TREASURE SPOT FINANCE CO LTD v. WAN SHUI SHEK AND ANOTHER

HCMP1219/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

Miscellaneous proceedings NO.1219 OF 2007

----------------------------

------------------------

------------------------

--------------------------

J U D G M E N T

--------------------------

1.     By a Provisional Agreement for Sale and Purchase (“Provisional Agreement”) dated 3 January 2006, the 1^st defendant agreed as vendor to sell to the 2^nd defendant as purchaser the land property known as Section A of Lot No. 462 in DD No. 244 (“the Land”). 

2.     The 1^st defendant as owner has obtained from the District Lands Officer Sai Kung a building licence to erect a small house upon the Land.  However the building licence provided that the owner is prohibited from assigning, etc. the said land without the prior written consent of the District Lands Officer. 

3.     Pursuant to the provisions of the building licence, the 1^st defendant obtained approval of the directors of the Land to obtain a loan from the plaintiff to finance the erection of the building on the Land.  The loan was secured by a building mortgage dated 7 November 2002 and was duly registered in the Land Registry. 

4.     The building mortgage also prohibited the 1^st defendant from selling, transferring or otherwise disposing of the Land or entering into any agreement to do so except with the prior written approval of the plaintiff. 

5.     The 1^st defendant failed to make repayment of the loan and the plaintiff therefore took enforcement action under the said building mortgage and obtained a judgment in its favour.  By an order dated 20 November 2006, the 1^st defendant was ordered to deliver vacant possession of the Land together with the building erected thereon to the plaintiff. 

6.     The plaintiff then discovered that the 1^st defendant had agreed to sell to the 2^nd defendant the ground floor of the small house erected on the Land for a consideration of $1 million.  

7.     The 1^st defendant did not appear and did not file any acknowledgement of service. 

8.     The 2^nd defendant appeared before me after filing an acknowledgement of service but did not file any affirmation in opposition to the plaintiff’s application.  At the hearing before me the 2^nd defendant cannot state any ground of objection apart from saying that :

(1)     When the plaintiff is suing him in this action, it will have to take the responsibility, probably he meant for the 1^st defendant as owner.   This however in my view is not a reason at all. 

(2)     He had paid the consideration to the 1^st defendant and the 1^st defendant cannot be found now.  There is no point for him to join the 1^st defendant as a third party or otherwise to sue him in a separate action. 

9.     The 2^nd defendant has no defence at all against the plaintiff.  The Provisional Agreement was registered subsequent to the building mortgage.  It was entered into without the consent of the District Land Officer and therefore was in breach of the building licence.  Further he has no written consent or at all from the plaintiff as mortgagee and therefore was also in breach of the building mortgage between the plaintiff and the 1^st defendant.  

Conclusion

10.     Accordingly the plaintiff is entitled for judgment herein, namely :

(1)     a declaration that the said Provisional Agreement is ineffective, null and void;

(2)     a declaration that the plaintiff is not bound by the Provisional Agreement;

(3)     an order that the registration of the Provisional Agreement shall forthwith be vacated from the Lands Registry, Sai Kung; and

(4)     costs of the action against the 2^nd defendant to be taxed if not agreed.