittings and finishes or the installations and appliances (including but not limited to the Fixtures and Equipment) incorporated in the Property or in the building which form part of the Property;

(c)  the composition of the said building or the nature or manner of its or their construction;

(d)  the floor area of any building on the Property or the site area of the Property;

(e)  the legality or actual or permitted user of the Property;

(f)  the fitness or otherwise of the Property for development or re-development;

(g)  whether the existing use or the permitted use of the Tenancies, the existing state and condition of the Property or any other matter specified in this Agreement is in accordance or in compliance with the Government Grant or the occupation permit or the approved building plans and any subsequent amendment or alteration approved by the Building Authority relating to the Property or the Building Ordinance (Cap 123) and/or its subsidiary legislation or regulation and/or other legislation or regulation; and

(h)  development or re-development potentials of the Property.

10.3 Without prejudice to the provisions of Clause 10.2, the Vendor gives no representation or warranty (express or implied) in respect of whether the Property is included in any lay-out plans (draft or approved) under the Town Planning Ordinance (Cap 131). The Purchaser shall be responsible for making, and declares and confirms that, prior to signing of this Agreement, the Purchaser has made its own inquiry and investigation in respect of the matters aforesaid as well as any provision or redevelopment restriction affecting the Property under the Town Planning Ordinance (Cap 131) and/or any other relevant ordinance for the time being in force and the Purchaser is deemed to have agreed to purchase the Property subject to such provision and/or restriction, if any, and the Purchaser shall be bound to complete the purchase notwithstanding any notice which may be given or issued or published in pursuance of the Town Planning Ordinance (Cap 131) after the signing of this Agreement.

10.4 (a)The Purchaser has, prior to the signing of this Agreement, instructed his professional advisers to ascertain whether there are any unauthorised or illegal structures or works or erections or alterations or additions or partitions or subdivisions or encroachments within or appertaining to the Property and whether the Property or any part thereof or any appurtenances is erected in accordance with the approved building plans or in compliance with the Buildings Ordinance (Cap 123) and/or other relevant ordinances and/or legislation. The Purchaser acknowledges that he has been invited to inspect the Property and that he has duly inspected or has caused the Property to be duly inspected on his behalf or is deemed to have duly inspected the Property prior to signing of this Agreement, and that the signing of this Agreement by him is not upon reliance on any representation or warranty whether written, oral, express or implied made by or on behalf of the Vendor

(b)  Notwithstanding anything herein contained and any covenant for good title in the Assignment(s), the Purchaser shall waive any right to:

(i)    claim against the Vendor;

(ii)  raise any objection or requisition to title; or

(iii)  proof of good title by the Vendor,

in relation to any unauthorised building work or alteration (if any) on, within or appertaining to the Property or forming part of the Property. The Purchaser shall accept the Vendor’s title without any claim for compensation, damages or abatement of Consideration notwithstanding any such unauthorised building work or alteration (if any).

(c)  The Vendor gives no warranty or representation whether the Property (or any part thereof) is subject to any building orders or notices issued by the Building Authority or other relevant authority, and irrespective of whether it is/they are registered at the Land Registry. The Purchaser has made their own enquiry and investigation on the existence of building orders or notices relating to the Property, and the status of compliance and/or works as required under such orders and notices.

(d)  The Purchaser hereby expressly declares and agrees to take the Property subject to any existing building orders and notices relating to the Property as mentioned in Clause 10.4(c) above, together with any other notice and/or order from time to time and at any time issued or to be issued by the Government or other competent authority in relation to the Property or any part thereof, irrespective of the kind or type of works or actions which may be required under such notice or order (the Orders). The Purchaser shall not require the Vendor to carry out any requisite demolition, alteration, reinstatement, repair, renovation or improvement works or to bear any costs and expenses in connection with the Orders. Any such demolition, alteration, reinstatement, repair, renovation or improvement works required under the Order and any costs and expenses for such works shall be borne by the Purchaser absolutely and the Purchaser shall indemnify the Vendor against any non-payment of the aforesaid.

10.5  (a) (i) Without prejudice to the provisions of Clause 10.2, the Vendor gives no warranty or representation whatsoever as to whether or not the Property or the Building or certain parts thereof has/have encroached on any adjoining or adjacent property and/or premises and/or land, and/or whether the adjoining or adjacent property premises and/or buildings and/or areas occupied by their occupants may have encroached on certain parts of the Property which, whether or not, may give rise to a claim of adverse possession over such parts of the Property (collectively, the Encroachment). The Purchaser shall be deemed to have made the investigation on any Encroachment and shall not raise any requisition or objection on title to or arising from the same (if any)

(ii)   The Purchaser has been advised to ascertain whether or not there is any discrepancy between the existing layout, partitioning, sub-division and use of the Property and those shown on the plans (if any) annexed to the title documents of the Property and/or the approved building plans and/or the approved carpark layout plan relating to the Property or any discrepancy between the description of the Property in the title documents and those shown on the assignment plan and/or any other plan annexed to the title documents of the Property (collectively, the Discrepancy).

(iii)  Without prejudice to the generality of the foregoing provisions, the Purchaser, having duly inspected or being fully satisfied with the Property and all physical state and conditions thereof (including the Encroachment and any structures) (the physical state and conditions of the Property including without limitation any structures herein and any Encroachment are collectively referred to as the Existing Physical Conditions), shall take the same (subject always to sub­paragraph (d) hereof and other relevant agreements hereof) on an ‘as is’ basis and agrees to purchase the Property as it stands in the full knowledge that the presence of any unauthorised or illegal structures or works or erections or alterations or additions or partitions or subdivisions or any Encroachment existing or within or appertaining to the Property or any part thereof (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) may potentially render the title of the Property defective or lead to the Government or any competent authority to exercise or exercising its right of re-entry or to take or taking enforcement action or the Government or other persons entitled to any property upon which an Encroachment has been made taking enforcement action in connection therewith and the Purchaser shall complete the purchase of the Property notwithstanding the same.

(iv)  The Purchaser specifically agrees that the Property shall be delivered to the Purchaser subject to the existing physical conditions and any structures or works or erections or alterations or additions or partitions or subdivisions or encroachments existing or within or appertaining to the Property or any part thereof (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) and subject also to the right(s) (if any) of any person in respect thereof.

(b) The Vendor gives no warranty, and shall not be responsible for:

(i)    the existence of any structures or works or erections or alterations or additions or partitions or subdivisions or encroachments existing or within or appertaining to the Property or any part thereof (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy);

(ii)   as to whether the existing layout and partition and subdivision of the Property is in compliance with existing legislation and ordinances (whether under the Fire Services Ordinance (Cap. 95), Fire Safety (Commercial Premises) Ordinance (Cap. 502) and/or other legislation) and/or the rules, regulations, directions, notices and/or orders issued by the Buildings Department or other Government or competent authorities; and/or

(iii) the Purchaser hereby confirms that he has sought independent professional advice in this respect and expressly waives his right and agrees not to raise any objection or requisition on title in relation to or arising from any structures or works or erections or alterations or additions or partitions or subdivisions within or appertaining to the Property or any part thereof (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) and the matter referred to in (ii) above, and agrees to accept the title of the Prope1iy and shall complete the purchase of the Property notwithstanding the same may exist.

(c) The Purchaser specifically agrees that the Purchaser shall not be entitled to request for any approved building plan or any carpark layout plan or any other plan or layout plan or any document relating thereto (whether or not the same is registered in the Land Registry or forms any part of the title deeds and documents of the Property) or raise any requisitions on or objection to any structures or works or erections or alterations or additions or partitions or subdivisions or encroachments existing or within or appertaining to the Property or any part thereof (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy), or relating to the user, area, legality, the partitioning, the sub-division, the fittings, or on any other physical aspects and/or conditions of the Prope1iy or the building thereon or any part thereof or any of the above matters. No warranty is or will be given on any of them by the Vendor or its agent and no requisitions or objections to title shall be raised on any of the above matters.

(d)  The Purchaser further agrees that the Vendor shall not be obliged or required to clean, remove, alter, rectify, demolish or reinstate any structures or works or erections or alterations or additions or partitions or subdivisions (if any) existing or within or appertaining to the Property or the building thereon or any part thereof (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) or any of the partitioning, sub-division, internal fittings, lifts, internal escalators, internal staircase or any chattels inside or appertaining to the Property or to otherwise reinstate the Property so as to remove or rectify the Discrepancy or the Encroachments or any irregularity, nor shall the Vendor be obliged or required to take any action in respect of any structures or works or erections or alterations or additions or partitions or subdivisions (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) or the partitioning, sub-division, the fittings or any other physical aspects and/or conditions of the Property, or in respect of any dealing between the Purchaser and any person who may claim any right or title over any structures or works or erections or alterations or additions or partitions or subdivisions (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy).

(ii) The Purchaser hereby further waives any right to claim against the Vendor for, and the Vendor shall have no liability whatsoever to the Purchaser or to any other person in respect of, any loss, damage, cost or expense which the Purchaser or any other person may suffer or incur as a result of any structures or works or erections or alterations or additions or partitions or subdivisions (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) and/or any other physical aspects and/or conditions of the Property, or in the event of any structures or works or erections or alterations or additions or partitions or subdivisions (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) having to be demolished or reinstated in future. The Purchaser further agrees that any alteration, change, rectification, removal, demolition or reinstatement in any structures or works or erections or alterations or additions or partitions or subdivisions (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy), if required or if the Purchaser considers necessary, shall be undertaken by the Purchaser at the Purchaser’s own cost and expense, and the Purchaser shall be bound to complete the purchase notwithstanding any structures or works or erections or alterations or additions or partitions or encroachments (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) and any irregularity. Without prejudice to Clause 10.5(d)(i) above and other agreements, the Vendor shall be entitled, but shall not be under any obligation, to remove and/or demolish and/or change any structures or works or erections or alterations or additions or partitions or subdivisions (including but not limited to the Existing Physical Conditions and the existence of the Discrepancy) and/or to reinstate the Property to remove or rectify the irregularity on or prior to Completion in such manner as the Vendor considers appropriate. The Purchaser agrees that vacant possession of the vacant portions of the Property shall be deemed to be delivered to the Purchaser on Completion despite the existence of any fittings and chattels and/or any structures or works or erections or alterations or additions or partitions or subdivisions in the Property, and the Purchaser shall not be entitled to raise any objection to the aforesaid on Completion.

10.6 The Vendor does not warrant that the existing fire installation or fire sprinkler system (if any) in the Property is in compliance with the Fire Services Ordinance (Cap 95), Fire Safety (Commercial Premises) Ordinance (Cap 502) and any other legislation, ordinances, and subsidiary legislation. The Purchaser hereby expressly agrees that, if there is any notice, building order, fire direction or any form of notification or request issued before Completion requiring any investigation, rectification, installation or other works to be done in relation to the fire installation or fire sprinkler system in the Property, the Vendor will not be required to take any action or steps to comply with or remove or discharge any such notice, building order or fire directions. The Purchaser agrees not to raise any objection or requisition on title or otherwise relating to any such notice, building order or fire directions and shall complete the purchase subject to all such notice, building orders and fire directions.

10.7 The Purchaser acknowledges that it is fully aware of the permitted use of the Property and is fully satisfied that the permitted use is suitable for the Purchaser’s own need. The Purchaser hereby further declares, acknowledges and agrees that certified copy of the Occupation Permit No. KN41/2016(OP) is the occupation permit relating to the Property. The Purchaser, whether or not it shall have inspected the said Occupation Permit prior to signing of this Agreement, shall be deemed to have satisfied itself in all respects with the said Occupation Permit

[…]”.

(9)  Clause 11 (“Identity of the Property”):

“11.1 The Purchaser shall admit the identity of the Property with that comprised in the title deeds and documents offered by the Vendor as the title to such Property upon the evidence afforded by a comparison of the description in the Property in Part 1 of Schedule 2 with the description in such title deeds and documents.

11.2 The Vendor shall not be required to prove that the Property corresponds with the description contained in the title deeds and documents. The Vendor shall not be required to indemnify, compensate or pay the Purchaser for any loss, expenses, damage, liability and claims whatsoever caused as a result of or in connection with such description. If the description of the Property or any title deed, document and agreement of the Property contain any error, mis-statement, mis-description or omission, the Purchaser shall not be entitled to annul the sale or withdraw from its purchase of the Sale Shares and the Sale Loan or claim any compensation, damages or any abatement of Consideration thereof.

11.3 The Vendor gives no representation or warranty (express or implied) in respect of the truth, correctness, completeness or accuracy of any description or measurement or area contained or stated in any title deed and document and the Purchaser shall raise no requisition in respect thereof.

11.4 The Vendor shall not be required to identify or relate or connect the Property with the description of the Property in Part 1 of Schedule 2 or in any title deed and document and agreement of the Property or in any plan.

11.5 If the Property or any part thereof or the premises occupied by any tenant(s), licensee(s) or occupier(s) of the Property or any part thereof encroaches on adjoining or adjacent property or premises or land or if adjoining or adjacent premises or buildings encroach on the Property, any such encroachment shall not be made the subject of any requisition or objection by the Purchaser nor shall the Purchaser be entitled to make any requisition or objection on or be entitled to withdraw from its purchase or claim any compensation, damages or any abatement of Consideration on account or in respect thereof.

11.6 No warranty or representation whatsoever is given by the Vendor as to the exact area of the Property. No error in any area (whether site area, gross floor area, saleable area of the Property) expressed in any title deeds or marketing materials shall annul the sale nor entitle the Purchaser to be discharged from his purchase nor shall any compensation be allowed or paid by the Vendor in respect thereof”.

(10) Clause 12 (“Matters Subject to Which the Property is Made”):

 “12.1 The Property will be delivered to the Purchaser on Completion subject to and with the benefit of all rights, rights of way, water, light, drainage and other easements and quasi-easements and rights of adjoining owners (if any) and/or the Government adversely or beneficially affecting the Property. Without prejudice to the generality of the foregoing, the Property will be delivered to the Purchaser on Completion subject to and (where applicable) with the benefit of the deeds and documents specified in Schedule 7 and any modifications or variations thereof.

12.2 The Property will be delivered to the Purchaser on Completion subject to the terms and conditions herein contained and subject to the terms and conditions set out, reserved by and contained in the Government Grant and subject to all rights and liabilities affecting the same and to the payment of all future Government rent, property tax and premium (if any) and together with all rights of way, easements, rights, privileges and appurtenances enjoyed therewith”.

(11) Clause 13 (“Title”):

 13.1  The Purchaser shall solely bear the expenses in connection with the following:

(a)  the production, inspection and examination of all deeds,plans,documents, evidence and muniments of title not in the Vendor’s possession and of obtaining, making and producing all office certified, attested and other copies of or abstracts from records, registers, deeds, wills, probates, letters of administration, plans or other documents of whatsoever nature, whether in the Vendor's possession or not;

(b)  all searches, inquiries and disbursements made or required for the Completion or verification of all or any part of the title to the Property or otherwise;

(c)  any penalty for stamping any deed or document of title insufficiently stamped (if any); and

(d)  the getting in, surrendering or releasing of any outstanding estate, right, title or interest or the completing or perfecting the Vendor’s title or for stamping any unstamped or insufficiently stamped document as may be required by the Purchaser.

13.2 The Purchaser shall not be entitled to any covenant, undertaking or acknowledgement in any respect of any deed, plan, document, evidence or muniment of title not in the Vendor's possession or control.

13.3 The Vendor shall not be called upon or be bound to produce or procure the production of any deed, plan, instrument or writing whatsoever not in its custody or possession nor to procure attested or other copies of or extracts from such other deeds, plans, instruments or writing nor to give any information in relation thereto and without prejudice to the generality of Clause 13.4 no objection or requisition shall be made in respect thereof.

13.4 The Purchaser has reviewed the Company’s title to the Property before signing of this Agreement and the Purchaser shall be deemed to have accepted the Company’s title to the Property upon signing of this Agreement. No objection and requisition (if any) in respect of the title to the Property may be made by the Purchaser whether or not the Purchaser has inspected the Company’s title to the Property and the Purchaser shall complete the purchase of the Sale Shares and the Sale Loan notwithstanding that the Company’s title may be defective under any rule of law or equity.

13.5 The Vendor will only deliver to the Purchaser upon Completion those title deeds and documents which are set out in Schedule 7 hereto. Without prejudice to the generality of Clause 13.4, the Vendor shall not be called upon or be bound to produce or procure the production of any deed, plan, document, evidence or muniment of title which are not set out in Schedule 7 hereto nor to procure originals, certified, attested or other copies of or extracts from such other deeds, plans, documents, evidence or muniment of title nor to give any information in relation thereto and no objection or requisition shall be made in respect thereof.

13.6 Without prejudice to the generality of Clause 13.4, the Purchaser shall not make any objection or requisition on the ground that any title deed or document affecting the Property was executed under a Power of Attorney but shall assume without enquiry that at the time of execution of any such title deed or document the grantor of such power was alive and that the Power of Attorney was in full force virtue and effect and unrevoked and that the grantee or its substitute thereunder had full power and authority to execute the said title deed or document. The Purchaser shall not call for the original or duly certified copy of the said Power of Attorney or make any requisition or objection in respect thereof.

13.7 All title deeds and documents executed by a corporation (whether incorporated in Hong Kong or otherwise) shall be deemed to be duly executed, binding and enforceable against that corporation, whether or not the mode of execution is authorised by the relevant memoranda and articles of association or bye-laws or the relevant constitutional documents of that corporation, whether or not any common seal or corporation seal or any seal or chop of the corporation is affixed or appears to have been affixed. The Purchaser shall not require the production of any memoranda and articles of association or by-laws or the relevant constitutional documents of the corporation, or any minutes or resolutions of the corporation’s board of directors or members or other supervisory or managing body thereof or any legal opinion for proof of due execution, validity, capacity or power (including the power to hold and/or dispose of real property in Hong Kong) and shall waive all requisition or objection in respect thereof”.

(12) Clause 14 (“Risk in the Property”):

“14.1 As from the date of the signing of this Agreement, the Property shall be at the sole risk and responsibility of the Purchaser as regards loss, expenses, damage, liability and claims whatsoever relating thereto.

14.2 The Vendor gives no representation or warranty (express or implied) as to whether any insurance exists in respect of the Property.

14.3 Notwithstanding other terms and provisions in this Agreement to the contrary, but without prejudice to the generality of the foregoing, the obligations of the Purchaser to pay the Consideration and to complete the purchase of the Sale Shares and the Sale Loan shall continue in accordance with this Agreement without any compensation, damages or abatement of Consideration notwithstanding the Purchaser and/or the Company being deprived of the benefit of any Tenancies or Contract or being unable to obtain possession or gain entry to the Property or any part thereof on Completion owing to fire, earthquake, or other calamities, force majeure, or Act of God causing destruction of or damage to the Property or any part thereof.

(13) Clause 15 (“Contract”):

 15.1 Subject to Clause 15.2, the Property will be delivered to the Purchaser subject to and with the benefit of the contracts for the maintenance or servicing of the Property and/or the equipment/installations at the Property as specified in Schedule 8 hereto (Contracts) and together with all rights, privileges and liabilities therewith.

15.2 The Vendor gives no representation or warranty (express or implied) in respect of whether any of the Contracts or any provision therein is or will be subsisting or enforceable at the time of or after Completion.

15.3 The Purchaser shall be solely responsible to pay all the fees payable in respect of the Contracts on and from Completion.

[…]”.

(14)  Clause 20 (“Exclusion of Liability of Receivers”):

“The exclusions mentioned in Schedule 9 shall apply to and form an integral part of this Agreement.  The Receivers act as agent of the Vendor and without personal liability and join in this Agreement in their personal capacity solely to take the benefit of the exclusions of liabilities under this Agreement”.

(15)  Clause 22 (“Special Conditions”):

“The Vendor shall cause and procure the Property and all and any assets and undertakings of the Company to be released from the Security Agreement upon Completion …”.

(16)  Schedule 2 gives particulars of the Property and the Government Grant.

(17)  Schedule 3 (“Vendor’s Warranties”), by which the Vendor gives inter alia the following representations and warranties:

“3.2 Save for any Encumbrance created under the Security Document, and subject to paragraph 9.2 of this Part A of Schedule 3, the Company owns and will own free from Encumbrance all its undertaking and assets (including the Property and the Sale Loan) shown or comprised in the relevant Accounts and all such assets are in its possession or under its control.

[…]

6.2 Since the date of this Agreement, no Encumbrance has been created or agreed to be created or permitted to arise over any of the assets and undertaking (including the Sale Loan and the Property) of the Company.

[…]

9.1 As at the date of this Agreement and as at Completion, and subject to paragraph 9.2 of Part A of this Schedule, the Company owns and has good marketable title to all the assets included in the Accounts and to all assets acquired since the date to which the Accounts had been made up

[…]”.

(18)  Schedule 6 (“Tenancies”) lists out the tenancies at the Property.

(19)  Schedule 7 (“Title Deeds and Documents”) lists out the title deeds and other documents relating to the Property to be delivered on Completion.

(20)  Schedule 8 (“Contracts”) lists out the contracts referred to at cl 15.1.

(21)  Schedule 9 (“Exclusions”):

“3. The Property is to be delivered to the Purchaser in its present state, condition and whereabouts and subject to all faults and to any extant lien, distraint, execution or detention, or claims or licences of third parties over them or in respect of their use, the cost of discharging or compromising any or all of which being for the account of the Purchaser.  Neither the Vendor not the Receivers shall be liable for any loss, damage, expense or injury of any kind, consequential or otherwise, arising out of or due to or caused by any defect or deficiencies of any sort in the Property.

4. The Purchaser acknowledges and agrees that:

(a)  it has satisfied itself as to:

(i)  the title, state, condition and whereabouts of the Property;

(ii)  the fitness of the Property for whatever purpose or purposes as the Purchaser may intend to use them;

(iii)  their correspondence with any description given or to be implied; and

(iv)  the transferability of the Property;

(b)  it is not relying on any representation, conduct, statement or silence on the part of the Vendor or of the Receivers or of their respective employees, solicitors, advisers, valuers, agents, partners or representatives in relation to any matter or circumstance and whether or not arising out of or under the provisions of paragraph (a) above, other than those in Schedule 3;

(c)  the Receivers act only as agents of the Vendor and have not given or entered into ant collateral understandings, representations, warranties or agreements as principal;

(d)  no reliance has been placed on the skill or judgment of the Vendor or the Receivers;

[…]

10.  The Receivers have joined in as parties to this Agreement solely for the purpose of obtaining the benefit of the provisions of this Agreement and each other provision of this Agreement in their favour.

[…]

13. The Receivers are the agents of the Vendor and shall incur no personal liability from acting in the capacity of agent, nor shall any claim arise otherwise than against the Vendor as principal.

14. The Receivers shall incur no personal liability as a result of acting in the name and on behalf of the Vendor.

[…]”.