LUEN FORD INDUSTRIAL CO LTD v. WOO MING HAN JULIANA

HCMP 1715/2015

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1715 OF 2015

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REASONS FOR JUDGMENT
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Introduction

1. On 30 November 2015, I made the following orders:

(1) The registration in the Land Office as lis pendens of the Amended Writ of Summons in HCA 1545/2015 by Memorial No 15071002150017 be vacated.

(2) The defendant do pay the plaintiff’s costs of these proceedings, including the costs of this application and including all costs reserved, to be taxed on indemnity basis.

2. My reasons follow.

HCA 1545/2015

3. Woo Ming Han Juliana (“Juliana Woo”), the defendant in HCMP 1715/2015, is the daughter of the Woo Koo Ping (“the Father”) and Woo Hung Kung Ling, deceased (“the late Mother”), and the sister of Woo Siu Hong Eric (“the Brother”).

4. Luen Ford Industrial Company Limited (“the Registered Owner”) is the registered owner of the following two landed properties:

(1) Factory Unit A on 13/F, Phase I of East Asia Industrial Building, No 2 Ho Tin Street, Tuen Mun, New Territories and Factory Unit B on 13/F with store room & Roof B, Phase I of East Asia Industrial Building, No 2 Ho Tin Street, Tuen Mun, New Territories (“the Subject Property”);

(2) Unit 1, Cambridge Garden, No 1 Lancashire Road, Kowloon Tong, Kowloon (“the Cambridge Garden Property”) which is irrelevant for present purposes.

5. The Registered Owner is a wholly owned subsidiary of Mastery Gain Investments Limited (“HoldingCo”).

6. On 9 July 2015, Hui & Lam issued the writ in HCA 1545/2015 on behalf of Juliana Woo, as personal representative of the estate of the late Mother, against the Father as 1^st defendant, the Brother as 2^nd defendant and the Registered Owner as 3^rd defendant.

7. On the following day, ie 10 July 2015, the Writ was amended.  The Indorsement of Claim, as amended (with the amendments marked up by underlining and crossing out) reads as follows (written exactly as it stands in the original):

“The Plaintiff claims against the Defendants for:-

(1) The 1^st and 2^nd Defendants’ undue influence and/or exploitation of weakness in procuring Madam Woo Hung Kung Ling (the ‘Deceased’) to execute certain share transfer documents (the ‘Purported Instruments’) the effect of which was to purportedly assign the Deceased’s 66 shares (the ‘Relevant Shares’) in Mastery Gain Investments Limited to the 1^st Defendant for the nominal consideration of US$1.00 (the ‘Purported Transaction’) which was grossly undervalue and not at arm’s length.

(2) Settling aside of the Purported Instruments and Purported Transaction on the ground of the Deceased’s want of capacity and grossly undervalue, in particular the estate of the Deceased would have become insolvent because of the Purported Transaction.

(3) Breach of trust and/or constructive trust in respect of the Relevant Shares.

(4) Unjust enrichment in respect of the Relevant Shares.

For the following relief:-

(1) A declaration that the Purported Transaction and Purported Instruments are null and void;

(2) A declaration that the Purported Transaction be set aside;

(3) A declaration that the 1^st Defendant holds the Relevant Shares on trust and/or constructive trust for the Plaintiff;

(4) An order that the 1^st Defendant do forthwith transfer or assign at his own expense the Relevant Shares to the Plaintiff and to take all necessary steps to effect, complete and duly register such transfer or assignment in favour of the Plaintiff;

(5) An order that the 1^st Defendant do deliver up all the Purported Instruments and original share certificates issued by Mastery Gain in relation to the Purported Transactions to the Plaintiff;

(6) A declaration that the 1^st Defendant holds the profits and dividends derived from the Relevant Shares, and the traceable proceeds hereof, on trust and/or constructive trust for the Plaintiff;

(7) A declaration that each of the 1^st Defendants is liable to account to the Plaintiff as trustee(s), or constructive trustee(s), or fiduciary agent(s) for all profits and dividends derived from the Relevant Shares;

(8) All necessary accounts and enquiries to enable the Plaintiff to trace and recover the monies or assets referred to in subparagraph (6) above;

(9) An order for the payment, delivery up or transfer to the Plaintiff of all such monies or assets referred to in subparagraph (6) above;

(10) An injunction restraining the 1^st Defendant, whether by himself or his servants or agents or otherwise howsoever, from disposing of or otherwise dealing with the Relevant Shares, and monies or assets referred to in subparagraph (6) above otherwise than by payment, delivery up or transfer to the Plaintiff;

(11) An injunction restraining the 3^rd Defendant from completing the sale and purchase of Factory Unit A on 13/F, Phase I of East Asia Industrial Building, No. 2 Ho Tin Street, Tuen Mun, New Territories, Hong Kong and Factory Unit B on 13/F with Store Room & Roof B, Phase 1 of East Asia Industrial Building, No. 2 Ho Tin Street, Tuen Mun, New Territories, Hong Kong (the ‘Property’) pursuant to a provisional sale and purchase agreement entered into with Billion Gold Holdings Limited dated 29^th May 2015;

(12) Alternative to subparagraph (11) above, an injunction restraining each of the 1^st, 2^nd and 3^rd Defendants, whether by himself/itself or his/its servants or agents or otherwise howsoever, from disposing of or otherwise dealing with the one‑third of the net sale proceeds from the 3^rd Defendant’s intended sale of the Property otherwise than by payment, delivery up or transfer to the Plaintiff;

(13) Damages to be assessed;

(14) Interest;

(15) Further and/or other relief;

(16) Costs.

Dated this 9^th day of July 2015.

Dated this 10^th day of July 2015.

Hui & Lam

Solicitors for the Plaintiff

Hui & Lam

   Solicitors for the Plaintiff”

8. On 10 July 2015, Mr Jacky K Y Lo of Hui & Lam presented a sealed copy Amended Writ of Summons for registration and signed a Memorial certifying that:

“the Memorial contains a just and true account of the several particulars therein set forth as required by the Land Registration Regulations.”

9. The Sealed Copy Amended Writ of Summons was received by the Land Registry on 10 July 2015 and the Memorial was assigned the Memorial No 5071002150017. This is the Memorial which I ordered to be vacated.

Land registration legislation

10. Section 1A of the Land Registration Ordinance, Cap 128, defines “lis pendens (待決案件)” as:

“(a) any action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land …”

11. Section 2(1) provides for registration of “judgments”:

“(1) The Land Registry shall be a public office for the registration of … judgments; and … all judgments, by which … 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.”

12. Section 14 extends the “provisions of [the] ordinance relating to judgments (subject to the provisions hereinafter contained)” to “lites pendentes”.

13. Section 19 provides for vacation of registration of lis pendens in certain circumstances:

“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.”

14. Section 23A(b) confers immunity on the Land Registrar or any other person employed in the Land Registry for registering, in good faith, any deed, conveyance, or other instrument in writing, or judgment, which does not affect any parcels of ground, tenements or premises in Hong Kong:

“… the Land Registrar or any other person employed in the Land Registry … shall not be liable in damages … for registering, in good faith, any deed, conveyance, or other instrument in writing, or judgment, which does not affect any parcels of ground, tenements or premises in Hong Kong.”

15. The immunity is confined to the Land Registrar or “any other person employed in the Land Registry”.  It is no comfort for a solicitor in private practice such as Mr Jacky K Y Lo who verified a memorial and procured the registration of the Amended Writ of Summons.

16. Regulation 6(2)(e) of the Land Registration Regulations, Cap 128A, provides that:

“A memorial of an instrument being a lis pendens … shall contain the following particulars … a description of the land and premises affected or intended to be affected, including the lot number and address (including the address in the Chinese language if known).”

17. Regulation 7(b) provides that:

“Every memorial shall be verified … by the certificate of a solicitor.”

Thian’s Plastics v Tin’s Chemical

18. In Thian’s Plastics Industrial Company Limited and others (No 2) v Tin’s Chemical Industrial Company Limited and another [1971] HKLR 249, the then Full Court (now Court of Appeal) held that:

(1) the only lites pendentes which are registrable are those which “affect” land; and

(2) the court had an inherent jurisdiction to vacate lis pendens which was not registrable.

19. Thian’s was a case where the lis pendens was registered against properties owned by the 1^st plaintiff (referred to by Briggs J as “Plastics”) and the 2^nd plaintiff (referred to by Briggs J as “Enterprises”).  The relevant five paragraphs of the endorsement on the writ in that case were:

“(g) that the first and/or second plaintiffs be declared the beneficial owners of the property known as New Kowloon Inland lots No. 4755 and 4756.

(h) that the first defendant and/or the second defendant be prevented or otherwise restrained from selling or advertising the sale of the properties (referred to above).

(i) Consequential injunctions.

...

(l) that the second defendant be prevented or otherwise restrained from dealing with the properties and/or assets of the first or second plaintiffs or otherwise interfering in the management of the first and/or second plaintiffs.

(m) that the second defendant be restrained from acting as a Director of the first and/or second plaintiffs respectively.”

20. Briggs J approved the following passage of the judgment in the court below:

“Before a plaintiff registers an action as a lis pendens it is his bounder 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 section 19) ‘in litigation’.”

21. Briggs J went on to explain and held that the lis pendens is not registrable:

“Paragraphs (g), (h) and (i) can be disposed of together. We are here dealing with a lis namely with a dispute. There is no dispute as to the ownership of the properties mentioned in paragraphs (g) and (h) of the writ. They are registered in the name of Enterprises. I cannot see how in these circumstances the first or third defendants can ‘sell’ such properties. Enterprises may sell but not the first and second defendants. If relief is sought to prevent the sale of these properties it must be directed to the person who has the power to sell i.e. to Enterprises: not to the Managing Director of Enterprises or the first defendant Company. These paragraphs obviously refer to a dispute within the Company. There is no lis, no dispute here. It is clear, I think that the writ is not registrable as a lis pendens affecting land because of these paragraphs.

The other two paragraphs ask for relief against the second defendant. If judgment is given in accordance with the terms of the relief sought in these paragraphs the second defendant will be enjoined not to exercise any of his powers as Managing Director of both Plastics and Enterprises. For example, he would be forbidden by the court to sign a conveyance on behalf of either of the companies.

The court is not being asked to make an order that the second defendant shall cease to be the Managing Director of Plastics. Such would not be possible because of the Articles of Association. The order sought is that he shall not exercise any of his powers. And if such an order were granted he would remain Managing Director.

But this would not affect the land. A mandatory order forbidding a Managing Director to use his power to sign a conveyance of land of his company as Managing Director does not affect the land. It affects the Managing Director. It is a personal order to him and disobedience to it may involve contempt of court. But such an order would not prevent the proprietors of the land, the Company, from dealing with the land.

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.

In my view this lis pendens was clearly not registrable.”

22. Huggins J pointed out that the land must be affected by the lis itself:

“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.”

23. Thian’s holding on the court’s inherent jurisdiction was applied by the Court of Appeal recently in John’s Win Holdings Limited v City Target Limited and another, CACV 190/2015, 23 November 2015.

Anstalt Nybro v HK Resort

24. Anstalt Nybro v Hong Kong Resort Company Limited [1980] 1 HKLR 76 was a Privy Council case on appeal from Hong Kong.  Lord Lane advised that it is only where the agreement might create some interest legal or equitable in the parcel of ground that the instrument could be the subject of registration under the Ordinance:

“There is no doubt that the agreement was prima facie registrable. If the parties had carried out their respective obligations ‘parcels of ground in the Colony’ would have been in one sense of the word ‘affected’, at least indirectly.

However, 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.

The question that has to be considered in the present case is this. If the case proceeds to trial is there any likelihood that specific performance of the option agreement would be ordered? If so, then the land may be ‘affected’ by Nybro’s equitable interest and the agreement is registrable. If not, there is no sufficient interest affecting the land and it was right to order the entries to be vacated.

…

The factual situation, from which there is no escape, is at present this. The option agreement was wedded to Plan 3.5 and the ‘Carving Out Agreement’. It is now clear that the Government has approved a different plan, Plan 4.0, and more recently on November 17^th 1979 has also approved extensive amendments to Plan 4.0. Their Lordships do not have a copy of the amended Plan 4.0, but it is as clear as anything can be, first that it bears little resemblance to Plan 3.5 with which it is inconsistent, and secondly that the Government is now firmly backing Plan 4.0 and would be extremely unlikely to sanction a return to Plan 3.5. Thus the venture which was the basis of the option agreement is now no longer alive and it would be an empty exercise to decree specific performance of an agreement which is to all intents and purposes dead and buried. Such a decree would not exhume the agreement because the Government would not be affected by it.

For this reason alone, even assuming the registration to have been initially justified because the agreement then might have affected land, the agreement no longer does so and the entries are rightly vacated.

That is enough to conclude the argument in favour of HKR.” (emphasis added)

25. Anstalt Nybro was applied by the Court of Appeal in John’s Win Holdings.

The Amended Writ

26. The “claims” in the Indorsement on the Amended Writ of summons relate to a share transaction in relation to 1/3 of the shares of HoldingCo. There is no complaint against HoldingCo’s wholly owned subsidiary, the Registered Owner.  Most importantly, the four “claims” have nothing to do with land and do not affect land.  I do not see how any lawyer can present such an Amended Writ for registration.

27. So far as the “relief” (sic) are concerned, they must be reliefs for the pleaded “claims”.

28. The four pleaded claims do not give rise to the “relief” in para 11.  Paragraph 11 is obviously unsustainable. 

29. There is no dispute that the Registered Owner is the registered owner of the Subject Properties.  What is in dispute is the conduct of the Father and the Brother in relation to 1/3 of the shares of HoldingCo. Juliana Woo seeks to regulate the conduct of HoldingCo and the Father and Brother.  Such being the case, the Registered Owner cannot be enjoined from completing the sale of its properties.  The lis may affect the Father and the Brother, but it does not affect the Registered Owner. 

30. Paragraph 11 is to there for Juliana Woo to pretend that the lis affects land.

31. Paragraph 12 claims an injunction to freeze 1/3 of the net proceeds of sale from the Subject Property.  This alternative claim to para 11 means that para 12 is a sufficient remedy in place of para 11. There is thus no likelihood of Juliana Woo succeeding on para 11. 

32. The other “relief” (sic) claimed have nothing to do with land.

33. The registration was a blatant tactical move to bring about a standstill in the sale of the Subject Property.  What is objectionable is that Juliana Woo and her then solicitors did not seek judicial approval to achieve her objective.  Instead, they simply abused the registration system.

Vacating registration

34. The Amended Writ of Summons was clearly not registrable.  Its registration was an abuse of the registration system.  In the exercise of the court’s inherent jurisdiction, I ordered its registration to be vacated.

35. To mark the court’s strong disapproval of the abuse, I ordered costs on indemnity basis.

Postscript

36. Registration of a lis pendens is a clog on the owner’s title. Those who act in concert to procure registration of a lis which does not affect land should beware of possible liability.