YAU SIU YEUNG AND OTHERS v. WING SUM LO t/a WING SUM LO & CO.(a firm)

1987, No. M.P. 1027

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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1. The Plaintiff is seeking a Declaration that he has a title free from incumbrances of the suit premises. The Defendant opposes the application. He seeks to maintain the validity of a charging order which is registered against the property.

2. Mrs. Clough for the Plaintiff helpfully provided me with a chronology of relevant events. It is as follows:

CHRONOLOGY

3. It will be noted that the Defendant obtained his Charging Order Nisi on the 23rd July 1985. Mrs. Clough accepts that the order absolute relates back in time to when the order nisi was registered in the Land Office on the 2nd August 1985. It is accordingly necessary to analyse what the position was for the Plaintiff on these dates. Put another way it is necessary to ask a series of questions to determine whether the Plaintiffs position was such that he is entitled to the Declaration he is seeking.

1.             When did the Plaintiff complete his purchase of the suit premises?

4. I accept Mrs. Clough's contention that it is a legitimate exercise to consider the evidence which has been adduced and if necessary to go behind the date appearing on the Assignment. Authority for this can be found in para.1486 of Halsbury's Laws of England Vol.12, 4th Edition. On considering the background evidence, it is note worthy to observe that the various statements made by the deponents to affidavits are supported by contemporaneous correspondence. I am prepared to accept such evidence generally.

5. The evidence which has been adduced all indicates that the Plainitffs purchase of the suit premises was completed on the 24th June 1985.

6. I accept that Vice President Huggins correctly stated the Law on p.4 of Liu Man Bun and another v. Li Yek Leung⁽¹⁾ concerning the situation where a solicitor acts for both vendor and purchaser and receives a duly executed assignment from the vendor and the purchase moneys from the purchaser. He had this to say:

"

In my judgment the answer to the Vendor's contention lies in the principle relied upon by Trainor, J. in Chu Yen Estates Ltd. v. Ho Sau-ki 1976 H.K.L.R. 863, namely that a solicitor acting for both parties to a conveyance on sale who has in his possession unconditionally both the purchase price and an executed assignment holds the former for the vendor and the latter for the purchaser once the agreed date for completion has arrived. In the present case the sale was completed when the Vendor executed the Assignment and handed it back to the solicitor, for the solicitor already held the purchase money".

2.             The next question which has to be asked is - was the completion subject to any conditions?

7. I think the answer to this has to be - No.

8. It is evident from Edward Wong v. Johnson, Stokes and Master⁽²⁾ that when arrangements are made for the discharge of a subsisting mortgage by a vendor of property they are administrative and practical procedures to enable the respective solicitors to protect their own and their clients interests.

9. Neither the vendor of the property nor the Plaintiff intended the transaction as a whole to be conditional in the accepted sense of the term. What as being provided for was the essential mechanics of the transaction.

10. For the reasons I have given I am satisfied that the sale and purchase was completed on the 28th June 1985.

3.             The next question which arises is whether the Defendant is able to validly register a charging order against the suit premises after the vendor thereof has disposed of his interest in the land. Again I think that the answer must be - No.

11. The Authority which Mrs. Clough referred to in this connection was a case I heard last year of a similar nature in some respects Ng Kam-ha v. Vincent Sina Traders (H.K.) Ltd.⁽³⁾ I held in that case that once a property has been disposed of by a party it is impossible for a charging order to be registered against that party's interest.

12. This also leads on to the other matter which I dealt with in that case which was namely the underlying philosophy of our Land Registration Legislation.

13. I held in that case that our system of registration is Registration of Deeds not registration of title. This being the case it is a legitimate exercise to scrutinize particular transactions notwithstanding the fact that it is evidenced in a Deed or document which has been registered. This further supports the approach adopted by Mrs. Clough of focusing attention to the relevant transactions and attempting to determine the position independent of registration.

14. Mrs. Clough agrued that on the basis of the submissions she had made her application should succeed.

15. In reply Mr. Kwok for the Defendant placed heavy reliance upon Section 3 of the Land Registration Ordinance at Cap.128. This section reads:

16. He argued that notwithstanding the "validity first and priority second test" laid down by Hunter J. (as he then was) in Financial and Investment Services v. Baik Wha⁽⁴⁾ it was clear that section 3 went much further than merely providing machinery for the registration of title deeds. It dealt with the essential validity of instruments.

17. The question of priority was particularly important in the present case as it was evident from the chronology given and the supporting evidence that the Plaintiff had failed to comply with

Section 5 of the ordinance. The assignment had not been registered within one month of its execution whereas the charging order had been registered timeously. I can see some merit in this contention and it is necessary to subject it to further analysis.

1.             Is the Defendant a bona fide purchaser for value as required in Section 3?

18. Here I think the answer must be - No.

19. To ascertain the true nature of a charging order it is necessary to consider the old Section 20 of Cap.4 the Supreme Court Ordinance. This was in operation at the relevant time. This reads:

20. It would seem to me to be manifest that all that the charging order achieves is to notify parties of a judgment which has been obtained against the owner of the land and state that the owners interest in the land is subject to the charge created. The ephemeral nature of the interest was recognised by Hunter J. at p.113 D of Financial and Investment Services. With respect I concur with His Lordship's assessment of the position. Certainly the Charger can not be described as a "Purchaser for value".

21. For this reason I do not think that the Defendant can establish priority over the assignment to the Plaintiff.

2.             In the alternative, can the Defendant establish any priority as a result of the failure of the Plaintiff to register the assignment within one month period to obtain the benefit of Section 5? I do not think that this failure can assist the Defendant. It is undoubtedly the case that the assignment was eventually registered on 15 August 1985. It is therefore clear that the assignment cannot be said to be void.

22. It is then necessary to fall back on the status of the charging order.

23. As I have earlier indicated I accept the validity of Mrs. Clough's contention that once the vendor of the land had completed the sale thereof a charging order could not be made against the vendors interest. This being the case the Defendant was unable to establish any priority against the Plaintiffs interest.

24. For the reasons I have given I regret that the Defendant is unable to establish any registerable right to the interest he is claiming. Equally I am satisfied that the Plaintiff has succeeded in establishing his interest in the land free from the said charging order. This being the case I am prepared to grant the relief which is being sought.

25. I will hear the parties on the form of the order or Declaration which will be made. I will also hear the parties on costs.

(1)    unreported HCA 171/85

(2)   [1984] 1 AC 296

(3)    unreported M.P. 699/87

(4)    [1985] HKLR 103