LEUNG LUEN KAI v. HIGASHIGI INDUSTRIAL COMPANY LTD

HCMP 872/2025

[2025] HKCFI 3357

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 872 OF 2025

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REASONS FOR DECISION

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INTRODUCTION

1.  At the hearing on 23 July 2025, after hearing the submissions from Mr Vincent Chan, counsel for the applicant (“AP”), I granted the relief sought by AP by ordering that the registration of the Loan Agreement against the Property be vacated. I also made no order as to costs.

2.  I said I would reduce the decision I made above into writing and would provide a short reasons for decision in due course for the record. This I do now.

3.  The originating summons filed by AP on 29 May 2025seeks to, inter alia, vacating the Loan Agreement registered against the Property from the Land Registry (“the OS”).

4.  In support of the OS, AP filed an affidavit together with the relevant exhibits on 29 May 2025 (“AP Aff”). An affirmation of service has also been filed(“Service Aff”).

BACKGROUND

5.  Briefly, the history leading up to the hearing can be summarized in the following paragraphs.

6.  The Property is a property purchased under the Home Ownership Scheme in 2001 and is subject to restrictions on alienation under the Housing Ordinance, Cap 283 (“HO”) and the terms, covenants and conditions under the Schedule to the HO.

7.  Since 2010, AP became the sole registered and beneficial owner of the Property.

8.  On 15 July 2010, the Loan Agreement (the vacation of registration of which is the subject matter of these proceedings) was registered in the Land Registry against the Property, which subsists till the present day.

9.  The Loan Agreement concerns a loan of HK$2,000,000 of which the respondent (“R”) was the lender, and provides, inter alia, that: -

(a)  the Property was charged to R as the security of the loan (the original Chinese: 物業（地址︰香港黃竹坑深灣道11號雅濤閣4座38樓F室）作為本借款協議項下的「擔保」，該「擔保」將押給東木實業有限公司作為借款擔保);

(b)  if repayment of the loan was not duly made, AP shall authorize R to sign and handle the procedure of assignment (original Chinese: 授權東木實業有限公司代表梁聯啟簽署及辦理「擔保」的業權轉換文件及辦理相關手續) or to sell the Property and apply the sales proceeds for repayment of the loan (original Chinese: 或轉售「擔保」套現還款給東木實業有限公司).

10.  AP divorced his ex-wife Madam Chan Yuexiang (陳悅香)(“Madam Chan”) in 2012. The case number of the matrimonial proceedings is FCMC 1243/2012.

11.  On 14 October 2016, the Companies Registrar struck off R’s name from the Companies Register pursuant to s746(2) of the Companies Ordinance (Cap 622).

12.  AP is an old, retired gentleman in his 70s who has had no source of income since 2022. Thus, he became unable to fulfil maintenance payments to Madam Chan and their daughter. They face livelihood difficulties, and therefore a sale of the Property is needed.

13.  On 7 March 2025, upon AP’s application, R’s name was restored to the Companies Register by the restoration order for the purpose of taking out the present proceedings.

DISCUSSION

Proof of Service

14.  Up to the present day, R has not entered any appearance in these proceedings nor filed any documents. Therefore, it was not anticipated that R would appear at the hearing. As it turned out, R did not. Thus, proof of service was necessary.

15.  According to the R’s Annual Return dated 27 July 2012 (the last document filed with the Companies Registry that contains information about R’s registered office), the registered office of R is Unit 9, 6^th Floor, Technology Park, 18 On Lai Street, Shatin, Hong Kong (“Registered Address”).

16.  The service was effected by leaving the relevant documents at the Registered Address. This is supported by the Service Aff: -

(a)  On 30 May 2025, a sealed copy of the OS (with acknowledgement of service in triplicate) was served;

(b)  On 30 May 2025, a copy of AP Aff was served;

(c)  On 19 June 2025, a copy of notice of appointment was served.

17.  The Registered Address is the only and latest registered address of R that can be found in public records.

18.  Further, despite the striking off and restoration (which may be relevant to whether R has actual notice of the proceedings), it is trite law that there is no need to establish if R had actual notice of the proceedings, and documents may be served on R by simply leaving it at its registered office.

19.  I am therefore satisfied that all the documents, including the OS together with AP Aff and the notice of hearing have been served properly on R’s registered address.

Jurisdiction

20.  AP makes the present application under the inherent jurisdiction of the Court.

21.  The Loan Agreement is not a lis pendens (and not registered as a lis pendens), as such, sections 19 and 20 of the Land Registration Ordinance (Cap 128) are not applicable.

22.  It cannot be disputed that this Court does have inherent jurisdiction to vacate the registration of any instrument in the Land Registry which does not affect or no longer affects land.

The Loan Agreement is not registrable

23.  In my view, the effects of the Loan Agreement were to charge the Property to R as a security for repayment of a loan, and that the non-payment of the loan would attract consequences including the assignment of the Property to R and/or the sale of the Property for repayment of the loan by the sale proceeds. In my judgment, for all intents and purposes, despite being titled as a loan agreement, it is a mortgage.

24.  Section 17B of the HO provides that: -

“(1)Where—

(a)(i)land in an estate is sold under section 17A;

...

(b)the person to whom the land is sold purports to mortgage or otherwise charge the land or to assign or otherwise alienate it; and

(c)that person acts in breach of—

(d)(i)any term or condition of the agreement for sale and purchase or any covenant in the deed of assignment relating to the land; or

(ii)in the case of such a mortgage or other charge, any term authorized under paragraph 4(a) of the Schedule as regards the mortgage or other charge,

the purported mortgage, other charge, assignment or other alienation, together with any agreement so to mortgage, charge, assign or otherwise alienate, shall be void.” (Emphasis added)

25.  §§1 & 4 of the Schedule to HO provides:

“1. Subject to paragraph 4 of this Schedule, the purchaser shall not at anv time alienate, convey, charge or part with possession or purport to alienate, convey, charge or part with possession or enter into any agreement to alienate, convey, charge or part with possession of the land sold other than to the Authority, or such person as the Authority may nominate, unless...

(b) the purchaser has first paid to the Authority the amount of the premium calculated under the following formula— ...”

(Emphasis added)

“4. Notwithstanding that the purchaser has not paid the premium mentioned in paragraph 1 of this Schedule, he may, in relation to the land—

(a) mortgage or charge the land with the prior approval of the Director and on such terms as are authorized by the Director in writing; or...[other provisions irrelevant]” (Emphasis added)

26.  Premium has never been paid and approval from the Housing Authority has never been obtained for the Loan Agreement. This has been confirmed by Housing Authority in writing. Further, none of the exceptions under §4 of the Schedule of HO applies.

27.  As such, I agree with Mr Chan that the Loan Agreement was executed in breach of section 17B and §1 of the Schedule to HO (which the Property is subjected to). As such, it is void and illegal.

28.  The Loan Agreement, being void and illegal, does not affect the Property or confer any interest in it, and therefore, is unregistrable.

29.  Even if the Loan Agreement is to be taken as an assignment of the proceeds of sale of land (relating to 轉售「擔保」套現還款給東木實業有限公司), it is still not registrable as such an assignment does not create an interest affecting land for the purpose of the Land Registration Ordinance in my view.

30.  In FCMC 1243/2012, there is in fact a decision handed down by District Judge KK Pang dated 31 March 2023 (“the Decision”) which provides, inter alia, that the charge under the Loan Agreement is invalid and both parties (ie AP and Madam Chan) could take steps to apply for the vacation of the registration of the Loan Agreement against the Property at the Land Registry.

Balance of convenience

31.  Out of abundance of caution, I also take into account whether the inherent jurisdiction for the vacation of registration involves the consideration of a balance of convenience.

32.  AP submits that the balance is heavily in favour of vacating the registration.

33.  I agree.

34.  Due to reasons aforesaid, the Decision also provides that the Property shall be immediately sold.

35.  I also agree.

36.  To date, the Loan Agreement remains an incumbrance on the Property, which would clearly cause issues in the sale and conveyance of the Property.

37.  AP (and 3^rd parties, including Madam Chan and his daughter) will suffer serious prejudice if the Loan Agreement remains registered.

38.  On the other hand, the vacation of registration causes no real prejudice to R.

39.  R had been deregistered for years. In any event, R could not have enforced the charging provision in the Loan Agreement for it being void and illegal.

40.  Overall, I understand the urgency of this matter as AP wants to remove this hurdle to get along with the selling of the Property in compliance with the Decision made by the Family Court and his obligations owed to Madam Chan and his daughter.

41.  I am therefore of the view that if this issue needs to be taken into account, the balance of convenience clearly tilts in favour of AP.

CONCLUSION

Order made by the Court

42.  After reading AP Aff (and the exhibits enclosed therein) and Mr Chan’s submissions on behalf of AP at the hearing, I was satisfied that the registration of the Loan Agreement should be removed from the Land Registry.

43.  I therefore made an order in terms of §1 of the OS and made no order as to costs in this case.

44.  I also gave directions to AP’s solicitors to draw up the Order within 3 days for my clerk’s approval in order to allow AP to proceed with removing the registration of the Loan Agreement from the Land Registry as soon as possible.

45.  I would like to thank Mr Chan for his helpful submissions.