SHIH CHING YANG v. TSOI ON PONG AND OTHERS

HCMP 1551/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1551 OF 2010

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Between

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J U D G M E N T

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Introduction

1.  This is the hearing of the Plaintiff’s originating summons dated 17 August 2010 (“Plaintiff’s Originating Summons”) and the inter-partes summonses of the 5^th Defendant (“DSB”), 4^th Defendant (“HSB”) and 3^rd Defendant (“Full Master”) filed respectively on 22 October 2010, 1 November 2010 and 2 November 2010, seeking payment out of funds paid into Court by the 2^nd Defendant (“BOC”) and setting aside of the charging orders absolute made by the District Court against a property at Lau Li Street, Hong Kong (“Property”).  Except for the Plaintiff, 1^st Defendant who was the vendor of the Property (“Vendor”) and Full Master, the other parties are banking institutions.

Background

2.  The facts of this case are well documented and not in dispute.  The Vendor was the then owner of the Property which had been mortgaged to BOC.  On 14 November 2007, the Plaintiff entered into a provisional sale and purchase agreement in respect of the Property with the Vendor at a price of $2,000,000 (“1^st Agreement”) and paid a deposit of $800,000.  By three supplemental agreements, completion of the sale and purchase was deferred to 14 November 2008 with the Plaintiff paying a further deposit  of $600,000.  The 1^st Agreement and three supplemental agreements were duly registered with the Land Registry.

3.  However, on 11 September 2008, the Vendor and the Plaintiff executed a cancellation agreement (“Cancellation Agreement”) in escrow.  On the following day, the Vendor entered into a sale and purchase agreement to sell the Property to Full Master for $3,200,000 (“2^nd Agreement”).  Full Master paid a deposit of $890,000.  That 2^nd Agreement was also duly registered with the Land Registry within one month.  The scheduled completion date was 11 October 2008.  Soon after the signing of the 2^nd Agreement, the Vendor dropped out of the picture.  He defaulted in the 1^st and 2^nd Agreements with the Plaintiff and Full Master, the Cancellation Agreement with the Plaintiff and mortgage payments to BOC.

4.  On 26 February 2009, HSB obtained a charging order nisi from the District Court against the Property for a debt of $79,000.  The order nisi was duly registered.  It was made absolute on 18 March 2009.  The charging order absolute was also duly registered on 26 March 2009.

5.  In April 2009, the Plaintiff commenced action in the District Court in DCCJ 1975 of 2009 against the Vendor, seeking (a) return of the deposit of $1,400,000; (b) interest; (c) damages; (d) a declaration of purchaser’s lien; and (e) a declaration that the 1^st Agreement between the Plaintiff and the Vendor was terminated (“DCCJ 1975/2009”). 

6.  On 20 May 2009, the Plaintiff’s solicitors and Vendor’s solicitors signed and filed a consent summons to settle DCCJ 1975/2009, seeking an order by consent from the District Court to grant the Plaintiff all the remedies sought, except for damages.  However, Master Lo raised requisitions regarding the declaration because under Order 15 of the Rules of the District Court a declaration will not be granted when giving judgment by consent and regarding the damages claimed which exceeded the jurisdiction of the District Court.

7.  On 9 July 2009, DSB obtained two charging orders nisi against the Property in the amount of $907,757.11 and $246,247.39.  The charging orders nisi were made absolute on 4 August 2009 and duly registered on  11 August 2009.

8.  On 21 August 2009, DCCJ 1975/2009 was transferred to the High Court and became HCA 1813 of 2009 (“HCA 1813/2009”).

9.  In December 2009, BOC took possession of the Property as mortgagee and sold it to an unrelated party for $3,820,000.  There was a surplus of $2,784,979.26 (“the surplus”) after repayment of the debt and expenses due to BOC.

10.  During January and February 2010, the Plaintiff’s solicitors and BOC’s solicitors negotiated about repaying the Plaintiff’s deposit of $1,400,000 from the surplus.  In that connection, the Plaintiff’s solicitors and the Vendor’s solicitors caused a consent order under HCA 1813/2009 forjudgment to be entered in favour of the Plaintiff against the Vendor for HK$1,400,000 with interests and costs (“HC Consent Order”).

11.  Despite having been provided with a copy of the HC Consent Order, BOC’s solicitors paid the surplus after deducting their costs into court in June 2010, asserting that there were two other judgment creditors against the Vendor who had registered charging orders against the Property during 2009.  The net amount paid into court was $2,728,063.48 (“Payment in Court”).  The Plaintiff therefore took out the Plaintiff’s Originating Summons against the 1^st to 5^th Defendants, while the 3^rd to 5^th Defendants took out their inter partes summonses, all seeking payment out from the Payment in Court to satisfy their respective debts.

12.  The following is a chronology of the significant events:-

Date	Event
28/06/2007	the Vendor purchased the Property for $1,900,000 and mortgaged it to BOC
27/07/2007	the mortgage deed was registered
14/11/2007	the Plaintiff entered into the 1st Agreement with the Vendor for the sale and purchase of the Property for $2,000,000 and paid $800,000 deposit
27/11/2007	the 1st Agreement was registered
17/06/2008	the Plaintiff entered into the 3rd supplemental agreement with the Vendor postponing the completion date to 14/11/2008 and paid a further deposit of $600,000
15/07/2008	the 3rd supplemental agreement was registered
11/09/2008	the Plaintiff and the Vendor entered into the Cancellation Agreement in escrow
12/09/2008	Full Master entered into an agreement with the Vendor for sale and purchase of the Property for $3,200,000 and paid $890,000 deposit
10/10/2008	the 2nd Agreement was registered
26/02/2009	HSB obtained a charging order nisi against the Property for $79,000
03/03/2009	HSB’s charging order nisi was registered
18/03/2009	HSB’s charging order nisi was made absolute
26/03/2009	HSB’s charging order absolute was registered
15/04/2009	the Plaintiff commenced action in DCCJ 1975/2009 against the Vendor
20/05/2009	the Plaintiff and the Vendor filed consent summons with a declaration for lien over the Property, damages in the amount of $1,400,000 and interest
22/05/2009	Master Lo’s requisition about declaration of rights and jurisdiction
10/06/2009	Master Lo ordered DCCJ 1975/2009 to be transferred to the High Court
09/07/2009	DSB obtained two charging orders nisi against the Property for $907,757.11 and $246,247.39 with interest
13/07/2009	DSB’s charging orders nisi were registered
04/08/2009	DSB’s charging orders nisi were made absolute
11/08/2009	DSB’s charging orders absolute were registered
21/08/2009	DCCJ 1975/2009 was transferred to HCA 1813/2009
21/12/2009	BOC sold the Property as mortgagee for $3,820,000
26/01/2010	the Plaintiff wrote to BOC in respect of its deposit etc
28/01/2010	BOC’s sale of the Property was completed with a surplus of $2,784,979.26
01/02/2010	the Plaintiff wrote to BOC about tracing
08/02/2010	BOC wrote to the Plaintiff again asking for judgment in respect of the deposits claimed
10/03/2010	BOC wrote to the Plaintiff asking for judgment in respect of the deposits claimed BOC wrote to Full Master, HSB and DSB advising them of the surplus
12/03/2010	the Plaintiff obtained a consent order giving judgment against the Vendor for $1,400,000 with interest and costs
02/06/2010	BOC paid $2,728,063.48 into Court

The parties’ case and issue

13.  The relevant facts are not in dispute.  The Plaintiff and Full Master relied on their purchaser’s lien over the Property, while HSB and DSB relied on their interests under their respective charging orders. 

14.  It is common ground that prior to the making of the HC Consent Order the Plaintiff had an equitable lien over the Property by reason of the two deposits he paid totalling $1,400,000.  The Plaintiff’s case is that his lien has priority over the lien of Full Master and the charging orders of HSB and DSB and hence the Plaintiff is entitled to be paid out of the Payment in Court, leaving the other Defendants to compete for the balance.  The Defendants argued that the Plaintiff had lost its lien, if not upon entering into the Cancellation Agreement, upon the making of the HC Consent Order.  Further, the Plaintiff’s lien had merged with the HC Consent Order and was extinguished. 

15.  Full Master’s case is that as in the case of the Plaintiff, it had a purchaser’s lien over the Property by reason of the deposit of $890,000 it paid.  HSB and DSB relied on their charging orders.  The Plaintiff sought to strike out the Defendants’ summonses by challenging the validity of their lien and charging orders.  Essentially, the Plaintiff argued that by reason of his equitable lien, there was no interest in the Property left for the Defendants’ interests to be created.  However, in the course of the hearing, the Plaintiff abandoned the striking out application but, nevertheless, maintained his challenge over HSB’s and DSB’s interests in the Property.  Of course, to obtain payment out, the Plaintiff only need to prove his equitable lien which was first in time and accordingly had priority over the Defendants’ claims even assuming those claims were valid.  If so, the Plaintiff would be paid his deposits out of the Payment in Court.  Then, whether the Defendants had any interest in the Property or in the balance of Payment in Court after the Plaintiff was paid would be of no concern to the Plaintiff. Among the Defendants, there was no disagreement that the Full Master’s claim ranked first, followed by HSB’s and then DSB’s.  However, if any of the Defendants are to succeed, they have to prove the validity of their interests.

16.  Thus, the issues are:

(1)  whether the Plaintiff and Full Master have acquired a lien over the Property;

(2)  whether the Cancellation Agreement and/or the HC Consent Order had the effect of extinguishing the Plaintiff’s lien; and

(3)  whether in view of the finding on the first and second issues there was any interest in the Property left to be charged by the 3^rd to 5^th Defendants.  

The burden of proving a lien lies on the party who asserts the lien.  Once that is proved, the burden lies on the parties who deny the existence of the lien to prove that the lien has been excluded or extinguished. 

The nature of a lien

17.  Before examining the parties’ argument about the effect of the Cancellation Agreement and HC Consent Order, I shall say a few words about the nature of a vendor’s or purchaser’s lien, which I think is not in doubt. 

18.  As soon as a binding sale and purchase agreement for property is entered into, the vendor has a lien on the property for the purchase price and a right to remain in possession of the property until full payment is made.  The lien does not arise on completion but on exchange of contracts.  It is discharged on completion to the extent of the purchase price paid: In re Birmingham, decd.; Savage v Stannard [1959] Ch 523 cited with approval in London and Cheshire Insurance Co Ltd v Laplagrene Property Co Ltd [1971] Ch 499 at 514.  So long as the purchase-money is not paid, the lien is not extinguished even if the vendor executes an outright conveyance of the legal estate in favour of the purchaser and delivers the title deeds to him or that the conveyance contains an express receipt for the purchase-money. 

19.  Similarly, as soon as the purchaser pays any part of the purchase price pursuant to a binding sale and purchase agreement for property, the purchaser has a lien on the property to the extent of the purchase-money he paid, even in the absence of a conveyance to him of  the property: Rose v Watson (1864) 10 HL Cas 672, Whitbread & Co Limited v Watt [1902] 1 Ch 835, Li Sze Fat v Cheng Ka Leung Tommy & Anor [2000] 3 HKC 224 and Fung Kan Wai & Anor v Leung Shui Fat & Ors [1999] 4 HKC 70.  The lien does not arise on completion but on payment of the purchase-money.  It is created by the contract under which the money is paid.  It is a security on the property which is enforced when the vendor fails to complete the assignment.  In Rose v Watson, Lord Cranworth held at 683:

“There can be no doubt, I apprehend, that when a purchaser has paid his purchase-money, though he has got no conveyance, the vendor becomes a trustee for him of the legal estate, and he is, in equity, considered as the owner of the estate. When, instead of paying the whole of his purchase-money, he pays a part of it, it would seem to follow, as a necessary corollary, that, to the extent to which he has paid his purchase-money, to that extent the vendor is a trustee for him; in other words, that he acquires a lien, exactly in the same way as if upon the payment of part of the purchase-money the vendor has executed a mortgage to him of the estate to that extent.”

20.  The lien, whether purchaser’s or vendor’s, arises by operation of law from the relationship of the parties independently of the sale and purchase agreement between the parties and their subjective intention.  Where a purchaser has paid the purchase-money or part thereof, the purchaser has a lien as a security over the property which can be enforced in the event that the vendor fails to complete.  An equitable lien is a form  of equitable charge over the property which confers on the holder a proprietary right so that he is regarded as a secured creditor in respect of purchase-money paid.  It is not created by the default of the parties of their obligations under the sale and purchase agreement.  It is the default which gives rise to the necessity for enforcing the lien.

21.  Based on the above legal principles, it is beyond dispute that by reason of the payment of the two deposits of $1,400,000, the Plaintiff acquired an equitable purchaser’s lien over the Property and likewise Full Master acquired an equitable purchaser’s lien after the Plaintiff. 

Extinguishing a lien 

22.  A lien arises by operation of law.  Likewise, it may be extinguished by operation of law.  It may also be extinguished by the common intention of the parties or the intention of the holder of the lien.

23.  A lien is extinguished by operation of law, for example where, on completion, the vendor receives all that he has bargained for or the purchaser has obtained all that he has paid for: In re Birmingham, decd; Savage v Stannard, London and Cheshire Insurance Co Ltd v Laplagrene Property Co Ltd.

24.  A lien may be excluded by the common intention of the parties, for example, a lien is excluded where its retention would be inconsistent with the provisions of the sale and purchase agreement or with the true nature of the transaction as disclosed by the documents.  Thus, where a vendor took a legal charge to secure payment of the purchase price, the vendor’s lien was excluded notwithstanding that the charge later became void for want of registration: Capital Finance Co Ltd v Stokes [1969] 1 Ch 261 and Congresbury Motors Ltd v Anglo-Belge Finance Co Ltd [1971] Ch 81. In Re Parkes, ex parte Parkes (1822) 1 Gl & J 228, the vendor executed a deed by which he consented to receive his purchase-money two years after resale of the property by the bankrupt.  It was held that the deed was implied authority by the vendor to take the premises free of the lien and the vendor’s consent to rely on the personal security of the bankrupt.  The lien was accordingly discharged.

25.  A lien may also be waived or abandoned by the party in whose favour it is created.  In Williams on Vendor and Purchaser, 4^th ed (1936), vol 2 p 984, the learned authors wrote:

“The vendor may, however, waive or abandon his lien for the unpaid purchase-money, and his intention to do so may be either expressed or implied from the circumstances of the case… Where such waiver or abandonment is sought to be implied, the onus lies on those who deny the existence of the lien, which arises by the rule of equity in the absence of stipulation to the contrary; the question is one of the parties’ intention, to be determined by the documents they have executed and the circumstances of the case; and the test is, whether they have in effect agreed that the vendor shall have some other security or mode of payment in substitution for his lien.”

26.  In Barclays Bank PLC v Estates & Commercial Ltd (CA) [1997] 1 WLR 415, Millett LJ, as he then was, quoted the following passage from Snell’s Equity, 29^th ed (1990) p 465:

“Occasionally, however, the vendor will have no lien. If he receives all that he bargained for, e.g. if he sells the property in consideration of the purchaser giving him a promissory note or a bond to pay him an annuity, and the promissory note or bond is duty given, there will be no lien on the property sold, even though the note is not met at maturity or the annuity is not paid. Similarly, the lien is lost where the vendor takes a mortgage for the money, even if the mortgage later becomes void against successors in title for want of registration. Moreover, the nature of the contract may exclude the vendor’s lien, as where the existence of a lien would prevent the purchaser from selling the property, or where the intention of the parties is that the purchaser shall resell or mortgage the property and pay off the vendor out of the proceeds; …”

Thus, whether a lien is excluded or waived is all a matter of intention. 

27.  Mr Chung, counsel for HSB, and along with him, Mr Wong, counsel for the Plaintiff, quoted extensively from Lam Fung Ying v Ho Tung Sing and Another [1993] 2 HKC 436, including paragraphs 43 to 47.  In that case, Ronny Tong QC sitting as a Deputy Judge of the High Court considered the effect of reaching a settlement agreement with accord and satisfaction.  I think it instructive also to quote paragraphs 37 to 39.  The learned deputy judge said:

“37. Whether a settlement has effectively and finally disposed of the original cause of action depends on the intent and effect of the settlement. David Foskett, Q.C. in his very informative book, The Law and Practice of Compromise, 3^rd edition, said at page 106 :

‘If the promised or actual forbearance to pursue the claim is construed as being in return for the promised performance of some act by the other party, such agreement will be regarded as one involving the immediate discharge of the claim. Where, however, the promised or actual forbearance is construed as being in return for the actual performance of some act by the other party, the claim forborne will not be discharged until such performance takes place.’

38. The editors of Chitty on Contracts, 26th edn., vol. 1 at page 996 are of the similar view :

‘In the modern law, therefore, a claimant may still insist upon the performance of some act by the other party in satisfaction of his claim. In that case, there is no satisfaction until performance, and the other party remains liable on the original claim until the satisfaction is executed. More often, however, the claimant will agree to accept the other party’s promise of performance in satisfaction of his claim. The original claim is then discharged from the date of the agreement and cannot be revived. The claimant’s sole remedy, in the event that the other party fails to perform, is by action for breach of the substituted agreement, and he has no right of resort to the original claim.’

39. The dichotomy between a promised act and the performance of an act in a settlement agreement is highlighted in a number of recent authorities on the law of accord and satisfaction. In Morris v. Baron & Co. (1918) A.C. 1 (H.L.) Lord Atkinson said at page 35 :

‘There is no doubt that the general principle is that an accord without satisfaction has no legal effect, and that the original cause of action is not discharged as long as the satisfaction agreed upon remains executory. That was decided so long ago as 1611 in Peytoe’s Case (1611) 9 Rep. 77b, 79b. If, however, it can be shown that what a creditor accepts in satisfaction is merely his debtor’s promise and not the performance of that promise, the original cause of action is discharged from the date when the promise is made : Sibree v. Tripp (1846) 15 M & W 23; Hall v. Flockton (1851) 16 Q.B. 1039 (Ex. Ch.); Evans v. Porris (1847) 1 Ex. 601.’

…

43. The position in law in the case of a settlement of a cause of action is thus: if the settlement is reached in return for a promise to pay or to do an act, there is an accord and satisfaction. The effect of this is that as soon as agreement is reached, the original cause of action is discharged and the plaintiff can no longer pursue his original cause of action. Since the lis is extinguished or gone, the court will no longer have jurisdiction over the matter and there is nothing the parties can do to revive either the original cause of action or the jurisdiction of the court. The only remedy open to the plaintiff is to sue for damages in respect of breach of the settlement agreement.

…

45. On the other hand, if the settlement is reached in return for the performance of an act or conditional or dependent upon the doing of an act then, there is merely an accord executory. If and when the promised act is performed, the plaintiff is contractually bound to accept it and once accepted, there is accord and satisfaction, and the original cause of action is discharged or extinguished. But unless and until the promised act is performed, the original cause of action is merely suspended so that if the defendant does not perform his part of the bargain then, the plaintiff has a choice to either pursue the original cause of action or to sue on the settlement agreement.

…

47. Here, the agreement was that the defendants should endorse on a consent summons whereby, inter alia, judgment would be entered in favour of the plaintiff for a lesser sum.  The plaintiff never did promise the defendants that she would abandon her cause of action before judgment is signed.  If the defendants are to consent to judgment as agreed, the plaintiff’s cause of action will, of course, merge in the judgment; but until then, the cause of action remains.  There is an accord, but until the consent summons is endorsed by the defendants, filed and judgment entered, there is no satisfaction.  The accord is merely executory.  Alternatively, as in the case of Scott v. English, the accord is conditional upon the defendants consenting to judgment.”

28.  Thus, Mr Chung argued, where a settlement agreement is reached with accord and satisfaction, the original cause of action is discharged and the plaintiff can no longer pursue his original cause of action.  Where the plaintiff has a lien under his original cause of action, his lien would be lost as a result of accord and satisfaction.  His remedy lies in an action based on the settlement agreement.  However, where there is an agreement with accord executory, unless and until the promised act is performed, the original cause of action is merely suspended.  The plaintiff may at his option sue on the settlement agreement or on the original agreement and the lien.  Likewise, Mr Chung argued, a consent order of the court is a settlement agreement with like effect.

29.  Mr Wong, submitted that a settlement agreement does not necessarily have the effect of extinguishing a purchaser’s lien.  It is all a matter of intention of the parties.  I think Mr Wong is plainly right. His submission is consistent with the general proposition I mentioned in paragraph 24 above.  It is trite law as stated in Lam Fung Ying at paragraph 37 that whether a settlement has effectively and finally disposed of the original cause of action depends on the intent and effect of the settlement. 

30.  Mr Wong also quoted the following passage from Lawrence Ma’s Equity and Trusts Law in Hong Kong, 2^nd ed (2009) in which the learned author wrote at paragraph 10-25:

“A purchaser’s lien is not extinguished by entry into a settlement agreement to repay or refund the money that the purchaser has paid the vendor unless it can be implied in the agreement that the lien is extinguished.”

31.  Mr Wong also referred to Liu Chi Keung and Law Sim Yuk [2006] 4 HKLRD 385.  In that case, the defendant paid the developer a deposit for purchase of land and building yet to be constructed.  In breach of that agreement, the developer built the building materially different from the agreed plan.  The defendant accepted the developer’s breach and demanded return of her deposit.  The developer and defendant entered into a settlement agreement in which the developer promised to refund the defendant her deposit with interest when they could re-sell the building or any part of it.  The developer sold part of the building to the plaintiff but did not return the deposit.  The defendant filed and registered a writ against the building on 18 April 2000, claiming return of the deposit and a declaration that she was entitled to an equitable lien over the building.  The formal agreement of sale to the plaintiff was dated 24 March 2000 but was not registered until 6 May 2000, while the assignment was dated 18 April 2000 but was only registered on 30 May 2000.  On 5 May 2004, the defendant obtained default judgment together with the declaration against the developer.  The plaintiff sought to remove the defendant’s registration of her writ against the building.  Deputy High Court Judge Muttrie dismissed the plaintiff’s action against the defendant.  The learned judge held in paragraphs 17 to 19:

“17. The argument here is that the agreement between Madam Law and the Lees pleaded by her in [HCA No 3952 of 2000] discharged the three Chinese agreements by way of accord and satisfaction. This operated as a discharge of the lien because the Lees agreed to pay interest at the judgment rate on the deposit until its repayment; this was additional consideration.

18. I do not know what defence the Lees put up in that action. Their defence and counterclaim has not been exhibited. But assuming that there was such an agreement I do not see why it would extinguish an existing lien. On the face of what is pleaded, all that was agreed was that Madam Law would give the Lees time to repay the deposit until they sold the Building, in return for extra interest. This appears to be a separate contract for forbearance to pursue the claim, the consideration being the interest.

19.    The case of Re Parkes, ex parte Parkes (1822) 1 Gl & J 228 cited by Mr Chong does not assist.  In that case the lien was discharged by a deed by which the vendor consented to receive his purchase money two years after resale of the premises by the bankrupt.  It was held that this was impliedly an authority by the vendor to take the premises discharged of the lien, and a consent to rely on the personal security of the bankrupt.  There is nothing in the contract pleaded to indicate any implied authority to the Lees to sell the Building discharged of any lien in Madam Law’s favour to which it might be subject.”  

32.  The same argument that a settlement agreement discharged the original agreement by way of accord and satisfaction with the effect of extinguishing the lien as advanced by Mr Chung was rejected by Deputy High Court Judge Muttrie.  The learned judge construed the settlement agreement as a separate contract of forbearance to pursue the claim with interest as the consideration. 

33.  I agree with the conclusion reached by the learned judge.  A lien is an equitable interest created by operation of law so that the holder is regarded as a secured creditor in respect of the money he has paid for the purchase or due to receive from the sale of the property.  It is independent of the causes of action relating to the sale and purchase agreement from which it arises.  It should be recalled that a vendor does not lose his lien even if he executes and delivers the title deed containing an express receipt for the purchase-money which he has not actually received: in London and Cheshire Insurance Co Ltd v Laplagrene Property Co Ltd.  Thus, whether the cause of action is discharged or extinguished by a settlement agreement has no effect on the lien unless the money which created this equitable interest is paid or returned as the case may be at the same time or unless the parties intended the lien to be extinguished.  In the case of the former, the lien is extinguished by operation of law, and in the latter, by the common intention of the parties or the holder of the lien.  I do not think Mr Chung has established any principle of law that a settlement agreement must have the effect of extinguishing a lien by way of accord and satisfaction. 

34.  In summary, a lien may be extinguished by operation of law just as it has arisen, or by the common intention of the parties or by the holder of the lien.  Such intention may be expressed or implied.  The test of intention is an objective one.  The question is: what intention is to be attributed to the parties from the transaction which the parties have entered into and from the documents they have executed. In the absence of express intention, the intention to exclude a lien may only be proved by clear and manifest inference that such was the parties’ intention.  The burden lies on the parties who deny the existence of the lien.  

The Cancellation Agreement

35.  It is the Defendants’ case that the Plaintiff has lost his lien upon execution of the Cancellation Agreement or at the latest the making of the HC Consent Order.  Hence, the burden lies on the Defendants to show that such lien has been extinguished or excluded by the common intention of the Plaintiff and the Vendor as may be drawn from the circumstances of execution of the Cancellation Agreement or the making of the HC Consent Order.  As there was no express intention to exclude or waive the lien, the Defendants have to establish such intention by clear and manifest inference.

36.  Since signing the 1^st Agreement on 14 November 2007, the Plaintiff and the Vendor entered into three supplemental agreements to postpone the completion date subsequently to 14 November 2008.  Then on 11 September 2008, the Plaintiff and the Vendor entered into the Cancellation Agreement in escrow to cancel the 1^st Agreement.  On the following day, Full Master entered into the 2^nd Agreement with the Vendor for $3,200,000 and paid a deposit of $890,000.

37.  By the Cancellation Agreement, the Plaintiff agreed to cancel the 1^st Agreement and release the Vendor from all the obligations under that agreement in return for the deposit of $1,400,000 paid and a sum of $200,000 as compensation.  Mr Chung submitted that the Vendor’s promise under the Cancellation Agreement to repay the deposit of $1,400,000 and compensation amounted to accord and satisfaction and has the effect of discharging the obligations under the 1^st Agreement.

38.  Clause 4 of the Cancellation Agreement provided that pending the payment of the deposit and compensation in full to the Plaintiff, the Vendor acknowledged and confirmed that the deposits and compensation shall stand as a charge against the Vendor’s interest in the Property.  It is on the strength of this Cancellation Agreement that the Defendants argued that the Plaintiff and Vendor reached a settlement agreement with accord and satisfaction which has the effect of extinguishing the Plaintiff’s equitable lien.  

39.  Mr Leung, counsel for the 3^rd Defendant, argued forcefully that the clear purpose and effect of the Cancellation Agreement was to cancel the 1^st Agreement upon which the Plaintiff’s lien arose so that the Vendor was free to re-sell or otherwise deal with the interest of and in the Property.  In order that the Property could be sold to Full Master, it must be the intention of the Plaintiff and the Vendor that the Plaintiff’s lien should thereby extinguish.  Not only that, the parties provided by clause 4 of the Cancellation Agreement an alternative and more extensive security for the Plaintiff, in that not only the deposits paid but also the agreed compensation shall stand as a charge against the Vendor’s interest in the Property.

40.  In Capital Finance Co Ltd v Stokes [1969] 1 Ch 261 and Congresbury Motors Ltd v Anglo-Belge Finance Co Ltd [1971] Ch 81, the court held that the vendor’s lien was lost when the vendor took a legal charge to secure the payment of the purchase price.  In addition, Mr Leung also referred me to the case of Burston Finance Ltd v Speirway Ltd [1974] 1 WLR 1648, in which Walton J held at 1652 to 1653 that an equitable lien ceased to be operative upon the grant of an alternative security.

41.  The Plaintiff had no answer to Mr Leung’s powerful submission except to argue that the Cancellation Agreement was null and void for want of registration or for want of payment.  There is no authority in support of such a proposition which, in my view, is bound to fail.  As pointed out by Mr Leung, it is trite law that registration is only relevant to the issue of priority but does not affect validity: Financial and Investment Services for Asia Ltd v Baik Wha International Trading Co Ltd [1985] HKLR 103 per Hunter J at 113H-I.  The Plaintiff’s argument that the Cancellation Agreement was void for want of payment to the Plaintiff is also doomed to fail as it is inconsistent with the clear terms of the Cancellation Agreement.

42.  In my view, the Cancellation Agreement as a whole and clause 4 in particular evinced a very strong intention on the part of the Plaintiff and the Vendor that the Plaintiff’s lien shall be extinguished and replaced by a legal charge over the Property not only in respect of the amount covered by the lien but also in respect of the compensation to be paid to the Plaintiff.  I am satisfied on the facts and on the law that the Plaintiff’s lien was extinguished upon execution of the Cancellation Agreement.

The HC Consent Order

43.  It is trite law that an order by consent made by the court is an agreement of the parties to the order.  The Defendants argued with even greater rigor that the Plaintiff’s lien, if not extinguished by the Cancellation Agreement was surely extinguished by the HC Consent Order.  Counsel similarly argued as they did in respect of the Cancellation Agreement that the HC Consent Order was a settlement agreement with accord and satisfaction and that the Plaintiff’s original cause of action has merged with the HC Consent Order.  Mr Chung submitted that the HC Consent Order was an immediate settlement and not a settlement in return for the performance of an act or was conditional or dependent upon the doing of an act.  He also sought to distinguish Lam Fung Ying from the present case on the basis that the defendants in that case did not sign the consent summons whereas in the present case the Plaintiff’s solicitors signed the consent summons and the terms of the consent summons were made an order of the court.

44.  As I have repeatedly emphasised, whether a settlement agreement has the effect of extinguishing a lien depends on the common intention of the parties.  In the absence of an express intention, the court has to infer their intention from what the parties did and the nature of the transaction they entered into.  The burden of proving an intention to exclude or to extinguish a lien rests on the parties denying the lien and they have to prove such intention by clear and manifest inference.

45.  I think it is appropriate to analyse the Plaintiff’s and the Vendor’s intention from what they did since their negotiation for a consent order from the District Court in May 2009.  The Plaintiff issued a writ in DCCJ 1975/2009 on 15 April 2009.  The parties signed the consent summons which was filed with the District Court on 20 May 2009.  They sought an order by consent in the following terms:

(1)   a declaration that the 1^st Agreement and the three supplemental agreements have been terminated;

(2)   judgment be entered in favour of the Plaintiff against the Vendor for the sum of $1,400,000 together with interest and costs;

(3)   a declaration that the Plaintiff is entitled to a purchaser’s lien on the Property for the sum of $1,400,000 with interest; and

(4)   the Vendor to pay the Plaintiff’s costs of the application.

Though previously in September 2008 under the Cancellation Agreement the Plaintiff gave up his lien in exchange for a charge over the Property,  Mr Wong argued that item (3) was clear evidence that the intention of the parties was that the Plaintiff shall maintain his lien over the Property.

46.  The application was met with a requisition from Master Lo of the District Court that a declaration may not be granted when giving judgment by consent and that the claim was outside the jurisdiction of the District Court.  The parties then sought and was granted an order by consent to have the action transferred to the Court of First Instance of the High Court on 10 June 2009.  There was no follow up between the parties for the seven months that followed.  On 9 July 2009, DSB obtained the two charging orders nisi. A month later, the two charging orders nisi were also made absolute. Then, BOC commenced mortgagee action against the Vendor.  The Property was sold by BOC on 21 December 2009. 

47.  Since January 2010, the Plaintiff’s solicitors and BOC’s solicitors negotiated about releasing part of the surplus from sale of the Property to the Plaintiff.  The Plaintiff’s solicitors wrote to BOC’s solicitors about tracing.  BOC’s solicitors wrote back on 8 February 2010:

“Meanwhile, please let us have a copy of the Judgment of the said action for our reference.”

On 10 March 2010, BOC’s solicitors wrote again:

“Meanwhile, we understand from you that your client has not obtained judgment against the Mortgagor in the captioned action. In the absence of court order and/or judgment, we cannot decide whether your client is entitled to the surplus and if so, the amount thereof.”

48.  On 12 March 2010, the Plaintiff and the Vendor obtained the HC Consent Order, which was in the following term:

“UPON AGREEMENT AND ACKNOWLEDGEMENT by the Plaintiff and the [Vendor] that the provisions referred to herein are accepted in full and final settlement of all claims that the Plaintiff and the [Vendor] may have against each other for all the matter as pleaded herein or otherwise; and

UPON the Plaintiff and the [Vendor] agreeing to the terms herein, BY CONSENT IT IS ORDERED that :-

(1) Judgment be entered in favour of the Plaintiff against the [Vendor] for the sum of HK$1,400,000 together with interest thereon at the rate of 8.00% per annum from 15 April 2009 to the date hereof and thereafter at the judgment rate until payment; and

(2) Costs of this Action be to the Plaintiff to be taxed on High Court Scale if not agreed.”

49.  The HC Consent Order was a settlement agreement between the Plaintiff and Vendor.  Counsel for the Defendants emphasised strongly that the HC Consent Order expressly stated that the Plaintiff and Vendor accepted the terms of that order in full and final settlement of all claims they may have against one another.  Thus, it must be the parties’ intention that the Plaintiff’s purchaser’s lien was to be excluded.

50.  Mr Wong replied that it was for the sole reason of satisfying BOC’s solicitors’ requisition for a judgment that the Plaintiff’s solicitors hastily caused to be obtained a consent order for a monetary judgment without the declaration of lien.  He also referred to the consent summons taken out in the District Court applying for judgment with a declaration of lien.  He further explained that the declaration was refused by Master Lo under Order 15 of the Rules of the District Court because it was not possible to obtain a declaratory judgment by consent.

51.  In fact, Master Lo did not refuse to make the declaration. He only raised requisition by referring to Order 15 of the Rules of the District Court and Hong Kong Civil Procedure 2008 paragraph 15/16/2.  The more fundamental problem with the application was that the monetary claim was outside the jurisdiction of the District Court.  Then by consent DCCJ 1975/2009 was transferred to the High Court.

52.  It is also incorrect to argue as Mr Chung did that the Court has no jurisdiction to make a declaratory judgment by consent under Order 15.  Indeed, the learned authors in Hong Kong Civil Procedure 2011 wrote in paragraph 15/16/2:

“The power to make binding declaration of right is a discretionary power. … If relief is to be granted without trial or evidence, the right course for the court is not to make a declaration but to state on what footing the relief is to be granted (per Buckley and Scarman LJJ in Wallersteiner v Moir (No. 1) [1974] 3 All ER 217.) A declaration can only be made after proper argument and cannot be made merely on admission by the parties whether in pleadings or otherwise (per Megarry V-C in Metzger 3 All ER 444 at 451) nor in default of compliance with rules of court.

On the other hand, the rule of the court that a declaration will not be granted when giving judgment by consent or in default without a trial is a rule of practice and not of law and will give way to the paramount duty of the court to do the fullest justice to the plaintiff to which he is entitled; accordingly the declaration will be granted, where the undefended claim is for breach of contract, to declare that the contract is at an end by reason of the defendant’s repudiation and that the plaintiff is no longer bound by it but is free to negotiate a fresh contract with a third party (Patten v Burke Publishing Co Ltd [1991] 1 WLR 541; [1991] 2 All ER 821).  Patten v Burke Publishing Co Ltd was applied by the court in Law Shing Shou v Lam Hon Man & Others [2002] 1 HKLRD D3, when granting judgment in default of defence and giving declaratory relief in relation to challenges to succession of property rights on a person’s death.  A declaration can also be granted without trial, by way of a default judgment under O.19 r.7, if the plaintiff has a genuine need for such relief and the court could properly grant it based on the merits of the case (Lam Lai Kuen v Wong Shau Kwong, unreported, HCA No. 3424 of 2003, November 12, 2004, [2004] HKEC 1373).  See generally para. 19/7/20.”

53.  Thus, it is only a rule of practice but not a rule of law not to make a declaration when giving judgment by consent or in default without a trial.  A declaration will be granted where justice to the plaintiff so requires.  It can also be conveniently noted that in Liu Chi Keung and Law Sim Yuk quoted by counsel in argument, the defendant obtained a declaration in a default judgment against the developer.  If the Vendor admitted liability to a monetary judgment to repay the deposits received and to pay compensation, there is no reason why a declaration that the Plaintiff had a lien over the Property would not have been granted.  Probably as Mr Wong submitted, in hastily seeking a judgment to meet with BOC’s solicitors’ requisition the Plaintiff’s solicitors thought it convenient and quick to obtain a monetary judgment without bothering themselves with seeking a declaration because of the time it might take.  This is some evidence for which the inference may be drawn that the Plaintiff abandoned his lien in favour of a quick settlement for BOC.

54.  This inference is further supported by the fact that in none of the correspondence between the Plaintiff’s solicitors and BOC’s solicitors did the Plaintiff’s solicitors ever assert the purchaser’s lien.  No correspondence between the Plaintiff’s solicitors and the Vendor’s solicitors relating to the negotiation for the HC Consent Order was produced. It is not known if during the negotiation for the HC Consent Order, the Plaintiff had reserved their right to the lien despite the terms sought in the HC Consent Order.  I am entitled to assume that he had not for if he had, his solicitors would have so produced such correspondence.  The Plaintiff asserted his lien in DCCJ 1975/2009 and HCA 1813/2009.  He applied for a declaration in respect of the lien in the consent summons filed with the District Court.  He was fully aware of his right to a declaratory judgment in respect of the purchaser’s lien.  He abandoned that when applying for the HC Consent Order.  He accepted a monetary judgment as full and final settlement of all his claims. In the circumstances, he must be taken to have abandoned his lien in favour of the additional compensation of $200,000 and/or in favour of a payment by a third party, namely BOC.

55.  Furthermore, as submitted by Ms Cheung, counsel for DSB, a consent order is final and conclusive just like any other judgment: Law Shi Ying v Law Kam Tai [1994] 1 HKC 378 at 382; Halsbury’s Laws of England, Vol 12 (5^th ed, 2008) paragraph 1172.  The HC Consent Order has discharged the original action.  Thus, the Plaintiff’s claim against the Vendor has merged into the HC Consent Order, which now alone governs the right and liability between him and the Vendor.  Accordingly, the Plaintiff has lost his lien.

Validity of the charging orders

56.  Though the Plaintiff was not pursuing the application to strike out HSB’s and DSB’s charging orders and that the Defendants had no dispute about the validity of the charging orders, it remains HSB’s and DSB’s obligation to prove the validity of their respective charging orders.  The main argument advanced by the Plaintiff against the validity of the charging orders was that as soon as the 1^st Agreement was made, the Vendor became the trustee of the Plaintiff holding the legal interest in the Property for the Plaintiff.  Hence, there was no longer any interest remaining in the Property held by the Vendor which was capable of being charged.  Such a charging order was in contravention of section 20A of the High Court Ordinance which provides among other things that a charge may be imposed by a charging order only on an interest held by the debtor beneficially.  

57.  In reply, Ms Cheung submitted that the charging orders were made in between the execution of the 1^st Agreement and intended assignment at completion and that there was a line of authorities in support of the proposition that until assignment, the vendor still retains a beneficial interest in the Property that is capable of being charged.  Thus, at the time of granting of DSB’s charging orders on 4 August 2009, the Vendor still retained some residual beneficial interest in the Property capable of being charged.

58.  Ms Cheung also referred to Ho King-yim and Lau King-mo [1980] HKLR 42.  In that case, the plaintiff contracted to purchase land from its owner on 27 June 1978 and had the sale and purchase agreement registered on 30 June 1978.  On 17 July 1978, the respondent obtained a charging order nisi against the land.  On 25 August 1978, the assignment was registered.  On 30 September 1978, the charging order was made absolute.  Huggins JA held at page 44:

“It is not in dispute that an order charging the land with a judgment debt can operate against only such interest as the judgment debtor has. At the date at which the charging order was made in this case the judgment debtor (Chan Han) had already concluded a binding contract for the sale of the land to the Appellant. Chan Han therefore held the legal estate as trustee for the Appellant and the substantial beneficial interest was in the Appellant. Nevertheless Chan Han did retain a limited beneficial interest: she was

“a trustee having a personal and substantial interest in the property, a right to protect that interest, and an active right to assert that interest if anything should be done in derogation of it. The relation, therefore, of trustee and cestui que trust subsisted, but subsisted subject to the paramount right of the vendor and trustee to protect [her] own interest as vendor of the property". (Per Lord Cairns in Shaw v Foster 1872 L.R. 5 English and Irish Appeal Cases 321, 338.)

Her rights were, I think, rights which could be the subject matter of a charging order. In addition the vendor acquired a beneficial interest in the purchase money.  When payment was made, the vendor ceased to have any beneficial interest at all in the land and the full relation of trustee and cestui que trust related back to the formation of the contract: see 34 Halsbury (3rd edition) 292 (485). Such relation back inevitably destroyed the basis of any charging order on the vendor’s interest, since that order was made subsequently to the agreement of sale and purchase.  The result is that, although the charging order was not totally ineffective, it was of very limited effect as an incumbrance on the land and would cease to have even that limited effect upon completion.”

At page 46, Cons J said:

“However, although it is clear that the vendor cannot give to the chargee more than he himself has, it is equally clear that he himself has something more than a bare legal estate. The authority for this is to be found in Shaw v Foster (1872) LR 5 HL 321:

“Under these circumstances I apprehend there cannot be the slightest doubt of the relation subsisting in the eye of a Court of Equity between the vendor and the purchaser. The vendor was a trustee of the property for the purchaser; the purchaser was the real beneficial owner in the eye of a Court of Equity of the property, subject only to this observation, that the vendor, whom I have called the trustee, was not a mere dormant trustee, he was a trustee having a personal and substantial interest in the property, a right to protect that interest, and an active right to assert that interest if anything should be done in derogation of it.”

As I see it the interest of the vendor, although of a very particular character, is an interest in land and is capable of being charged.  It is another matter, however, whether the charge can be enforced against the land itself unless, of course, the sale falls through and the agreement is removed from the register.”

59.  More recently, in Tse Fook Choy, Joey Callan v Kwong On Bank Limited [1999] 3 HKC 126, Seagroatt J adopted Ho King-yim v Lau King-mo, and considered it a simple and straightforward proposition that the vendor must have a beneficial interest in the land as the interest was not assigned until completion.  His Lordship said at 130D-I:

“Did [the vendor] have a beneficial interest in those premises at the date of the charging order (i.e. 22 September 1997)? - or at the date of the registration of the charging order at 28 September 1997 (i.e. one day after actual date of registration)? The answer is straightforward. She must have had an interest beneficially because her tenancy in common was not assigned until completion day i.e. 13 October 1997. If her interest had ceased on the signing of the sale and purchase agreement, she would have had no interest to subsist until the assignment five weeks later. After the date of the sale and purchase agreement she held her interest in the premises as trustee for the purchaser but retained a beneficial interest. Shaw v. Foster [1872] LR 5 HL 321. [See Ho King Yim v. Lau King Mo [1980] HKLR (CA) 42.] The position is by implication confirmed by the decision of Mayo J (as he then was) in Ng Kam Ha v Vincent Sina Traders (HK) Ltd [1987] 2 HKC 517. In that case although judgment had been obtained before the assignment no charging order had been obtained until after the assignment. The learned judge held that with the assignment passed any interest in the land so there was none to charge.”

60.  Neither Huggins JA nor Cons J defined what residual interest the vendor had between execution of the sale and purchase agreement and assignment.  They both made no secret that it was a very particular and limited interest.  In my view, such an interest may be incapable of precise definition.  It may be as limited as a possessory interest which is necessary to protect the property from trespass or to insure the property against risks of fire and theft etc.  But it is a sufficient interest for a charge to hang on to give validity to a charge.  It may worth very little before execution of the assignment and nothing thereafter.  But if the prior interests are discharged, for example if the purchaser’s lien is repaid or if the sale falls through, the interest may become a substantial interest.

61.  I consider Ho King-yim v Lau King-mo binding on me.  I accept Ms Cheung’s submission that despite the 1^st and 2^nd Agreements, the Vendor retained sufficient interest in the Property which was capable of being charged under the subsequent charging orders.  Accordingly, the charging orders of HSB and DSB are valid.  HSB and DSB are entitled to be paid out of the Payment in Court according to the order of their priority.

Conclusion

62.  The Plaintiff had a purchaser’s lien over the Property by reason of the two deposits he had paid.  However, he lost his lien when he entered into the Cancellation Agreement to terminate the 1^st Agreement in favour of a compensation of $200,000 and in exchange for a legal charge over the Property.  If he did not lose his lien then, he certainly would have lost it when his settlement agreement with the Vendor was made the terms of the HC Consent Order.  He is only left with a personal remedy against the Vendor by way of enforcing the terms of the HC Consent Order.  Hence, the Plaintiff’s Originating Summons is dismissed with costs to the 2^nd to 5^th Defendants.

63.  BOC has served a statement of costs in respect of the Plaintiff’s Originating Summons in the amount of $37,775.  I assess BOC’s costs in the amount of $32,000 on a lump sum basis.  The costs of the 3^rd to 5^th Defendants are to be taxed if not agreed.

64.  There is no dispute that the 3^rd Defendant is entitled to a purchaser’s lien over the Property in respect of the purchase price of $890,000 he had paid.  I am satisfied that the charging orders of HSB and DSB were properly and validly made.  The Plaintiff having lost his priority, the 3^rd to 5^th Defendants are entitled to enforce their charges over the surplus and be paid from the Payment in Court in that order.

65.  The 3^rd Defendant also claimed interest at commercial rate by arguing that it is a commercial entity and had to borrow money while being kept out of the deposit paid to the Vendor.  I have no doubt that I have power to make such an award if I consider it appropriate. However, according to the affirmation of its sole director and shareholder, he paid the deposit out of cash in the company’s safe and the company had funds to pay for the purchase without having to borrow.  Hence, there is no basis for a claim at commercial rate.  I do not think it appropriate to award interest at commercial rate.  In addition, I do not think it is entitled to be paid any interest at all as it had not even started any action against the Vendor for breach of the 2^nd Agreement.  It is, therefore, only entitled to be paid its lien out of the Payment in Court without interest. 

66.  HSB’s and DSB’s charging orders are valid and they are entitled to be paid the amount charged with interest under the respective charging orders out of the Payment in Court.

67.  In respect of the summonses taken out by the 3^rd to 5^th Defendants, they are all entitled to have their costs out of the Payment in Court after paying the principal sums and interest charged.  I do not envisage there would be sufficient funds left to pay all the costs of the 3^rd to 5^th Defendants.  Accordingly, I make an order nisi that the balance after discharging the 3^rd Defendant’s lien and the 4^th and 5^th Defendants’ charging orders shall be shared equally among the 3^rd to 5^th Defendants as their costs in lieu of taxation and for that purpose there be liberty to apply.

68.  Accordingly, I make the following orders:

(1)   In respect of the Plaintiff’s Originating Summons dated 17 August 2010, the Plaintiff’s application is dismissed with costs to the 2^nd Defendant in the lump sum amount of $32,000 and with costs to the 3^rd to 5^th Defendants to be taxed, if not agreed;

(2)   In respect of the 3^rd Defendant’s summons dated 2 November 2010, the sum of $890,000 be paid out to the 3^rd Defendant from the Payment in Court;

(3)   In respect of the 4^th Defendant’s summons dated 1 November 2010, the sum of $78,078.98 together with interest and costs under the Charging Order Absolute dated 18 March 2009 and registered in the Land Registry by memorial no. 09032601590038 be paid out to the 4^th Defendant from the Payment in Court;

(4)   In respect of the 5^th Defendant’s summons dated 22 October 2010, the sum of $907,757.11 and $246,247.39 together with interest and costs under the Charging Orders Absolute dated 4 August 2009 and registered in the Land Registry by memorial no. 09081102560026 and 09081102560039 be paid out to the 5^th Defendant from the Payment in Court;

(5)   A costs order nisi that the balance, if any, from the Payment in Court after deducting the payments out pursuant to items (2), (3) and (4) above shall be shared equally among the 3^rd to 5^th Defendants as the costs of their applications under the respective summonses in lieu of taxation and there be liberty to apply.

69.  I cannot help feeling uneasy that this case is not what it purports to be.  There is a possibility that the court’s machinery of justice is being used to enforce securities in unlawful money lending transactions even to the extent of attempting to defraud banks engaging in genuine lending activities.  The following features relating to the 1^st Agreement are peculiar.  There were repeated extensions of completion date under the 1^st Agreement ending up with a final completion date of exactly one year after the execution of the 1^st Agreement.  The Plaintiff’s payment of 40% deposit upon execution of the 1^st Agreement was unusual.  It was equally unusual that he paid another 30% deposit on the final extension.  It was even more unusual that he abandoned the purchase when he only had a balance of $600,000 to pay for the purchase of the Property with an appreciation of $1,820,000.  He abandoned that purchase only for a compensation of $200,000!  He gave up all his $1,400,000 deposits and $1,800,000 appreciation in property value for nothing but a piece of paper, the Cancellation Agreement.  Then, coincidentally as well as timously, the 3^rd Defendant whose director was a friend of the 1^st Defendant entered in the scene and agreed to purchase the Property the very next day!  He opened his safe and took out $890,000 in cash to pay the 1^st Defendant on a standard sale and purchase agreement.  Then the 1^st Defendant disappeared, leaving the Plaintiff, the 3^rd Defendant and the banks with his debts.  These features are characteristic of an unlawful money lending activity.  If in fact it was, the 1^st and 2^nd Agreements were just security documents used by   the same money lender in securing his loan and interest to the extent of defeating the genuine interest of other lawful money lenders.  As usual  with such unlawful money lending activities, they were supported by an abundance of legal documentation prepared by solicitors who may not genuinely realise what they were doing or who simply turned a blind eye.

70.  That said, I have duly and always warned myself during my deliberation that there was no argument or evidence of unlawful money lending being advanced in these proceedings.  I reached my conclusion on the basis of counsel’s arguments and the parties’ affirmations and I assumed that the 1^st and 2^nd Agreements and the various extensions of completion date were just by coincidence than by design.