RICH TREND LTD v. KINGFAIR INTERNATIONAL ENTERPRISE LTD

HCMP 656/2022

[2022] HKCFI 3119

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 656 OF 2022

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REASON FOR DECISION

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1.  On 6 October 2022, I granted an order in terms of the Amended Originating Summons in this matter for the following reliefs:

(1)  A declaration that a Memorandum of Lien pending registration (“Memorandum”)  against Lot No. 770, 771, 774, 778, 780, 781, 782 in Demarcation District No. 216, Tai Wan, Sai Kung, New Territories (“the Property”)  is not registrable under the Land Registration Ordinance (Cap. 128); and

(2)  An order that the Memorandum be removed from the Land Registry, including any reference to it being “deed pending registration”.

2.  The Plaintiff is and was a corporate vehicle for holding the Property since 2004.  The current shareholder of the Plaintiff acquired the company in July 2020.

3.  The documents demonstrate that in 2008, there was an aborted sale between the Plaintiff and the Defendant, wherein the Plaintiff had originally agreed to sell the Property to the Defendant (“the 2008 Transaction”).  It would appear that as part of the fallout of the transaction, the Defendant asserted a purchaser’s lien against the Property, allegedly by reason of the Defendant’s entitlement to have its paid deposit refunded.

4.  The Plaintiff’s position in this application was that the Defendant’s claim was unmeritorious as the Plaintiff was entitled to forfeit the deposit (owing to the Defendant’s non-completion), and in any event the claim is now time-barred.  It has had trouble in attempting to sell the Property, owing to the attempt to register the Memorandum. These are the circumstances in which the present proceedings were initiated.

5.  Prior to the initiation of the proceedings, the solicitors for the Plaintiff had written to the solicitors who had acted for the Defendant in the original 2008 Transaction.  They had only written back with holding replies indicating that they were taking instructions from their client, but had not provided any substantive response.  The Defendant has not acknowledged service.

6.  The Plaintiff thus asked the Court to determine the matter summarily.  On the circumstances of this case as summarized below, I was satisfied that it is appropriate to summarily determine the matter and to grant declaratory relief (O.28, r.8, Rules of the High Court; Sky Joy Investment Ltd v Zheng Dunmu, HCA 395/2016, unreported decision dated 16 August 2017 at paragraphs 49-50).

7.  Legally, the basis for vacation of the Memorandum cited by the Plaintiff is the inherent jurisdiction of the Court, the essential proposition being that the Court has the jurisdiction to vacate the registration or purported registration of any instrument in the Land Registry which does not affect or no longer affects the land (Loa Kwok Fun Tso v Jamax Development Limited [2022] HKCFI 1424 at §§22-26; Goldstar H.K. Development Ltd v Mega Gold Enterprises Ltd [2020] 2 HKLRD 1006 at §23).

8.  Further, any possible registrable interest can lose registrability in the course of time (Tang Kwok Cheung and Tang Fuk Wo as Managers of Tang Tsung Fuk Tso v City Wave Development Ltd [2021] 6 HKC 647 at §§11-16).

9.  The contemporaneous documents available to the Court show as follows:

(1)  On 28 August 2008, the Plaintiff and the Defendant entered into a sale and purchase agreement (“SPA”)  for the Property, the consideration being HK$71,750,000.

(2)  The Defendant had paid HK$7,175,000 as the initial deposit, with the balance being payable upon completion.  Per Clause 12.1 of the SPA, the Plaintiff was entitled to forfeit the deposit if the Defendant failed to complete. Completion was fixed for 7 November 2008.

(3)  The completion date lapsed, and from the available documentation, it appears that the balance was not paid.  This is supported by contemporaneous correspondence between solicitors acting for the Plaintiff and Defendant at the time.

(4)  Somewhat oddly, some three years later on 10 July 2012, the Memorandum was submitted to the Land Registry for registration by the Defendant.  In the Memorandum, it was not indicated that the balance had been paid.  Instead, it was said that the claim arose because the Plaintiff had failed to observe the terms and conditions of the SPA, specifically, a clause which required simultaneous completion of another agreement relating to another property.

10.  The Plaintiff’s present shareholders and management state that they do not know of what transpired at the time.  However, when they wrote in September 2020 and thereafter to inquire as to the status of the matter and demand for vacation of the registration, they were met with no answers or explanations from the Defendant.

11.  On the basis of the above, it is the Plaintiff’s case that the Defendant had failed to pay the balance, that the Plaintiff was entitled to forfeit the deposit, and there is no merit in the Defendant’s claim against the Plaintiff, such that the Memorandum ought to be vacated.

12.  In addition thereto, the Plaintiff very fairly addressed the Court on possible arguments as to lien that could be raised by the Defendant, whether being a common law lien or an equitable lien.  Briefly:

(1)  Insofar as any common law lien is concerned, this is dependent on possession of the deeds by the purchaser (Snell’s Equity (34^th ed.)  at §44-014).  In this case, no such lien can arise since the title deeds have been returned to the Plaintiff.

(2)  As to the equitable lien, this would in any event be time barred at the very latest by November 2020, i.e. 12 years from the date when completion ought to have taken place (S.19(1), Limitation Ordinance; Snell’s Equity (supra)  at §44-013, which suggests that the 12-year time bar applies to a vendor’s equitable lien – the Plaintiff’s submission, which I accept, is that this must also logically apply to a purchaser’s equitable lien).

13.  In the circumstances, I was satisfied that this is a case suitable for the relief as sought.  I thus made an order in terms of the Amended Originating Summons, with costs summarily assessed on an indemnity basis in the sum of HK$120,000.

14.  Indemnity costs are appropriate in circumstances where there has been an irresponsible use of the land registration system (Goldstar (supra)  at §26).  The reasons for the indemnity costs order in the present case are threefold:

(1)  The registration has been left in abeyance for over a decade without any explanation.

(2)  The oddity of the circumstances surrounding the initial registration also suggest there has been some form of abuse of the system, which remains unexplained.

(3)  The failure to respond to the pre-action correspondence compounded the above.

15.  As such I considered it appropriate to order indemnity costs.

16.  I thank counsel Mr Billy Liu and Mr Brian Fan for their assistance.