WONG KAM WING AND ANOTHER v. VYRIL MURKIN (HK) LTD AND OTHERS

1988, M.P. No, 1722

IN THE HIGH COURT OF HONG KONG

HEADNOTE

P1 and P2 were beneficially entitled to certain property in equal shares, The property was subject to a bank mortgage, and P1's beneficial interest was further subject to two charging orders. One charging order was made, in favour of D2, on 5th May 1988 (registered on 3rd June 1988). The other charging order was made later in favour of D1, on 26th May 1988 (but registered earlier, on 19th May 1988). Both charging orders were made absolute; and further registered on the same day, 30th June 1988 D2's charging order was the first to be registered). D1 assigned his interest to D3 on 14th October 1988, The question for decision was whether the claim of D2 took priority over the claim of D3.

HELD: (1)    The registration, on 19th May 1988, of the charging order claimed by D3 gave it priority over the earlier charging order claimed by D2, not registered until 3rd June 1988. It was the original registration of the charging orders which mattered;

    (2)    If that was wrong, and it was the subsequent registrations which mattered, the order of priorities would have been reversed; for even though the subsequent registrations were made on the same day, D2's registration was first in time.

1988, M.P. No. 1722

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. These proceedings concern a property known as Flat B, 33rd Floor, Block 13, Wonderland Villas, Kowloon ("the property").

2. The Plaintiffs are beneficially entitled to the property in equal shares. The beneficial interest of the 1st Plaintiff is the subject of two charging orders. One is a charging order nisi made on 5th May 1988 in favour of the 2nd Defendant, The other is a charging order nisi made on 19th May 1988 in favour of the 1st Defendant, The charging order nisi made on 5th May 1988 was registered, under the relevant provisions of the Land Registration Ordinance, Cap. 128, on 3rd June 1988. The charging order nisi made on 19th May 1988 was registered earlier, on 26th May 1988, The charging order nisi made on 5th May 1988 was made absolute on 14th June 1988, The charging order nisi made on 19th May 1988 was made absolute on 16th June 1988.

3. Both charging orders absolute were registered on 30th June 1988. The first to be registered (under Memorial No. 513594) was the charging order made for the benefit of the 2nd Defendant. The second to be registered (under Memorial No. 513712) was a charging order made for the benefit of the 1st Defendant.

4. The 3rd Defendant on 6th July 1988 paid the 1st Defendant the money to secure the payment of which the 1st Defendant had obtained his charging order, and on 14th October 1988 the 1st Defendant assigned to the 3rd Defendant the benefit of the 1st Defendant's interest thereunder.

5. The property is subject to a first charge in favour of the Hong Kong and Shanghai Banking Corporation to secure some HK$1.5m.

6. All the parties are now agreed that the property should be sold for some HK$2.2m. After the bank has been paid, there will be something left over. The only question which arises for decision is whether the 2nd Defendant is entitled to the 1st Plaintiff's interest in the surplus in priority to the 3rd Defendant or vice versa. There will not be enough to satisfy them both.

7. The 2nd Defendant and the 3rd Defendant are agreed that, in general the rule is that charging orders take priority one over the other according to the priority of their respective dates of registration. They are divided over the question of the application of this rule to the facts of the present case.

8. The charging order nisi made on 5th May 1988 in favour of the 2nd Defendant was not registered until 3rd June 1988. The charging order nisi made in favour of the 1st Defendant was made on 19th May 1988, after the charging order nisi made on 5th May 1988. But it was registered first, on 26th May 1988. On this basis, the 3rd Defendant claims, as the person now entitled to the benefit of the charging order nisi which was registered first, priority over the 2nd defendant, In my judgment, the 3rd Defendant is right. The priorities do depend on the order of registration of the charging orders nisi. It is net the orders absolute which matter. The charge, which is what falls to be protected, is imposed by the charging order nisi. The charging order absolute merely perfects it.

9. I was not referred to any relevant authority upon the point during the argument and I reserved my judgment in order to consider it. My own researches have led me to Haly v. Barry (1868) LR 3 Ch, 452 and Brereton v. Edwardes (1888) 21 QBD 468 (see especially per Lord Esher MR at pp 495,496). These cases show that the order absolute, when it is made, relates back to the date of the order nisi. There is only one charging order. In my judgment, the result is that the charging order registered first takes priority over the charging order registered second.

10. So in the instant case the charging order made on 19th May 1988 and registered on 26th May 1988 takes priority over the charging order made on 5th May 1988 and registered only on 3rd June 1988.

11. Further, I accept the submission of the 3rd Defendant that, by virtue of the assignment of 14th October 1988, he stands in the shoes of the 1st Defendant in relation to what was originally the 1st Defendant's charging order.

12. If I am right so far I do not have to go on to resolve the difficulty which arises from the fact that the two charging orders absolute were both registered on the same day, 30th June 1988. I was referred to, and have found, no authority, of any assistance; but in case I am wrong, and the matter goes further, I should I think deal with the point.

13. Usually, the law takes no account of fractions of a day. But here it is clear (and accepted, having regard to their respective memorial numbers) which charging order absolute was registered first. It was the charging order absolute the benefit of which is claimed by the 2nd Defendant. In these circumstances, the general rule that fractions of a day are to be disregarded does not fall to be applied, That rule never does fall to be applied where the object of a statute (here, the provisions of the Land Registration Ordinance relating to priority of registered instruments) would as a result be defeated. There are here conflicting claims, the resolution of which depends on the question which of two events was first in order of time. In such a case the rule must in my judgment be (I will use English in preference to Latin): He who is earlier in time, is stronger in law.

14. For these reasons I would have concluded that the claim of the 2nd Defendant took priority over the claim of the 3rd Defendant, if I had decided it was the charging orders absolute which mattered.

15. The court does have jurisdiction, under Section 20B(4) of the Supreme Court Ordinance, Cap.4, to make an order discharging or varying the 3rd Defendant's charging order.  If the 2nd Defendant makes an application (supported, of course, by evidence to justify that application) to discharge or vary the 3rd Defendant's charging order, that application will have to be dealt with on its merits. But, for myself, I can nee no good reason, on the material before me, for discharging or varying the 3rd Defendant's charging order.

16. I will hear counsel on the matter of the form of the order to be made as a result of this judgment, and on any question of costs.