OCEAN RICH INVESTMENT CO. LTD. v. LEUNG YIU BIU AND ANOTHER

HCMP 1903/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1903 OF 1998

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J U D G M E N T

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1. This is an application by the plaintiff Ocean Rich Investment Company Limited against the defendants, Leung Yiu Biu and Chan Po Lin for a declaration that the plaintiff had shown a good title to the property at Flat H, 10th Floor, Block 4, Golden Dragon Industrial Centre, Tai Lin Pai Road, Kwai Chung, New Territories (hereinafter called the said property) in accordance with the agreement between them.

2. By an provisional agreement dated 24th March 1998 and made between the plaintiff and the defendants, the plaintiff agreed to sell and the defendants agreed to purchase the said property for the price of HK$450,000.00. Under the said agreement, completion was to take place on or before 30th April 1998.

3. A formal agreement was then executed on the 30th March 1998 at which time the parties anticipated difficulties in relation to certain charging orders registered against the said property at Tsuen Wan New Territories Land Registry by Memorial Nos. 722597, 728249 and 1195166 (hereinafter called the said charging orders). Hence in clause 35 of the formal sale and purchase agreement, it is provided as follows:

"(a) The parties are aware that there are three Sealed Copy Charging Orders registered at Tsuen Wan New Territories Land Registry by Memorial Nos. 722597, 728249 and 1195166 against the Property ("the said Orders") and requisitions have been raised by the Purchaser's solicitors on the same.

(b) In view of sub-clause (a) hereof and in order to resolve the requisitions raised by the Purchaser's solicitors, it is expressly agreed that the Vendor shall take out a Vendor and Purchaser Summons under s. 12 of the Conveyancing and Property Ordinance for an order/declaration of the Court ("Court Order") whether good title has been shown by the Vendor in respect of the existence of the said Orders and that notwithstanding any provision contained in this Agreement, the sale and purchase shall be proceeded in the following manner:"

4. In the light of the wordings of the aforesaid clause, the only issue that this court have to decide is whether the plaintiff has shown a good title to the said property in accordance with the sale and purchase agreement in question.

5. The history of the said charging orders can be summarised as follows:

6. The said property was assigned by one Ngai Keung Electroplating Limited (Ngai Keung) to the plaintiff on 10.1.1991 by memorial No. 725386 which was registered on 11.2.1991. It is not disputed that 11th February 1991 was a Sunday and hence the registration of the assignment was made within one month after its execution and hence under s.5 of the Land Registration Ordinance, the said assignment is entitled to priority as from 10.1.1991.

7. On 21.1.1991, a charging order nisi was imposed on the said property by Spechem Company (Spechem) in respect of a judgment sum of HK$304,610.00 which judgment was obtained by Spechem against Ngai Keung on 24th December 1990. The said charging order nisi was registered on 29.1.1991 by memorial No. 722597. The charging order nisi was made absolute on 19.2.1991 and was then registered by memorial No. 728249. There was an attempt to re-register the charging order absolute by memorial No. 1195166 on 19.2.1998. It is now ascertained that the attempt has been unsuccessful. The charging order absolute has not been formally re-registered and the most updated land search record does not show such re-registration.

8. In the assignment memorial No. 725386 by which the said property was assigned to the plaintiff by Ngai Keung, it was stated that the plaintiff accepted title to the said property "subject to the sealed copy order memorial No. 728249," (the said proviso).

9. The plaintiff is not in a position to explain the circumstances in which the said proviso was inserted into the said assignment. Indeed the plaintiff was not made aware of the said proviso until shortly before the scheduled date for completion.

10. In a letter dated 22nd April 1998, solicitors for the defendants raised requisitions of which the following two are in issue:-

"1. Three Sealed copy Order Memorial Nos. 722597, 728249 and 1195166 are being registered against the captioned property. Further in the Assignment Memorial No. 725386 (copy enclosed), your clients accepted title to the said Property "subject to the Sealed Copy Order Memorial No. 728249".

Please procure a discharge of the said Three Orders prior to completion in order to convey title to the said Property to our clients free from any incumbrances.

2. We note that the directors of the Vendor (i.e. Ngai Keung Electroplating Ltd.) in the said Assignment Memorial No. 725386 is Yuen Wai Chuen and Yuen Kit Ching and the director of your clients is Yuen Wai Ming. It appears that the shareholders and directors of the two companies, Ngai Keung Electroplating Limited and your clients Ocean Rich Investment Co. Ltd. may be related and if that is the case, your clients may be estopped to deny the fact that they had duly acknowledged the effectiveness of the said Sealed Copy Order Memorial No. 728249 and had duly accepted the liability to pay the Judgment debt due to the Plaintiff Spechem Co. with the proceeds of sale of the said Property by accepting the Conveyance of Sale of the said Property from Ngai Keung Electroplating Limited expressly subject to the said Sealed Copy Order. We need proof to rebut the above estoppel. We reserve the right to disclose this fact to the court in the course of the Vendor and Purchaser Summons proceedings."

11. The plaintiff took the view that when the charging order nisi was granted, Ngai Keung had already disposed of the interest in the said property and hence the plaintiff's interest thereon could not be affected even though the assignment in favour of the plaintiff contains the words "subject to the sealed copy order Memorial No. 728249".

12. It was also suggested that the Memorials of the charging order was not prepared in accordance with the Land Registration Ordinance and that the charging order in any event ceased to have effect after a period of 5 years by virtue of Section 17 of the Land Registration Ordinance.

13. The assignment of the said property took place prior to the registration of the charging orders in question, but the factual background suggests that the plaintiff had knowingly and willingly allowed the insertion of the said proviso. It can at least be argued that the plaintiff's interest over the said property is subject to the charging orders in question if such charging orders are still valid.

14. Until and unless the issues over the charging orders are properly resolved between the plaintiff and Spechem, it is wrong to force upon the defendant a questionable title despite the wordings of section 5 of the Land Registration Ordinance.

15. But it is not disputed that more than 8 years had elapsed since the registration of the charging orders in questions and that they had not been successfully re-registered.

16. Section 17 of the Land Registration Ordinance provides:

"The registration of a judgment, order, or lis pendens shall cease to have effect at the end of 5 years from the date of registration, but the judgment, order or lis pendens may be re-registered from time to time and, if so re-registered, shall have effect for 5 years from the date of re-registration."

17. Section 3(2) of the said Ordinance further provides:

"All such deeds, conveyances, and other instruments in writing, and judgments, as last aforesaid, which are not registered shall, as against any subsequent bona fide purchasers or mortgagee for valuable consideration of the same parcels of ground tenements, or premises, be absolutely null and void to all intents and purposes:"

18. The charging orders registered in 1991 ceased to have any effect by the lapse of time. They have not been re-registered. Even if they were to be re-registered, they only start to have effect from the date of re-registration.

19. Section 17 of the Land Registration Ordinance is a complete answer to the worry of the defendants.

20. Mr. Wong on behalf of the defendants suggests that somehow the said proviso can be indication of some acknowledged interest of Spechem over the said property which can be enforced against the said property. He also suggests the defendants are not bona fide purchasers for value without notice.

21. With respect, we are not concerned with any other possible interest that Spechem may have over the said property. We are only concerned with the possible interest of Spechem arising out of the charging orders in question. Apart from the said charging orders, there is no known interest of Spechem chargeable against the said property. Whatever interest that Spechem may have arising out of the charging orders has ceased to have effect by reason of section 17 of the Land Registration Ordinance.

22. Section 3(2) of the Land Registration Ordinance lends assistance to a bona fide purchaser for value. The lack of notice is not a requisite element as demonstrated in the case of Ample Treasure Ltd v. Eight Gain Investments Ltd. [1992] 1 HKC 457.

23. In any event, the only notice that the defendants have is the charging orders which have ceased to have any effect. Such notice cannot have any adverse effect against the defendants as the bona fide purchasers of the said property.

24. I have considered the various matters raised in this case. I am satisfied that there is no risk of Spechem making any successful claim against the said property by reason of the charging orders in question.

25. In the circumstances, I am prepared to grant the application as sought by the plaintiff and declare that the plaintiff has shown a good title to the said property pursuant to the agreement between the plaintiff and the defendants.

26. In accordance with the indication of the parties, there is no need to make any other or consequential orders.