HO WAI KWAN AND ANOTHER v. CHAN HON KUEN AND ANOTHER

HCMP 250/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 250 OF 2014

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J U D G M E N T

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1.  This is a vendor and purchaser summons.

BACKGROUND

2.  The captioned property (“the Property”) has the following conveyancing history:

(1) At all material times before 1994, Cheng Kwok Sum (“Cheng”) and Wong Lai Ha (“Wong”) were the joint tenants of the Property.

(2) On 21 March 1994, the Standard Chartered Bank obtained a charging order nisi in respect of the Property against Cheng.  It was made absolute on 15 April 1994.

(3) On 30 March 1995, the orders were discharged.

(4) On 17 April 1998, Cheng passed away.

(5) On 18 February 2005, Wong, as the surviving joint tenant, executed an assignment of the Property to Cheung Chun Wing and Li Wai Hung (“Cheung & Li”).

(6) On 16 June 2005, Cheung & Li executed an assignment of the Property to the plaintiffs.

(7) By the captioned agreement dated 8 November 2013 (“the Agreement”), the plaintiffs agreed to sell and the defendants agreed to buy the Property.

3.  What stands in the way of the parties now is the question of whether the charging order against Cheng in 1994 had the effect of severing the joint tenancy between Cheng and Wong so that Wong has since become a 50% tenant in common.  If yes, the other 50% interest as tenant in common would remain with the estate of Cheng.  The parties agree that that would mean Wong had no good title in the entirety of the Property to pass to Cheung & Li; and likewise, Cheung & Li had no good title to pass to the plaintiffs.

4.  The plaintiffs’ stance is that the charging order did not operate to sever the joint tenancy of Cheng and Wong.  The defendants take the opposite view.  The parties have agreed to bring this issue to the court for determination by way of the present originating proceedings.  No issue is taken by the defendants as to whether the requisitions on title have been satisfactorily or sufficiently answered; and defendants do not seek to rescind the deal on this ground[1].

SEVERANCE

5.  Subject to argument as to the effect of the charging order, it is common ground that Cheng and Wong were at all material times joint tenants both at law and in equity.

6.  A joint tenancy is characterised by the unities of possession, interest, title and time.  A joint tenancy would sever, if any one of the unities ceases to exist.

7.  Under the Conveyancing and Property Ordinance, Cap 219, a severance at law may be effected by notice or instrument: section 8(1).  A severance in equity may be effected by notice or any other method that is effective in equity or that would, but for section 8(1), be effective at law: section 8(2).

8.  References in the authorities to the law in this respect always started with Williams v Hensman (1861) 70 ER 862.  Of the 3 methods of severance set out in that case[2], the relevant one for the present purpose is:

“…… an act of any one of the persons interested operating upon his own share may create a severance as to that share…… Each one is at liberty to dispose of his own interest such manner as to sever it from the joint fund – losing, of course, at the same time, his own right of survivorship……”

9.   The question is whether the charging order in the present case constituted such an act.

CHARGING ORDER

10.  Section 20B(3) provides that:

“Subject to the provisions of this Ordinance, a charge imposed by a charging order shall have the like effect and shall be enforceable in the same courts and in the same manner as an equitable charge created by the debtor by writing under his hand.”

11.  Mr Man, appearing with Mr Ho, for the plaintiffs refers to the local decision of Sino Billion v Lam Chok Wai [2003] 2 HKC 167.  There DHCJ Poon (as he then was) summarised the state of the law (at §12). A charging order on an interest in land, unlike a mortgage, does not confer any proprietary right or title in the land.  It merely gives the chargee certain rights over the property as security for the loan.  An equitable charge is created by appropriating specific property to the discharge of some debt or other obligation without there being any change in ownership either at law or in equity.  The chargee has the rights to apply to the court for an order for sale or for the appointment of a receiver, but no right to foreclosure (so as to make the property as own) or take possession.

12.  Mr Lam for the defendants refers to English decision of Midland Bank plc v Pike [1988] 2 All ER 434.  There the issue before the court was whether the judgment creditor granted with a charging order over one of the joint tenant’s beneficial interest under a statutory trust for sale was a “person interested” within the meaning of section 30 of the Law of Property Acts 1925[3] so as to entitle it to apply to the court for an order.  Deputy Judge Edward Nugee QC (at 435f-436e) accepted the submission that an equitable charge (under a charging order) has all the characteristics of a proprietary interest, which operates as an assignment pro tanto of the property charged.  This statement was subsequently approved by the majority in Croydon (Unique) Ltd v Wright [2001] Ch 318 (at 328D, per Sir Christopher Staughton; at 338D, per Butler-Sloss LJ).

13.  The Midland Bank case was actually considered in the Hong Kong case of Chan Ching Kit Katherine v Lam Sik Shi & Anor, HCMP 2239/2000 (24 June 2002).  There Kwan J (as she then was) had to consider if the chargee under a charging order is a “person interested” for the purpose of section 3(1) of the Partition Ordinance, Cap 352 so that she was entitled to apply for partition or order for sale.  Hence an issue similar to that in Midland Bank.  For the chargee, it was argued that section 3(1) of Cap 352 is in pari materia with section 30(1) of the 1925 Act, and what was said by the court in Midland Bank mentioned above should apply.

14.  Kwan J explained the legal position in England as well as the difference between the nature of interest of a joint tenant in England and that in Hong Kong subject to a charging order:

“36. The Partition Acts were repealed in England by the Law of Property Act 1925 when the partition of land held in co-ownership was abolished. By section 34 of the 1925 Act, land held by co-owners is subject to a statutory trust for sale and the interest of each co-owner in the land is automatically converted into an interest in the proceeds of sale in respect of that land. Unlike the position in Hong Kong, until the law was amended by the Charging Orders Act 1979, it was the position in England that the interest of a co-owner could not be charged by the imposition of a charging order under section 35(1) of the Administration of Justice Act 1956, because the interest of a beneficiary under a trust for sale of land did not constitute “land” or an “interest in land” for the purpose of the 1956 Act.

37. It does not seem to me that a proprietary interest in the proceeds of sale of land should be equated with an interest of a proprietary nature in land. I do not think section 30(1) of the 1925 Act could be regarded as in pari materia with section 3(1) of Cap 352. It would not be appropriate to adopt the construction of section 30(1) of the 1925 Act in interpreting section 3(1) of Cap 352.

38. In the present case, it is important to bear in mind the characteristics of an equitable charge in land. This is a form of security whereby property is appropriated for the discharge of a debt or other obligation, “but which does not pass either an absolute or a special property in the subject of the security to the creditor, nor any right to possession. In the event of non-payment of the debt, the creditor’ right of realisation is by judicial process” (see Fisher & Lightwood’s Law of Mortgage, 11^th ed p.25). An equitable chargee in land does not have a right to foreclosure (Tennant v Trenchard (1869) 4 Ch App 537 at 542). Under the Partition Acts until they were repealed in 1925, it was not the law that an equitable charge of a co-owner with no right to possession and foreclosure could apply for partition or sale.”

15.  Whilst it was suggested in Midland Bank that a charging order amounted to an assignment pro tanto of proprietary interest in a joint tenant’s beneficial interest in the proceeds of sale under the statutory trust for sale to the chargee (since the Charging Orders Act 1979), Kwan J nevertheless highlighted the difference between the English and the local contexts.  In Hong Kong, a co-owner’s beneficial interest is indeed that in the land, which differs from a proprietary interest in the proceeds of sale.  On that basis, Her Ladyship found it necessary to reiterate the effect of charging order, which DHCJ Poon consistently said in the subsequent case of Sino Billion.

16.  Chan Ching Kit was applied in the subsequent case of Fortis Bank Asia HK v Yu Kam Hoi Herman & Anor [2004] 2 HKC 314 (at §35, per Reyes J) in the context of the entitlement of the beneficiary of a charging order to apply under Cap 352[4].

17.  The effect of the charging order that the local cases consistently reiterated is also in line with the academic text in this respect: see for instance, Megarry & Wade, The Law of Real Property (8^th ed) at 24-005; Gray & Gray, Elements of Land Law (5^th ed) at §6.1.28.

18.  With this as the starting point, the refined question is whether a charging order with such effect in respect of a joint tenant’s beneficial interest in land as explained operates to destroy any of the unities of joint tenancy.

WHETHER A CHARGING ORDER SEVERS THE JOINT TENANCY

19.  Mr Man emphasizes that an act of severance must have a final or irrevocable character in precluding the joint tenant from claiming by survivorship any interest in the subject matter of the joint tenancy.  A charging order, with such effect as discussed above, entails no passing or conveyance, and thus no disposition or alienation, of any interest of proprietary nature to the chargee.  The interest so created has the effect of an encumbrance restricting the joint owner’s ability to deal with his share.  The charging order in the present case had indeed been discharged prior to the passing of Cheng and the operation of the right of survivorship.  In the premises, the charging order in 1994 does not, in principle and in fact, operate on the owner’s share in the property so as to sever the joint tenancy between Cheng and Wong.

20.  Mr Man refers to numerous Australian and Canadian authorities where a judgment or charge registered against the interest of a joint tenant in the land to secure a debt was held not to suffice to sever the joint tenancy.  He does so, because, he submits, they were cases where the issue was decided after actual argument and analysis.

21.  In Re Young [1968] 70 DLR (2d) 594, section 35 of the Execution Act 1960 in British Columbia provided that a judgment when registered against the land would form a lien and charge, which was enforceable in the same manner as if the land was charged in writing by the judgment debtor under his hand and seal.  A judgment was registered against a joint tenant’s interest in the land.  The court had to consider if a judgment so registered against a joint tenant’s interest in land would constitute a severance.  If yes, the charge would bind the severed share of the judgment debtor.  The Court of Appeal by majority held there was no severance.  In doing so, Maclean JA explained (at 602) that the trend of the authorities is that a mere lien or charge on the land, either by a co-tenant or by operation of law, is insufficient to sever the joint tenancy; and there must be something that amounts to an alienation of title to give rise to severance.

22.  Pawluk v Bank of Montreal 1991 CanLll 5838 (AB QB) involved the Seizure Act 1980 in Alberta. Section 25(1) of the Act provided that the judgment creditor intending to take advantage of the seizure procedure should serve a notice on the judgment debtor.  The issue before the court was whether such a notice in respect of a joint tenant’s interest in land was registrable.  That depended on whether the notice effected a transfer of and thus severing the joint tenant’s interest in land.  O’Leary J referred to Re Young and held (at §16) that the seizure of the interest of a joint tenant in a leasehold by notice was a record of intention to seek realisation of the interest to satisfy the judgment debt by the further step of sale.  Until that stage, the notice did not affect the right of survivorship or any of the unities, and severance did not arise.

23.  In Power v Grace [1932] 2 DLR 793, the Court of Appeal in Ontario also held that a writ of fi fa against the land of a joint tenant involves no alienation and therefore does not sever the joint tenancy until actual execution

24.  The Canadian text of Ziff, Principles of Property Law (5^th ed) (at p.344) also summarises that a severance results when a joint tenant mortgages his or her interest as this involves a transfer of title to the lender.  The mortgagee acquires a property right that differs in time, title and interest from those of the other joint tenant.  Conversely, in jurisdiction where a mortgage is treated as creating a charge on the owner’s title, no severance results.  The unities remain intact, as in the case of an easement, though the interest of the joint tenant has been coated with an encumbrance.

25.  In Australia, there were cases where the court had a similar conclusion in respect of the effect of a mortgage under the Torrens system on joint tenancy.  A Torrens mortgage involved a charge without a conveyance.  In Lyons v Lyons [1967] VR 169[5], the Supreme Court of Victoria accepted (at 173) that under the general law, the mortgagor conveys his estate as a joint tenant in the mortgaged land to the mortgagee.  He thus obtained the estate and interest under a different instrument or judicial act than the other joint tenant.  The original unities of title between them were thus destroyed.  McInerney JA continued (at 174) to observe that an encumbrance however does not pass the estate or interest in the land itself and therefore does not destroy any of the unities between the joint tenants.  Examples of such encumbrances are the grant of a rent-charge or profit a prendre.  A Torrens mortgage does not operate as a transfer of the estate or interest but has the effect as a security.  His lordship held (at 174) that such a mortgage affects none of the unities of joint tenancy and thus amounting to no severance.

26.  As to charging order, the Supreme Court of South Australia in Anderson Solicitors v Schigulski (2004) 88 SASR 1 had to decide whether a joint tenant’s interest could be subject to a charging order. The court held (at §§12-13; 19-21) that a charging order does not create an interest in land for the benefit of the judgment creditor, and will not destroy any of the unities of the joint tenancy or the right of survivorship. Severance may occur if the order for sale ancillary to the charging order is made.  The situation is unlike a bankruptcy order whereby the property of the bankrupt becomes vested in the trustee in bankruptcy.

27.  Mr Man refers to numerous textbooks (some of which cited the abovementioned authorities) that consistently summarise the legal position that whilst total or partial alienation of a joint tenant’s interest in the land would effect severance of the joint tenancy, encumbrance without alienation of any kind would not.

28.  Halsbury’s Laws of England (4^th ed) Vol 87 says (at §§206-207):

“……An encumbrance by a joint tenant, such as a rent charge or profit a prendre, which did not pass an interest in the land itself but could be satisfied out of the grantor’s share of the rents and profits, was not binding on the surviving joint tenant.”

29.  Megarry & Wade (at 13-040) says:

“Although at common law the right to alienate was preferred to the right of survivorship, the right of survivorship took precedence over mere encumbrances. The distinction lay between acts which were inconsistent with the right of survivorship and those which were not. Thus a rentcharge could be satisfied out of one joint tenant’s share of the rents and profits without disturbing the joint tenancy. These distinctions may no longer be strictly applied now that the equitable rules for the severance of interests in personalty prevail. The trend of modern decisions is to treat any partial alienation by a joint tenant as a severance if it can be regarded as act operating on his share……

……

By contrast, where a joint tenant creates an encumbrance such as an easement or profit, no estate or interest passes to the grantee.  Such a grant destroys none of the four unities and provided that it does not interfere with the rights of the other joints (and in particular, the right to possession), the joint tenancy will not be severed.”

30.  Gray & Gray (at §7.4.73) says:

“…… in order to amount to severance the ‘act’ of the joint tenant must be such as to preclude him from claiming by survivorship any interest in the subject-matter of the joint tenancy. In other words, the ‘act’ which operates upon the joint tenant’s share must have a final and irrevocable character which estops any future claim that longevity has conferred the benefits of survivorship on that co-owner.”

31.  The local text of Goo & Lee, Land Law in Hong Kong (3^rd ed) (at p.461) has similar things to say about the final or irrevocable nature of the act that would operate to sever a joint tenancy.

32.  Mr Lam for the defendants disagrees.  He submits that a charging order does create some interest and involves some deduction from the right of ownership of the joint tenant in the property.  As such, the charging order operates on his share in the property to result in severance.  He also submits that the relevant time is when the charging order is made; and therefore once the order is made, the joint tenancy is severed and its subsequent discharge becomes irrelevant.

33.  Mr Lam refers to Cheshire & Burn’s Modern Law of Real Property (18^th ed) (at p.507), which says:

“Since ‘each joint tenant stands, in all respects, in exactly the same position as each of the others’, it follows that anything that creates a distinction between them severs the tenancy and converts it into a tenancy in common.”

34.  The first sentence cited in the above paragraph apparently came from Challis, Law of Real Property (3^rd ed) (at p.367) [6].  What was said on that particular page of Challis was actually referred to in Lyons (at 173).  Noteworthy is that before proceeding to consider the effect of a Torrens mortgage, the court in Lyons actually discussed (at 174) what Challis also said in the same note:

“In the same note, Challis writes: “But in order that a grant by one joint tenant may bind his fellows, it must be the grant of an estate and not the grant of a mere encumbrance or burden of the estate, such as a rent-charge or a right of common……” The reason is that the encumbrance does not pass the estate or interest in the land itself, and, therefore, does not destroy any of the four unities.  Yet one may suppose that there would be as much (or as little) reason for thinking that the grantor of the rent charge or profit a prendre would not have intended that his grant should cease to be operative upon his death as there is in the case of a grant of a mortgage by one joint tenant over his undivided share. The justification for the different result would seem to lie in the more technical reason that in one case (the mortgage by conveyance of the fee simple to the mortgagee) the unity of title is destroyed by that conveyance, while in the other (the grant of a rent-charge, or profit a pendre, or easement), where the fee simple is not conveyed away, the unity of title is not destroyed.”

35.  Then to illustrate what is said to follow from what Challis said, the authors referred to the scenario in Goodman v Gallant [1986] Fam 106[7].  It was said that where the parties expressly create a beneficial joint tenancy, the shares of the tenants in common on severance are equal regardless of unequal contribution to the purchase price; where they do not so create, the beneficiary may claim shares proportionate to their contributions.  In other words, this was about distinction by the creation, not severance, of joint tenancy.

36.  I therefore understand why Mr Man warns against capitalising on what this short paragraph in Cheshire & Burn seems to suggest.  It actually contains no real authoritative support for the notion that anything that creates a distinction between the joint tenants suffices to sever the joint tenancy and converts it into a tenancy in common.  The authorities and textbooks so far referred to indeed do not suggest that mere distinction without regard to its nature and effect on the unities of joint tenancy suffices to sever the joint tenancy.  Indeed quite the contrary is said.

37.  The discussion in Lyons of what Challis says also provides a counter-argument to another point made by Mr Lam.  Mr Lam submits that the intention of the joint tenant is relevant in that the parties could not have intended that the security created by the charge would be void if the debtor predeceases his co-owners: Re Sharer, Abott v Sharer (1912) 57 SJ 60; Re Young (above) (at 599, per Davey CJBC (dissenting)).  As held by the majority in Re Young (above) and Lyons (above; and at 179), the justification lies not in the parties’ intention but in the technical reason that a mere encumbrance, unlike transfer or conveyance of interest or title, does not destroy the unities between the joint tenants.  If anything, it could equally be argued that the parties presumably would not have expected the charge to have affected the joint tenancy between the co-owners irrevocably, even though the debt was repaid and the charge discharged.

38.  Mr Lam also refers to a number of English cases where the court suggested that a charging order may sever the equitable joint tenancy.

39.  The report of Monarch Aluminium v Rickman [1989] CLY 1526 is brief.  A charging order was made in respect of the husband’s interest as joint tenant in the proceeds of sale of a matrimonial home under a statutory trust for sale.  It was registered.  Then the couple purported to transfer the property to the wife absolutely, and sought to register it.  The judgment creditor applied to restrain the registration.  Knox J granted the order on the ground that the transfer was not a sale in the absence of consideration in money.  The learned judge stated, obiter, that the effect of the charging order was to sever the beneficial joint tenancy.

40.  James F Walker v Susan Lundborg [2008] UKPC 17 was an appeal to the Privy Council from the Bahamas.  There a charging order and the consequential order for sale to be completed had already been made.  Before the court was the question of whether, amongst other orders, the order for sale ought to be set aside.  Lord Walker started by setting out the facts down to the judgment debtor’s bankruptcy.  In the course of that, Lord Walker (at §8) recited section 63 of the Supreme Court Act, which provided that the judgment operated as an equitable charge on the debtor’s interest in the property subject to the charging order, and the same was enforceable in the same way as an equitable charge.  It did not affect the interest of the debtor’s wife, but enabled the creditor to apply to the court for an order for sale of the property charged as a whole.  His lordship continued to say that the making of the charging order effected a severance of the joint tenancy; and half of the sale proceeds would go to the wife and the other half would be applied in or towards satisfaction of the judgment debt.

41.  Lord Walker’s statement about the effect of the charging order, with respect, may have to be viewed with caution.  To start with, this was mentioned in the course of the factual background.  In view of the fact that an order for sale had indeed been made, severance was not a live issue.  As to whether it was indeed the making of the charging order or that of the order for sale in realisation of the security that severed the joint tenancy, no actual argument or legal analysis was set out in the judgment.

42.  In C Putnam & Sons v Taylor [2009] BPIR 769, a charging order had been made absolute in respect of the indebtedness of one of the joint tenant defendants.  They purported to agree for the other to buy out the other’s interest afterwards.  The claimant sought to enforce the charging order.  Judge Purle QC found that the purported agreement did not defeat the interest of the claimant.  He stated, obiter (at §20), that the effect of the charging order had been to sever the joint beneficial interest.

43.  The relevant statements in these cases were largely obiter.  They are somehow not amongst those cited in support of the views expressed in the textbooks, such as Megarry & Wade (at §13-047) and Cousins on The Law of Mortgages (3^rd ed) (at §20-05), that Mr Lam refers to in support of his contention.  The authority cited in the textbooks for such contention is no other but the Midland Bank case.  As discussed, whilst a charging order in respect of a joint tenant’s interest was said to be an assignment pro tanto to the chargee of some proprietary interest in his beneficial interest in the sale proceeds under a statutory trust for sale in England, it has been reiterated by the court that the local position differs in that a charging order does not convey interest of a proprietary nature in the joint tenant’s interest in the land.

44.  In the Hong Kong context, Mr Lam refers to 2 cases on charging order. Again the statements in these cases that a charging order severs the joint tenancy were obiter.

45.  First, in Malahon Credit Co Ltd v Siu Chun Wah Alice & Anor [1987] 2 HKC 79, the Court of Appeal considered that first and foremost, the issue was what beneficial interest, if any, the woman had in the property subject to the charging order[8].  The court found on the evidence that whilst it was a joint tenancy at law with the right of survivorship, it was always the intention that it was in equity a tenancy in common in equal shares.  It was only upon that when Fuad JA added, obiter, that if this was not the true position and it was a joint tenancy both at law and in equity, the same was in any event severed when the charging order was made absolute and thus rendering it a tenancy in common.

46.  Fortis Bank v Yu Kam Hoi Herman & Anor [2004] HKC 314 involved, amongst others, the question of locus of the chargee under a charging order to apply for order for sale under the Partition Ordinance, Cap 352.  That was similar to the question considered by Kwan J in Chan Ching Kit Catherine (above); and Reyes J indeed came to the same conclusion as that if Kwan J after considering Chan Ching Kit Catherine.  Proceeding to consider the nature of the interest of the defendants in the property, Reyes J found on the evidence that they were tenants in common in equity in equal shares.  It was upon that when he added, obiter, that even if he were wrong on that, and the property was assigned to the defendants as joint tenants both at law and in equity, the charging order would have severed their interest as joint tenants in equity.

47.  Mr Lam submits that due weight should be given to these statements by the English and Hong Kong courts, albeit largely obiter. On the contrary, the Canadian and Australian cases contained no real reasoning; and that Re Young and Lyons were wrongly decided, because the court there merely focused on the unity of title.  Yet considering the authorities, I would hesitate about agreeing.

48.  Mr Lam also refers to another line of English authorities involving mortgage by way of legal charge for support.  However Mr Man is right in highlighting the nature and effect of such a charge for proper understanding of those cases.

49.  Since the Law of Property Act 1925, legal mortgage of freeholds may be created by: (i) a demise for a term of years absolute, subject to a provision for cesser on redemption; or (ii) a charge by deed expressed to be by way of legal mortgage: section 85(1).  A purported conveyance of the fee simple by way of mortgage operates as a demise for 3,000 years subject to cesser on redemption: section 85(2).  A charge by deed expressed to be by way of legal mortgage does not create a term in the mortgage, but the chargee is given the same powers, protection and remedies as if he had a term of 3,000 years (including the right to take proceedings to obtain possession from the occupiers and the persons in receipt of rents and profits): section 87(1).

50.  Cousins (at §2-16) has this to say about the effect of such a charge:

“Although the chargee does not in fact have a legal term of years vested in him in the charged property, the effect is that he is as fully protected as if he had such. The chargee is therefore empowered to create tenancies and enforce covenants. The legal charge is in effect a mortgage and the terminology is somewhat a misnomer and confusing.”

51.  Fisher and Lightwood (at p.31, §2.7) describes that:

“It ranks as a legal interest and in questions of priority it ranks as a legal estate. A chargee of leasehold land may protect his charge by applying for relief against forfeiture.”

52.  In Bedson v Bedson [1965] 2 QB 666, the husband and wife were the joint tenants of their matrimonial home on trust for sale.  Mr Lam relies on what Russell LJ said (at 690E-691A) about Lord Denning MR’s proposition that in that case, so long as one was in possession, neither could sell his or her beneficial interest or sever the beneficial joint tenancy.  Russell LJ found that such proposition had no foundation in law or in equity.  His lordship then suggested several matters, which might well have severed the beneficial joint tenancy.  As Mr Man observes, there was no real argument or analysis.

53.  In Cedar Holdings Ltd v Green [1981] 1 Ch 129, the husband, together with a woman posing as his wife, purported to execute a charge by way of mortgage over the property. The chargee contended that the charge was effective to create a charge over the half share of the husband; but failed on this ground[9]. Buckley LJ continued to say (at 138F-H), that if the effect of either the legal charge or a contract to create a legal charge was, in one case, occasion a disposal by the husband of his beneficial interest or, in the other, to oblige him to dispose of that interest, that would have effected severance of the beneficial joint tenancy.  The legal charge or the contract would constitute an act by a joint tenant operating on his share so as to sever the beneficial joint tenancy.  As Mr Man observes, such comment was obiter. Further, in the English context as explained above, it is perhaps not difficult to understand why a charge by way of mortgage or a specifically enforceable contract to create such a charge, which was said to occasion a disposal by a joint tenant of his beneficial interest, would have severed the beneficial joint tenancy.

54.  In First National Securities v Hegerty [1985] 1 QB 850, the husband forged the wife’s signature and purported to execute a legal charge on the matrimonial home.  In default, the chargee obtained judgment and charging order on the husband’s interest in the property.  It was made absolute.  The only issue was whether the order should be made absolute.  Bingham J held (at 854B-D) that the legal charge was a disposition by the husband, which amounted to a sufficient act of alienation to sever the beneficial joint tenancy.  In any case, the disposition created an equitable charge in favour of the chargee in respect of the husband’s beneficial interest.  On appeal, this was approved by Sir Denys Buckley (at 862G-H).  Again, in the English context as explained above, it is not difficult to understand why the act of the husband was considered as disposition and alienation of his beneficial interest; and that that served to sever the beneficial joint tenancy.

55.  In First National Bank plc v Achampong [2004] 1 FCR 18, the wife claimed to have executed the legal charge over the property jointly owned with the husband under his undue influence.  Blackburne J held (at §54) that the legal charge was ineffective against the wife but nevertheless had a two-fold effect: first, to create an equitable charge in respect of the husband’s beneficial interest; and second, to sever the beneficial joint tenancy.  Reference was made to section 63(1) of the Law of Property Act, which provides that every conveyance is effectual to pass all the estate, right, title, interest, claim, and demand which the conveyancing parties respectively have, in, to, or on the property conveyed, or expressed or intended so to be, or which they respectively have power to convey in, to, or on the same.  Blackburne J held that the effect of the provision applied to a purported transfer or conveyance[10] as much as to a purported mortgage or charge.  Such context does not exist for an analogy in the present case, where a charging order conveys nothing.

56.  In United Bank of Kuwait plc v Sahib [1997] 1 Ch 107, the husband confirmed to the bank that the land certificate relating to the freehold property owned jointly by him and his wife was being held to its order as security for the judgment debt.  On this basis, the bank obtained a charging order against the husband’s interest in the property.  It was held that the old rule that a deposit of title deeds for securing a debt would create an equitable charge did not survive section 2 of the Law of Property (Miscellaneous Provisions) Act 1989.  Pursuant to the new rule, a disposition of an interest in land had to be in writing in a document signed by the parties incorporating all the terms of the agreement.  The purported equitable charge in favour of the bank thus failed.  Chadwick J further said (at 117G-H) that acquisition by a third party of an interest by way of mortgage or charge in the equitable interest of a joint tenant would be repugnant to the continuation of the joint tenancy.  In other words, this was obiter.

57.  Considering the circumstances in which the different statements of law came to be made in the authorities and textbooks cited by the parties, and in the light of the effect of a charging order in the Hong Kong context, I am persuaded by Mr Man and do not agree with Mr Lam.

58.  I therefore conclude that the charging order in 1994 in the present case did not sever the joint tenancy between Cheng and Wong.  It had been discharged well before the time when Wong became entitled to the entirety of the beneficial interest in the Property by virtue of the right of survivorship upon the passing of Cheng.  She was in a position to pass such beneficial interest, and did so, to her successor in title; and eventually the plaintiffs.

ORDER

59.  For the above reason, and in line with the only issue defined for determination, I find and declare that the plaintiffs have, and have shown, good title to the Property in accordance with the sale and purchase agreement.

60.  By agreement, the parties shall bear their own costs irrespective of the outcome of these proceedings.  I so order.

61.  I thank counsel for their assistance.

[1] The plaintiffs seek a declaration that they have satisfactorily and sufficiently answered the requisitions on title.  Counsel confirmed that no issue is taken as to that.

[2] The other 2 ways are (i) an agreement between the joint tenants; and (ii) the conduct of the joint tenants that shows the mutual intention that they are to hold their interests in common.

[3] Which provided that if the trustees for sale refuse to sell or any requisite consent to the exercise of their powers cannot be obtained, any person interested may apply to court for a vesting order or other order giving effect to the trust for sale.

[4] Reyes J at the same time commented (at §94, obiter) that a charging order would sever a joint tenancy in equity.  This aspect of the case will be re-visited in the section below.

[5] followed in the New South Wales case of Guthrie v ANZ Banking Group (NSW 4413/1987) .

[6] See footnote no. 81 in the text.

[7] See footnote no.82 in the text.

[8] See 86A.

[9] This ground was subsequently held to have been wrongly decided: see Williams & Glynn’s Bank Ltd v Boland [1980] 3 WLR 138 (at 146, per Lord Wilberforce, with whom the other Law Lords agreed).

[10] As in Ahmed v Kendrick [1988] FLR 22.