XCHRX WONG LAI SUK CHUN v. WONG CHIU MING

DIVORCE JURISDICTION
ACTION NO.3570/1992

HEADNOTE

Application for transfer of matrimonial property by Petitioner under s.6 of Matrimonial Proceedings & Property Ordinance - property purchased under the Home Ownership Scheme in Respondent's name - Respondent's share and interest subject to Charging Orders - Petitioner wife who had been in occupation throughout held a beneficial interest under a resulting or constructive trust arising from her payment of mortgage instalments - Constructive / imputed notice to Chargees of Charging Orders of Petitioner's occupation arising from Home Ownership Scheme conditions - Priority of interests.

IN THE DISTRICT COURT OF HONG KONG

DIVORCE JURISDICTION

ACTION NO.3570 OF 1992

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O R D E R

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1. This is an application by the Petitioner wife against the Respondent husband for an order that:

"the matrimonial home situated at Flat 5, 33rd floor, Block E, Yuen Tin Court, Shatin, New Territories do be transferred to the Petitioner free from charging orders absolute numbered 350412, 361167, 437561, and 511772 and incumbrances registered against the property; "

2. The application is pursuant to s.6 (a) of the Matrimonial Proceedings & Property Ordinance which state:

"6. On granting a decree of divorce, ... , or at any time thereafter...,the court may, subject to provisions in s.10 and 25(1), make any one or more of the following orders, that is to say -

(a) an order that a party to the marriage shall transfer to the other party. to any child of the family ... such property as may be so specified, being property to which the first-mentioned party is entitled. either in possession or reversion; "

3. In the Petition for divorce, based on two year separation with consent. the Petitioner had in her Prayer sought orders for ancillary relief including "transfer of property order as shall be deemed just."

4. At the hearing of Decree Nisi at which the Respondent was absent, the matter of ancillary relief was adjourned to Chambers with directions for the filing of affidavits by both parties.

The Facts

5. The facts of the case show that the parties were married on the 27th August 1975. There is one child of the family and she is Wong Sze Wai who was born before the marriage on the 12th July 1975. During the course of the marriage, the parties cohabited at the address of the property the subject of this application, (hereinafter referred to as "the said property"), which is a flat purchased under the Home Ownership Scheme. As a result of differences between the parties, the Respondent left the said property which was the matrimonial home in or about July 1989 and he now lives in Japan.

6. The said property was purchased in October 1982 by the Respondent through the Hong Kong Housing Authority for $221,700. The deposit of $22,200 was paid by the Respondent who obtained a loan from the Far East Bank Limited for $199,500 to complete the purchase. Thereafter the Respondent paid the monthly mortgage instalments until he left in 1989. The Petitioner did not make any monetary contribution directly towards the purchase of the matrimonial home beause she was not working and spent her time caring for the daughter and looking after the matrimonial home. The mortgage loan was paid up in April 1993.

7. After the Respondent ceased cohabitation with the Petitioner, the Petitioner commenced payment of the monthly mortgage instalments. She provides documentary evidence of her payments attached to her affirmation filed on the 4th March 1993 marked "WLSC-1".

8. During the course of the marriage the Respondent ran into financial difficulties with his various business ventures and as a result a number of charging orders were registered against the said property. These are the Charging Orders referred to in the Application. The Petition fears that the judgment creditors who registered the charging orders against the property would take action to sell the property after the ten years restriction period imposed on sale of the property has elapsed. The Petitioner was of the view the said property was now worth about $2,000,000 if sold in the open market.

9. This application was served on the Chargees of the Charging orders referred to in the Application and the Chargees of Charging Orders Absolute registered under Memorial No.s 350412 and 361167 respectively instructed Solicitors to intervene on their clients' behalf at the hearing of this application on the 28th May 1993. Solicitors representing the Chargees of Charging Orders Absolute registered under Memorial No.s 437561 and 511772 respectively stated that their respective clients did not wish to make representations to this Court in this application.

Basis for Transfer

10. The basis for the application for transfer of the Respondent's share and interest in the said property to the Petitioner were:

(1) The Petitioner had contributed to mortgage repayments since July 1989 having paid $140,000 of the mortgage repayments. It is not specifically stated whether this sum included both principle and interest, it would appear to, judging from the evidence of payments adduced.

(2) The parties had been married for 18 years.

(3) Since the Respondent left the said property he had not maintained the Petitioner who had to support herself and the child of the family from her earnings in the business which she entered into. The Respondent had sporadically sent money equivalent to $4,000 at a time for the child of the family but not for the Petitioner.

(4) It seemed that the Respondent had no intention of supporting the Petitioner except by transfer of his interest and share in the said property to her.

(5) In the Acknowledgement of Service returned to this Court signed by the Respondent, the Respondent stated in answer to questions 8(g) and 9(h) that he wanted the said property to be transferred to the Petitioner.

11. On the basis of the above factors I find that the Petitioner is entitled to the transfer of the Respondent's share and interest in the said property to her.

Priority of Interests

12. The only remaining issue which I have to decide is whether the transfer could be free from the Charging Orders Absolute registered against the said property on the basis of the arguments submitted on behalf of the Petitioner by her Counsel. These arguments are in paragraph 12 of her written skeleton argument which she submitted to the Court.

Submission of Petitioners' Counsel

13. Miss Remedios the Petitioner's Counsel states that the Petitioner has been in residence in the said property which was the matrimonial home since 20th October 1982, before any of the Charging Orders had been registered. It was submitted that on the basis of the House of Lord's decision in Williams & Glyn's Bank Limited v. Boland, [1980] 2 All ER 408, the Petitioner in fact was "in actual occupation" and this conferred on her protection of an overriding interest, on her rights. as defined in s.70(1) (g) of the 1925 Land Registration Act of England. It was held in Boland's case that non registration of the overriding interest cannot have the effect of cutting down the general application of s70(1) of the Land Registration Act of 1925. In Boland's case it was held that the fact that the husband Vendor/Mortgagor was also in occupation did not exclude the possibility of the wife in occupation having independant rights of her own in the matrimonial home so that the occupation in question need not be apparently inconsistent with the title of the Vendor/Mortgagor.

14. The principle in Boland's case was confirmed in the Hong Kong case of Wong Chim Ying v. Cheng Kam Wing Civil Appeal No.75 of 1990. The principle in the Wong Chim Ying case is that notice of occupation is notice of the occupier's rights. The purchaser of property for value takes subject to the rights of every person in actual occupation of the land save where enquiry is made of such person and the rights are not disclosed. A spouse of the Vendor/Mortgagor in occupation can be "in actual occupation".

15. Boland's case would have been decided in the same way had the land been unregistered. Support for that was found in the cases of Northern Bank Ltd. v. Henry (1981) I.R. 1 and Kingsnorth Finance Limited v. Tizard [1986] WLR 783. In the Hong Kong case of Wong Chim Ying, Clough J.A. applying the law of unregistered land in England held on the basis that the Plaintiff by her agent had discovered from the wife that the husband was in occupation with the wife and their two sons but made no inquiry of the husband, that the Plaintiff was fixed with constructive notice of the husband's rights in the flat.

16. The case of Whitworth v. Gaugain (1846) 3 HARE 416 held that a judgment creditor has no priority by force of his judgment over persons who have prior equitable interests. In this case the Petitioner wife had prior equitable interest by virtue of her overriding interest.

17. The case of Scott v. Lord Hastings (1858) 4K & J 633 was referred to as the basis for the argument that the Petitioner stood in priority to the judgment creditors who registered the Charging Orders against the said property as the case held that the judgment creditor gets only what the judgment debtor can himself dispose of and further in that case the judgment debtor had ceased to be the sole owner of the trust fund. It is argued that parallels can be found with this present case.

18. The said property is a property purchased under the Home Ownership Scheme. It is a fact that a single person wishing to occupy a flat on his/her own is not entitled to purchase a flat under the Home Ownership scheme which requires the purchaser to live in it with his wife and or family members. Therefore there is constructive notice to the Chargees that other occupants are in the said property.

Submission of Interveners' Solicitors

19. Mr. Yuen representing the Chargee registered under memorial no. 350412 i.e. the Plaintiff in D.C. Action No. 22439/85 submitted in reply that under s.6 of the Matrimonial Proceedings & Property Ordinance the Court can make an order for transfer of property to which the Respondent husband is entitled at the date of the order. The Husband's entitlement is a beneficial interest which is subject to the Petitioner's interest and to the Charging Orders. S. 50 of the District Court Ordinance relates to Charging Orders. A Charging Order has the effect of an equitable charge created by a debtor written under his hand. An equitable interest ranks in priority from date of creation. The Petitioner's equitable interest in the said property was created on the date when she commenced to pay mortgage repayments. Prior to then she did not have an equitable interest but had a right to stay in the matrimonial home. Her equitable interest was created in July 1989, after the Charging Orders respectively registered under Memorial No.s 350412. 361167 and 437561 all registered prior to July 1989. The Petitioners contribution to the family through caring for the home and the daughter cannot give rise to a beneficial interest in property. He therefore submitted that the Court should not make a transfer of the said property to the Petitioner free from the first three Charging orders which take priority over the Petitioner's equitable interest in the said property.

20. Miss Lai representing the Chargee registered under memorial no. 437561 i.e. the Plaintiff in H.C.A. 2388/88 said that she concurred with the submission of Mr. Lai that the Petitioner's situation could be distinguished from that of the wife in the Boland case and the husband in Wong Chun Ying who had both contributed towards to the purchase of the property. The Respondent in this case paid the initial deposit for the purchase price and thereafter paid mortgage instalments until June 1989. There is no question of the need to give actual or constructive notice to anyone in respect of a Charging Order. The Chargee of a Charging Order has the position of a judgment creditor enforcing right of judgment debt. Further the procedure prior to the making of a Charging Order Absolute enables interested parties to come forward to make representations at the stage of Charging Order Nisi to Show Cause.

21. In reply Miss Remedios submitted that enquiry should have been made by the Chargees, of the occupant wife of the said property.

Finding

22. In Boland's case the issue which was decided was whether the Respondent wifes in each case was a "person in actual occupation" within s70(1)(g) of the Land Registration Act 1925 if so, her equitable interest as a tenant in common of property would be protected as an overriding interest by virtue of her occupation and therefore her interest would not merely be a "minor interest" within s. 3(xv)(a). As her interest was an overriding interest it was held that the subsequent mortgagor of the legal estate for value could not obtain possession against her. Lord Wilberforce in his judgement on page 503 stated that the "the 1st question is whether the wife is a "person in actual occupation" and if so, whether her right as a tenant in common in equity is a right protected by this provision". The second question, he stated, "is whether the wife's equitable interest under the trust for sale, if she is in occupation of the land, is capable of being an overriding interest, or whether, as is generally the rule as regards equitable interests it can only take effect as a "minor interest." In the latter event a registered transferee, including a legal mortgagee, would take free from it.

23. The list of overriding interests contained in section 70 includes such matters as easements, liabilities having their origin in tenure, land tax and title rentcharge. seignorial and manorial rights, leases for terms not exceeding 21 years, all are interests in land and finally, the relevant paragraph being section 70(1)(g). s.70(1)(g) of the Act state:

"The rights of every person in actual occupation of the land... save where enquiry is made of such person and the rights are not disclosed:..."

24. There have to be existing rights which could be protected by actual occupation. It is clear that "the rights" under section 70(1)(g) refer to interests in land.

25. Clearly the Wong Chim Ying case both in the first instance and in the Court of Appeal addressed the situation of the husband with a beneficial interest in property whose occupation of the said property was capable of constituting constructive notice of his interest to the purchaser of the legal estate for value. It is clear that in both instances the Court did not address "the nebulous rights formerly claimed for the deserted spouse in the matrimonial home", although both in the first instance and in the Court of Appeal arguments were advanced on behalf of the Plaintiff and Appellant based on National Provincial Bank Ltd. v. Ainsworth [1965] AC 1175 (H.L.) but Clough J.A. stated at p.274 of his judgment reported in 2 HKLR [1991] that "we could derive no assistance from that case which was concerned with the fatally nebulous rights formerly claimed for the deserted spouse in the matrimonial home and not a claim, by a spouse, as in the present case, to a recognized beneficial interest in land based on resulting trust." In the case of National Provincial Bank Ltd. v. Ainsworth it was held that a wife's right of occupation in the matrimonial home is generally regarded as a personal right and would not bind third parties. The Wong Chim Ying case as was the Boland case were concerned with questions of resulting trust and constructive trust. In this case before me the Petitioner wife's interest in the said property derived from a resulting or constructive trust which arose from the time she started payment of mortgage instalments in July 1989. Both Boland's case and the Wong Chim Yung case dealt with the right of an occupier of property beneficially entitled under a constructive trust or resulting trust as against a purchaser for value of the legal estate or mortgagee of the legal estate. The Petitioner is seeking a transfer of the Respondent's interest and share in the said property to herself free from the Charging Orders registered against the said property on the basis of her rights as against the Chargees of Charging orders. Charging Orders have the effect of equitable charges written under the hand of the debtor. The doctrine of notice applies. An equitable interest ranks in priority from date of creation with notice. Priority of notice dictates priority of rights. Notice includes constructive notice.

26. It is clear that the Petitioner's equitable interest as a tenant in common in the the said property having been created after the Charging Orders registered under Memorials 350412, 361167, and 433268, ranks after them in priority. The question of notice constructive or otherwise is not relevant as against these equitable interests created before the Petitioner's own equitable interest as a tenant in common of the said property. However as against the Charging Order registered under Memorial No. 511772 priority of notice is relevant.

27. The property, having been purchased under the Home Ownership Scheme, it cannot but be known by Solicitors of Chargees of the Charging Orders that either the purchaser's spouse or close family member would occupy the said property together with the purchaser. The reason is because a condition is imposed by the Housing Authority on all purchasers under the Home Ownership Scheme related to occupation of such properties. A purchaser have to reside therein with either the purchaser's nuclear family or with at least one other member of his/her immediate family. I can take judicial notice of the fact that restrictions against disposal imposed by the Hong Kong Housing Authority common to such properties are registered in the register of the property in the Land Office, Chargees therefore would have notice of the following facts through their solicitors:-

(1) From the land register - that the said property is a property purchased under the Home Ownership Scheme.

(2) There would be other occupants in the property consisting of either a spouse or other family member. Solicitors of Chargees cannot but be aware of this condition through conveyancing connected with Home Ownership Schemes.

(3) Unless enquiries were made of the Petitioner by the Chargee registered under Memorial No. 511772, as to her rights in the said property and her rights were not disclosed by her the Chargee takes subject to to the Petitioner's interest in the said property.

28. I find that the value of the Petitioner's beneficial interest in the said property can be calculated by the following formula:-

"$140,000 divided by ($22,200 + mortgage repayments paid by Respondent ) X value of the said property."

29. It is clear that the Charging Orders could only be secured against the Respondent's beneficial interest in the said property, the legal estate having vested in the Morgagee of the legal Mortgage subsisting at the time. I have sought to put a value on the Petitioner's beneficial interest on the property based on her contribution to mortgage payments in order to define the Respondent's beneficial interest, to be transferred to her.

30. I therefore order that the Respondent transfer his share and interest in the said property to the Petitioner. The "property to which the first-mentioned party (Respondent) is entitled" is subject to the four Charging Orders. I therefore order its transfer to the Petitioner subject to these Charging Orders. However by virtue of the principle in Boland's case and Wong Chim Ying the Chargee registered under Memorial No. 511772 takes subject to the Petitioner's rights and would not be able to enforce this Charging Order by sale nor obtain possession of the property against the Petitioner for the reasons stated above, unless he were able to establish his lack of notice constructive or otherwise of the Petitioner's rights in the said property at the time of registration of the Charge.