FAST FORWARD LTD. v. MAGICSOUND CO. LTD. AND OTHERS

Civil Appeal
Nos. 180/90 & 3/91

Land Registration Ordinance (Cap. 128)

Requirements for the valid registration of an instrument in writing considered.

BETWEEN

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JUDGMENT

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Kempster, J.A.:

1. This is the judgment of the court on appeals from orders made by Liu, J. on 8 and 21 November 1990.

2. By an instrument in writing dated 26 June 1970 Sui Ying Investment Co. Ltd., the third party in these proceedings, for value and with reference to the terms of a Deed of Mutual Covenant sold to Wong Kai Lun ("Wong") 24 of the 100 undivided shares in the Sui Ying Industrial Building, Kowloon, together with the exclusive right of occupation of the workshops on the 9th, 10th and 11th floors together with the office space on the 9th and also "the exclusive right to use the surface of the main roof of the building" subject to the third party's entitlement to place thereon "advertisements and signboards and water tanks and ... cooling towers ..." and to maintain and repair the same. Wong covenanted with the third party not to put up any advertisement or signboard on the main roof himself and undertook "at all times hereafter" to "maintain at his own costs and expenses the said main roof and to indemnify the (third party) against all claims, actions and demands whatsoever arising out of (his) acts or omissions in use of the main roof." There was also a covenant by the third party for quiet enjoyment. The sale of 24 shares reflected the intention that 8 shares should go with each upper floor expressed in recital (3) of the Deed of Mutual Covenant. The 4 shares intended to go with the main roof were not, however, included in the sale. During 1981 Magicsound Co. Ltd., the first defendants, became Wong's successors in title and Hung Nien Electronics Ltd., the second defendants, the first defendants' tenants of the 9th floor of the building with a conditional right to use the surface of the main roof. The interests of the first and second defendants in this litigation are identical.

3. By an instrument dated 20 July 1988, again for value and referring to the same Deed of Mutual Covenant, the third party sold to Fast Forward Ltd., the plaintiffs, 49/50 shares in 8 of the 100 undivided shares in the building and 4 further such shares in their entirety together with the exclusive right of occupation of a substantial part of the ground floor as well as "the exclusive right to the use, occupation and enjoyment of the main roof ... subject to ... all other subsisting rights ...". This transaction fully reflected the intention of the Deed of Mutual Covenant.

4. The memorials of the instrument of 26 June 1970 and of instruments effecting subsequent sales, culminating in that giving rise to the first defendants' interest, which were delivered to the Land Office pursuant to sections 2 (1) and 6 or 2(1) and Regulation 5 of the Land Registration Ordinance (Cap. 128) as the case may be, a distinction to which we will return, did not mention the main roof as being affected or intended to be affected by such instruments; in our view the proper construction of section 8(1) and regulation 6(1)(d). The memorial delivered to the Land Office on 12 August 1988 in respect of the plaintiffs' interest did. We have to determine whether Liu, J. was right in finding that, in these circumstances, the plaintiffs' instrument had priority under the Ordinance.

5. The plaintiffs claimed possession of the roof. The defendants contested the claim but joined the third party to safeguard their position. The action was heard over a period of 9 days between 23 July and 8 August 1990. On 24 July a consent order was made that evidence in the action should also constitute evidence in the third party proceedings. On 31 July, following an earlier suggestion made by Mr. Merry for the plaintiffs, Mrs. Clough for the defendants asked that any damages should be assessed. The judge so ordered on 1 August though Mr. Chain for the third party had not agreed.

6. On 8 November the judge made an order refusing Mr. Chain's application for an adjournment to allow him to reopen his case and to adduce evidence from the Buildings Ordinance Office relating to the legality of structures upon the roof of the building. On 21 of that month he made further orders granting the plaintiffs possession of the roof, requiring the defendants to pay mesne profits and directing that the third party should indemnify the defendants (inter alia) against such sums as, after assessment by a master, they should be found liable to pay to the plaintiffs by way of damages and costs, should pay to the defendants their costs of defending the action on a common fund basis and should also pay to the defendants damages for breach of covenant to be assessed in like manner. The judge had handed down his reserved judgment. ([1991] 1 HKLR 277)

7. The third party appeals against the orders made on 21 November by notices dated 22 November 1990 and 10 January 1991 respectively. The earlier notice is in effect an application to adduce fresh evidence under RSC 0.59, r.10 (2). By notice dated 6 March 1991 the defendants cross-appeal against the order made in the action on 21 November requiring them to yield vacant possession of the main roof to the plaintiffs and to pay them mesne profits. On the previous day Macdougall, J.A. had extended the time provided by RSC 0.59, r.6 (3) (b)

8. On behalf of the third party Mr. Chain submits that, in the absence of a sale to Wong of 4 further undivided shares, as envisaged by the Deed of Mutual Covenant, and having regard to the words used in the instrument of 26 June 1970 the interest in the roof granted to Wong was not exclusive as against the third party and conceptually less extensive in nature than that subsequently granted to the plaintiffs. The plaintiffs' rights to the roof, he maintains, are expressly subject to the lesser rights of Wong's successors in title. This argument, demonstrating an ingenuity worthy of a mediaeval schoolman, failed to convince us. The exclusive interest in the roof plainly precludes any user on the part of the third party and, accordingly, no ostensible right to use, occupy or enjoy it was exercisable or of the slightest value if Wong's contractual entitlement, which if it amounted to a licence was coupled with an interest, was registered under the Ordinance. It is not submitted that the plaintiffs and the first defendants are entitled to use the roof or its surface for different purposes. Be that as it may, the rights of Wong and his successors in title to the use of the roof surface would not be saved by the words "subject to ... all other subsisting rights ... thereto belonging or appertaining (if any)" in the instrument dated 20 July 1988 if not registered. Markfaith Investment Ltd. v. Chiap Hua Flashlights Ltd. [1990] 2 WLR 1451. Mr. Chain also argued that any damages which the defendants might be adjudged liable to pay to the plaintiffs derived from their own failure, if such failure there was, to register the final instrument from which they claim title. This argument also is unsustainable. Registration is not mandatory, the first defendants' were under no contractual obligation to their vendors to register and no more were they required to mitigate possible damage. Wright v. Dean [1948] Ch D 686 at p.696.

9. The basis of the judgment of Liu, J. was not that the instrument of 21 June 1970 and the further instruments through which the first defendants claim title had never been registered and were therefore "absolutely null and void to all intents and purposes" against the plaintiffs as provided by s.3 (2) of the Ordinance. His conclusion was that, having regard to the terms of the memorials accompanying them, the instruments had not, as a matter of election, been "submitted against the sub-division" relating to the roof of the building; treated separately as "premises". "The right to use the surface of .the main roof is registrable but unregistered" he held. It is accepted before us that the plaintiffs were bona fide purchasers of the roof for valuable consideration. Liu, J. went on to find the third party liable to the defendants for damages for breach of the covenant for quiet enjoyment and for derogation from grant.

10. If the judge was wrong and the instrument which, inter alia, granted an interest in the roof was registered as from 30 July 1970 the only relevant interest assignable by the third party thereafter would have been the right to enter upon it "for the purpose of putting up advertisements and signboards and water tanks and cooling towers" etc. and "to repair and maintain the same", the earlier instruments would have had priority under section 3(1) and the plaintiffs' more extensive claim in this regard would fail.

11. The matter is so far reaching in its implications for the practice of search, ascertainment of title and conveyancing in the Colony that we invited the Registrar General to afford us such assistance as he thought fit. We gratefully acknowledge the assistance as to the practice in the Land Registry which we were given by Mr. Logan on his behalf.

12. By one of the amendments and part repeals made on 8 June 1981 the long title to the Land Registration Ordinance was expressed to read:-

''To provide for the registration of deeds, conveyances, wills, judgments and other instruments affecting real or immovable property, the keeping of Land Office records, and or other matters relating to land registration" in substitution for "To provide for the registration of deeds, conveyances, ... affecting real or immovable property."

The preamble remained:-

"Whereas it is expedient to prevent secret and fraudulent conveyances, and to provide means whereby the title to real and immovable property may be easily traced and ascertained."

It is apparent that since 1844 the legislature has been concerned to facilitate the ascertainment of title to real property by providing means analogous to those which in earlier years were afforded by the Middlesex Registry Act 1708 and the Yorkshire Registration Act 1884, namely the Land Office, whereby instruments may be registered and achieve priority over those which are subsequently registered and unregistered instruments may be ignored. By section 19 of the Interpretation and General Clauses Ordinance (Cap. 1) the Land Registration Ordinance must be construed and interpreted in such manner "as will best ensure the attainment of" such objects. As Mr. Logan informed us this was the object of the Registrar General when, in 1956 and as an administrative measure, he introduced the practice of "registering sub-divisions of property". It has been operated with the co-operation of the legal profession to the advantage of all concerned.

13. All instruments constituting the first defendants' title save the last, being the sale to them of the 24 undivided shares by Kapok Garments Ltd. on 15 June 1981, were subject to the terms of the Ordinance as they stood prior to the 8 June 1981 amendments and part repeals. Section 2, which governs subsequent sections, read as in substance it still reads,:-

"(1) The Land Office shall be a public office for the registration of deeds, conveyances, and other instruments in writing, ... by which ... any parcels of ground, tenements, or premises ... may be affected ..."

There is no provision for the registration of rights of user or occupation or of other interest in land.

Section 3 provided:-

"(1) Subject to this Ordinance, all such deeds, conveyances, and other instruments in writing, ... registered in .pursuance hereof, shall have priority one over the other according to the priority of their respective dates of registration, ...

 

(2) All such deeds, conveyances, and other instruments in writing, ... which are not registered shall, as against any subsequent bona fide purchaser ... for valuable consideration of the same parcels of ground, tenements, or premises, be absolutely null and void to all intents and purposes ..."

This must refer to such parcels of ground, tenements or premises as were affected by an earlier instrument. For completeness we will also recite section 4 which was neither amended nor repealed:-

 

"No notice whatsoever, either actual or constructive, of any prior unregistered deed, conveyance, or other instrument in writing, ... shall affect the priority of any such instrument as aforesaid as is duly registered."

The effect of sections 6 to 8 was to require "the registration intended by this Ordinance" to be effected by delivering into the Land Office a memorial containing specific information which should "especially particularize and express the parcels of ground, tenements and premises affected or intended to be affected by such deed, conveyance or other instrument ..." Delivery of the instrument itself was not called for. By section 9(l) the Land Officer on the delivery of any memorial providing the required particulars, was obliged to number it and to provide a receipt. By subsection (2) he was also obliged "in like manner immediately to endorse on the back of the memorial a certificate containing the day and the time of day when the memorial was so delivered and the name and place of abode of the person verifying it and (to) sign the certificate when so endorsed". By subsection (3) "such certificate shall be taken and allowed as evidence of the registration and of the time of registration of the deed, conveyance or other instrument..." The memorials of the instruments relied upon by the defendants ostensibly comprised the required particulars and the Land Officer's respective certificates were indorsed thereon. Registration was evidenced accordingly.

The terms of sections 11 and 13, as they stood before June 1981, may be significant:

 

"11. The Land Officer shall also keep an index of the parcels of ground, tenements and premises mentioned in every such memorial and also a like index or indices of the names of the several parties to deeds, conveyances, and other instruments in writing ... with accurate references in all such indices respectively to the number and page of registry of the memorial to which any entry in such indices relates."

 

"13. If the Land Officer or any other person employed in the Land Office wilfully neglects or omits to number register or enter in manner hereinbefore directed any memorial or certificate delivered into the said office he shall be liable in damages to the party injured to the extent of the loss or injury sustained."

14. Section 11 is the nearest any provision in the ordinance or, in due course, regulations has come to requiring submission of instruments "against" a sub-division or part of larger parcels of ground, tenements or premises.

15. No doubt a generous construction of the ordinance is appropriate for the assured tracing and ascertainment of title to real and immovable property. The words "parcels of ground, tenements or premises" are wide enough as well to embrace a building in multi-storey occupation as the several rooms, offices, workshops, garages and roof or other spaces which it comprises. As Scrutton, L.J. stated in Frost v. Caslon [1929] 2 KB 138 at p.147:-

"It was said first that one room does not constitute 'premises' because it is part of premises, and the Act (Representation of the People (Equal Franchise) Act 1928) by the word 'premises' means the whole structure and not a part of it ... we have become familiar with the fact that one dwelling-house may include a number of others, and with the idea that premises within premises may still be premises. In dealing with this point I can see no reason why a room separately occupied should cease to be 'premises' because it is contained within the structure of a larger building which is also 'premises'."

 

16. In Maunsell v. Olins [1975] AC 373 at p.383 Viscount Dilhorne's speech included the observation:

 

"'Premises' is an ordinary word of the English language which takes colour and content from the context in which it is used. ... It has, in my opinion, no recognised and established primary meaning. "

17. Save that by regulation 5 (1), which effectively replaced section 6, it became necessary to deliver the material instrument into the Land Office like .considerations apply to the last instrument upon which the defendants rely. It was subject to the terms of the Ordinance as amended and partly repealed and to regulations. Regulations 6 to 9 effectively replaced sections 7 and 8. A redrafted section 23 specifically required the Land Officer to satisfy himself that the memorial complied with these regulations before he registered the instrument and regulation 13 states: "The Land Officer shall scrutinize every instrument delivered for registration and the memorial thereof and shall ensure that all the particulars required by regulation 6 are accurately contained in the memorial." By regulation 14 (2)"...the Land Officer shall sign a certificate of registration on the instrument whereupon registration shall be deemed to be completed." More significantly by regulation 16 "Registration of an instrument ... shall take effect from the date recorded on the memorial thereof ... and such record together with the certificate of registration referred to in regulation 14(2) shall be evidence of the registration ..." The instrument of 15 June 1981 bears his certificate and the dates of delivery appear thereon and upon the memorial (No. 2117510).

18. There can be no question but that registration of the instruments founding the first defendants' title was and still is evidenced by the Land Officer's certificates. No application has been made to set aside or vacate such registrations though, by inference, it may be said that the plaintiffs have sought findings of invalidity ab initio. We would not wish to find ourselves imprisoned by procedure. Whether or not the Land Officer was in a position so to ascertain and by reason of the absence of reference to the surface of the main roof, the memorials in question did not contain the particulars specified in section 8(1) or regulation 6(1)(d) and, accordingly, no registrations were made in accordance with section 6 or regulation 5(1). There was and is no other means whereby such registrations could lawfully have been affected. The purported registrations of the material instruments evidenced by the Land Officer's certificates are shown, on analysis, to have. been fatally flawed and therefore invalid for all purposes. It follows that the instrument duly registered by the plaintiffs has priority.

19. There remains an issue as to the order made that the third party should pay the defendants their costs of defending the action on a common fund basis. We are satisfied that it was well within the discretion of the judge so to order and that no grounds have been shown warranting our interference. Bowmaker (Commercial) Ltd. v. Day [1965] 1 WLR 1396. The third party's appeal in relation to fresh evidence has not been pursued. The evidence in question would seem to have no relevance to the issues canvassed before us in any event.

20. We uphold the orders made by Liu, J., dismiss the two appeals and the cross-appeal and make an order nisi that the third party should pay both the plaintiffs' and the defendants' costs of the appeals and of the cross-appeal to be taxed as between party and party. Edgington v. Clark [1964] 1 QB 367.