HUNG HEUNG KENG v. CHALLENGE WAY INVESTMENT LTD

HCMP 789/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 789 OF 2006

____________

____________

____________

_______________

J U D G M E N T

_______________

Introduction

1.  This is a vendor and purchaser summons where a difficulty has arisen concerning the registration of a Prohibitory Order dated 25 March 1950 and a statement in the Memorial dated 27 November 1950 which says that the Lot to which it relates was “subject to the rights of Chung Pak Woo and Chung Kan Wan”.  These two entries have held up the sale of the two Lots which comprise the property upon which stands a house which the vendor plaintiff is trying to sell to the Defendant.

2.  Both parties are anxious for the sale to proceed but wish to be assured that these two entries will not cause difficulties in the future.  For these reasons, the Plaintiff is seeking the three declarations in the Originating Summons (page 2 of the Bundle).

The Prohibitory Order

3.  This and the statement concerning the two Chungs fall to be separately considered.  As to the Prohibitory Order, I am grateful to both counsel for their researchers into this type of Order.  I have been referred to two cases where such an Order had to be considered by the court.  In Fung v Kwok [1990] MP 1494 (unreported), Godfrey J (as he then was) said he could not “form any sensible view as to the nature and effect of (a) Prohibitory Order”, in that case dated 1925, he was quite satisfied that it presented no more than a theoretical rather than real blot on the title, “fanciful rather than real” as he put it.  Subsequently, Judge Downey in the District Court in Lam v Lam, DCMP 1273/1993 (unreported) had a little more luck.  He was able to say from his own and counsel’s researches that a Prohibitory Order was a form of attachment of property in execution of a judgment for a sum of money.  He said that it is “neither a judgment nor a lis pendens.  It is perhaps akin to a charging order over land …”.  This being the case he held that section 17, Land Registration Ordinance would now apply to such orders with the consequence that a failure to re-register every five years would have the effect of rendering such an order null and void and he was content to grant a declaration to that effect.  This had also been the basis for Godfrey J in the case of Fung v Kwok (supra.) saying that the absence of re-registration had made the Prohibitory Order, a fanciful rather than real blot on the title.

4.  Before me Mr Cheung for the Defendant has, with great industry, been able to discover the origins of such an order.  In this case it had been issued in execution of a judgment in Action 49 of 1949 in the Supreme Court of Hong Kong.  It was an order issued under section 401 of the Civil Code in these terms :

“To the Defendant Chung Ngau Kan

Whereas you have failed to satisfy a judgment for money given against you in this Court on the 7^th day of May 1949, in favour of the Plaintiff Li Ping for the sum of $9,940.00, together with interest thereon at the rate of 2 per month from the 5^th day of March 1949 to date of the said judgment, and also for cost to be taken; and whereas a writ of execution has been issued to enforce the said judgment by the attachment of your property; and whereas it is alleged that certain lands, houses or other immovable proper belong to you.  It is ordered that you be and you are hereby prohibited and restrained, until the further order of this Court, from alienating such lands, houses or other immovable property, and particularly from alienating Lot Nos. 248, 2101 2113, 427 & 808 in D 19 by sale gift or in any other way whatsoever and it is also order that all persons be and they are hereby prohibited and restrained, until the further order of this Court, from acquiring or receiving any such property by purchase, gift or in any other way. (Emphasis added)”

5.  The Civil Code under which this order was made was the Code of Civil Procedure being the Civil Procedure Ordinance 1901 which later became the Rules of Supreme Court.  Mr Cheung is able to say that a Prohibitory Order was a form of execution of judgment.  He has drawn to my attention the relevant sections of the Code which relate to this form of order which I am pleased to set out here :

“399. If the judgment is for money and the amount thereof is to be levied from the property of the judgment debtor, the court shall cause the property to be attached in the manner hereinafter prescribed.

401. Where the property consists of immovable property or any interest therein, either at law or in equity, the attachment shall be made by a written order prohibiting the judgment debtor from alienating the property by sale, gift or in any other way, and all other persons from receiving the same by purchase, gift or in any other way.

411. If in any case the amount of the judgment, with all costs, charges, and expenses incurred by the attachment, is paid into court or if satisfaction of the judgment is otherwise made, the attachment shall be withdrawn; and such steps shall be taken as may be necessary for staying further proceedings in execution of the judgment.”

6.  The Code of Civil Procedure was then included as rules under the Supreme Court Ordinance when a revised edition of Ordinances was published in 1950.  The Code of Civil Procedure  was repealed by the Rules Committee of the Supreme Court under its powers contained in section 38 of the Supreme Court Ordinance.  Notwithstanding its repeal this would not invalidate the attachment of a Prohibitory Order.  Mr Cheung is able to say this by virtue of section 23(b) of the Interpretation and General Clauses Ordinance which is in these terms :

“Where an Ordinance repeals in the whole or in part any other Ordinance, the repeal shall not

(a) …;

(b) affect the previous operation of any ordinance so repealed or anything duly done or suffered under any Ordinance so repealed.”

Therefore, submits Mr Cheung, the Prohibitory Order remains on the title and without evidence that the judgment has been satisfied it remains an encumbrance on the title.

7.  Mr Cheung’s analysis is, in my view, a correct one save for the effects of the Land Registration Ordinance which Mr Li, for the Plaintiff, relies on.  He refers to sections 3 and 4 which relate to the effects of non-registration and of the priority of duly registered instruments over actual or constructive notice of prior unregistered instruments in writing and, crucially importantly, to section 17 which provides that registration of an order ceases at the end of five years unless re-registered.  I am entirely satisfied therefore that absent re-registration the 1950 Prohibitory Order ceased to have effect.  I am therefore content to make a declaration in terms of para. 1 of the Originating Summons and also under para. 3 as it relates to this Prohibitory Order.

The rights of the Chungs

8.  The rights of the Chungs as expressed in the Memorial are completely unspecified.  There is a reference to a footnote to the Memorial TP 252 in 28/46.  The Plaintiff’s solicitors have tried to find out more about this from the District Lands Office but it has not been able to assist them.  No information is available.  Mr Li says that even if this falls to be considered as an “Unwritten Equity”, a subsequent purchaser must know of the exact nature and effect or type of unwritten equity that is being asserted when he purchases the property.  On the present state of the evidence this has not been possible.  A bona fide purchaser for value without notice of any equitable rights takes the property free from that equitable right.  Nothing has come of this for the past 56 years.  Nobody knows anything about this. Even if registrable then it would fall foul of section 17 for want of re-registration.  This is a classic case of a, to borrow the words of Godfrey J, “fanciful rather than real blot on the title”.  In respect of the Chungs’ rights I am also content to make the declarations sought under paras 2 and 3 of the Originating Summons.

Conclusion

9.  These being the orders I can see no impediment to this sale going through to a successful completion.  I have been asked to make no order as to costs which I am content to do.  I am grateful to both counsel for their assistance in this, not uninteresting, matter.