XCHRX JIMMY INVESTMENTS LTD. v. LAM FONG CHUN AND ANOTHER

HCA 18720/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 18720 OF 1998

____________

_______________________

REASONS FOR DECISION

_______________________

1. This is an appeal by the Plaintiff against the decision of Master Ho vacating the registration of the present action with the Land Registry against the Property known as Flat B, 38th floor and Roof, Block 7 Kenswood Court, Kingswood Villas, Tin Shui Wai, Yuen Long (the said property) as a lis pendens.

2. Under a Provisional Sale and Purchase Agreement signed by the Plaintiff on 6 December 1997, the Plaintiff agreed to purchase the said property. The Provisional Sale and Purchase Agreement when signed by the Plaintiff contains a special condition which requires the vendor to procure the developer to repair the water leakage parts to the satisfaction of the Plaintiff.

3. After the Provisional Sale and Purchase Agreement was signed by the Plaintiff, it was then handed over to the employees of the Midland Realty International Limited (Midland) together with a cheque deposit of $220,000.00. The employees of Midland then handed over the Provisional Sale and Purchase Agreement to the Defendants for their signatures as the vendor of the said Property together with the cheque payment of $220,000.00 from the Plaintiff.

4. The Defendants, before executing the Provisional Sale and Purchases Agreement, chose to alter the aforesaid special condition. Instead of agreeing to procure the developer to repair the water leakage, the Defendants only agreed to assist the purchaser to procure the developer to repair the water leakage.

5. The Plaintiff considers the act of the Defendants constitute an anticipatory breach of the Provisional Sale and Purchase Agreement and hence treats the Provisional Sale and Purchase Agreement as terminated.

6. The Plaintiff refuses to pay the further deposit under the Provisional Sale and Purchase Agreement and brings the present action against the Defendants for the return of the deposit of $220,000.00 as well as a lien over the said property arising out of the payment of such deposit.

7. The Defendants contend that the alteration to the Provisional Sale and Purchase Agreement was made with the express consent of the Plaintiff.

8. The Plaintiff contends that the Defendants were in breach of the agreement and that they only refused to complete the transactions because the market at the material time was falling.

9. The Defendants claim to be entitled to forfeit the deposit and the Defendants also counterclaim for damages against the Plaintiff for breach of the contract.

10. The parties hotly dispute as to whether the employees of Midland were the Plaintiff's agents or agents for both parties as the Defendants contend that those employees had expressly agreed to the alteration to the provision of Sale and Purchase Agreement in question.

11. The Plaintiff might not have a very strong case. But at this stage of proceedings, as I keep repeating in the course of counsel's submission, it is not possible for this court to resolve the disputes as to the facts or even to make any strong comment on such disputes.

12. The Court must proceed on the basis that both parties have an arguable case on their respective assertions.

13. The only issue that I have to decide is whether the claim by the Plaintiff for the return of the deposit and for a lien arising out of the payment of such deposit is registerable under the Land Registration Ordinance as a lis pendens.

14. For obvious reason, the Plaintiff is not seeking specific performance of the Provisional Sales and Purchase Agreement. It is only asking for a return of the deposit together with a claim for a lien.

15. Under section 2 of Land Registration Ordinance, "all deeds, conveyances and other instruments in writing, and judgment which affects any parcels of ground, tenements or premises may be registered with the Land Registry.

16. Under Section 14, judgment, of course, includes lis pendens which is defined as "any action or proceedings pending in a court or tribunal that relates to land or any interest in or charge on land".

17. To be registerable against the said property under the Land Registration Ordinance, the Plaintiff must establish, (1) the present action relates to the said property and (2) the action affects this said property.

18. The Plaintiff's claim against the Defendants is not just a claim for the return of the deposit. It is also a claim for a lien over the said property arising out of the payment of the deposit.

19. Ms Wong on behalf of the Defendants concedes that the payment of deposit can give rise to a claim of a lien over the said property, a well established the principle of law (see Halsbury's Laws of England Vol. 28 (4th Ed), at paras. 760 and 764).

20. A claim for a lien certainly relates to the said property in that the lien arises out of the payment of the deposit under the Provisional Sale and Purchase Agreement in connection with the said property.

21. The action, in my view, certainly affects the said property in that if the lien is established, subsequent purchasers' title over the said property will be subjected to the lien.

22. I had been referred the case of Fung Kan Wai & Anor v. Leung Shui Fat & Ors in its judgment of the Court of First Instance by Deputy Judge Whaley [1998] 2 HKC 115 and the judgment of Court of Appeal [1999] 4 HKC 70. I had also been referred to the judgment of Patrick Chan J as he then was in Chow Chiu Tai v. Chan Tak Ming [1993] 2 HKC 582.

23. In my view, on the proper and correct understanding of those judgment, they support the contention that the claim of a lien arising out of the payment of the deposit under a Sale and Purchase Agreement can be registered under the Land Registration Ordinance.

24. It is an action relating to the property in question and it affects the property.

25. The action for a lien will be adversely affected by or deferred to some other interest in the land if the action or proceeding is not registered or registered in time.

26. In my view, the learned Master was wrong in vacating the registration of the present action.

27. In the circumstances, the appeal against that decision must be allowed and the order of the learned Master is hereby set aside.