CHAN WING MUN ANITA v. FORTUNE SPEED LTD.

1996, No. M.P.2919

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H E A D N O T E

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Vendor and purchaser summons pursuant to s. 12(1) of the Conveyancing and Property Ordinance, Cap. 219 between defendant (vendor) and plaintiff (purchaser) under a sub-sale agreement of a property - the property sold by C to defendant - prior Loan Agreement between A and B showing that A was to make funding arrangement for B in the purchase of the property in the name of C, a subsidiary company of A - the proposed registration of the Loan Agreement was cancelled - whether there is a real risk that B may lay claim as beneficial owner of the property - whether the non-registration of the Loan Agreement makes B's interest absolutely null and void against the interests of the plaintiff, who would have been a bona fide purchaser for value with notice of the contents of the Loan Agreement

Held :

(1) The Loan Agreement showed that C might have purchased the property with all the purchase money provided for and on behalf of B, whereby a resulting trust might have arisen in favour of B.

(2) C was not a party to the Loan Agreement, which was not signed by C or C's duly authorised agent. The Loan Agreement was therefore not binding upon C so as to make it a land contract or instrument in writing under ss. 3 and 5 of the Conveyancing and Property Ordinance, Cap.219.

(3) The Loan Agreement was not a conveyance or instrument in writing binding C or superseding the resulting trust in favour of B or confirming or sufficiently expressing the resulting trust in favour of B, and as such was not registrable under the Land Registration Ordinance, Cap. 128 : Citibank NA v. Lai Tai Cheung [1986] 2 HKLR 885, Fullerton & Anr v. Provincial Bank of Ireland [1903] 309 and Chu Yam On & Anr v. Li Tam Toi Hing (1954) HKLR 114, Full Court and (1956) HKLR 250, PC distinguished; Financial and Investment Services for Asia Ltd. v. Baik Wha International Trading Co. Ltd. [1985] HKLR 103 followed.

(4) The resulting trust in favour of B was not required to be contained in a document under the Conveyancing and Property Ordinance and was recognised by s. 5(2) of the Ordinance; such an interest was not required to be registered under the Land Registration Ordinance.

(5) The possible resulting trust in favour of B arose from the possible fact of the purchase money being paid for and on behalf of B, and as there was no registrable document regarding B's interest, the requisition of the plaintiff to the defendant to obtain B's confirmation of the sub-sale of the property by the defendant to the plaintiff or that B had no interest in the property was properly made but, as conceded, not satisfactorily answered.

1996, No. M.P.2919

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. This is a vendor and purchaser summons brought under section 12(1) of the Conveyancing and Property Ordinance, Cap. 219 in respect of a property known as all those 15 equal undivided 5,379th parts or shares of and in all that piece or parcel of ground situate lying and being at Hong Kong and registered in the Land Registry as the Remaining Portion of Inland Lot No.5710 and the Extension Thereto (Flat D on the 12th Floor of Block 1 of Ronsdale Garden and Car Parking Space No. 5 on the First Basement of Ronsdale Garden) ("the Property"). The plaintiff is the purchaser and the defendant the vendor.

2. By an agreement dated 14 May 1996, one Besteco Investments Limited ("Besteco") agreed to sell the Property to the defendant. By a sub-sale and purchase agreement dated 28 June 1996 ("the sub-sale agreement"), the defendant agreed to sub-sell the Property to the plaintiff. The agreements were registered with the Land Registry on respectively 31 May 1996 and 3 August 1996.

3. Clause 5(a) of the sub-sale agreement provides, inter alia, that the defendant shall give a good title to the Property in accordance with section 13 of the Conveyancing and Property Ordinance, and that the defendant shall prove its title to the Property at its expense. Clause 6 provides, inter alia, for the usual right of the purchaser, i.e., the plaintiff, to make requisition and objection in respect of the title or otherwise.

4. By a letter dated 10 August 1996, before the date fixed for completion of the sub-sale agreement, the defendant's solicitors furnished a document in Chinese dated 29 July 1995 and a letter from Messrs Ng & Lam to the plaintiff. The Chinese document is headed "Loan Agreement" ("the Loan Agreement") made between one Sinolite (Hong Kong) Ltd. ("Sinolite") and one Vincent Max Ltd. ("VML"). As the construction of the provisions of the Loan Agreement is crucial to this judgment, I set them out in full, using the above abbreviations :

Loan Agreement

Ref. No. : 950728-3

Party A : Sinolite

Party B : VML

In accordance with Clause 4 of the Cooperation Agreement signed by Party A and Party B (Ref. No. : 950728), the following terms of Loan Agreement have been mutually agreed :

1. Party B entrusts Party A to purchase the Property in the name of Party A's subsidiary, Besteco.

2. Party A provides Party B with all the purchase money of which 70% will be arranged by Party A through Bank mortgage, 30% by cash loan. (The 30% amount will be based on the Bank's valuation).

3. The cash loan will be calculated at an interest rate of 14% per annum; Party B will repay to Party A the principal and interest every 6 months, repayable in full by 4 instalments.

4. Expenses incurred in the purchase of the Property such as stamp duty, legal fees and bank charges are to be paid by Party B.

5. Party B will charge the Property as security, and will be responsible for providing Party A with the monthly instalment amount for the bank mortgage.

6. If Party B wants to redeem the mortgage, Party A will transfer Besteco together to Party B.

7. This Agreement is signed in 4 copies, each Party to keep 2 copies.

8. This Agreement is effective upon the signing by the representative of each Party.

Party A	Party B
Signed with Company Chop of Sinolite	Signed with Company Chop of VML
	29th July 1995

Enclosure :	1. Agreement for Sale and Purchase of the Property
	2. Repayment Schedule

5. According to the land register dated 19 July 1996, Besteco entered into an agreement to purchase the Property in its own name on 10 August 1995 and the assignment in its favour was made on 24 August 1995.

6. On 4 May 1996, Messrs Ng & Lam sent the Loan Agreement to the Land Office for registration, but they later withdrew the document from registration. In the land register dated 19 July 1996, the document is shown to be entered against the Property under the section "Deeds Pending Registration" as having been delivered to the Land Office on 4 May 1996. However, in the land register dated 15 October 1996 relating to the Property, the document was no where to be found. Apparently, the deletion of the earlier entry in respect of the document was caused by a letter dated 10 August 1996 from Messrs Ng & Lam seeking its return and cancellation of its registration.

7. Based on the information contained in the Loan Agreement, the plaintiff raised requisitions as to title. Despite of the plaintiff's insistence that the requisitions had not been satisfactorily answered, the defendant terminated the sub-sale agreement and forfeited the deposits paid by the plaintiff when she failed to complete on the agreed extended date for completion.

8. Mr Cheung for the plaintiff requested me to make only a decision on a single issue which is whether a requisition relating to VML's interest in the Property was properly raised. By the requisition ("the requisition"), the plaintiff in effect requested the defendant to obtain VML's confirmation that it approved the sale by Besteco to the defendant or that it had no interest in the Property. If the court were to decide that the requisition was a proper one, Mr Chow for the defendant conceded that it had not been sufficiently answered prior to completion.

9. The plaintiff's submissions were premised on the existence of a real risk that VML was the beneficial owner of the Property, based on the information disclosed in the Loan Agreement that the purchase money of the Property was paid by or on behalf of VML and not Besteco. That would give rise to a resulting trust in favour of VML by operation of law. The interest of VML in the Property was not required to be in writing or evidenced in writing under sections 3, 4 and 5 of the Conveyancing and Property Ordinance, and it was an interest expressly recognized by s. 5(2) of the Ordinance.

10. The relevant parts of the sections of the Ordinance are set out below :

3. Land contracts to be in writing

(1) Subject to section 6(2), no action shall be brought upon any contract for the sale or other disposition of land unless the agreement upon which such action is brought, or some memorandum or note thereof, is in writing and signed by the party to be charged or by some other person lawfully authorized by him for that purpose.

(2) This section applies to contracts or other dispositions whenever made and does not affect the law relating to part performance or sales by the court.

4. Legal estate to be disposed of etc. by deed

(1) A legal estate in land may be created, extinguished or disposed of only by deed.

(2) ...

5. Certain instruments to be in writing

(1) Subject to section 6 --

(a) no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;

(b) a declaration of trust respecting land or any interest therein shall be manifested and proved in writing signed by the person who is able to declare such trust or by his will.

(2) This section does not affect the creation or operation of resulting, implied or constructive trusts.

11. Mr Cheung for the plaintiff argued that the Loan Agreement merely evidenced the fact that the purchase money whereby Besteco acquired the legal estate in the Property was provided by or on behalf of VML, and it was not a document or instrument from which VML's interest in the Property stemmed. The interest of VML in the Property was unwritten and unregistrable. Consequently, the fact that the Loan Agreement had not been registered did not and could not affect VML's interest in the Property in the context of the Land Registration Ordinance, wherefore the effect of that Ordinance giving priority to title in accordance with the date of registration had no application.

12. The relevant sections of the Land Registration Ordinance, Cap. 128 provide as follows:

2. Establishment of Land Registry for registration of instruments affecting land

(1) The Land Registry shall be a public office for the registration of deeds, conveyances, and other instruments in writing, and judgments; and all deeds, conveyances, and other instruments in writing, and all judgments, by which deeds, conveyances, and other instruments in writing, and judgments, any parcels of ground, tenements, or premises in Hong Kong may be affected, may be entered and registered in the said office in the prescribed manner.

(2) .....

3. Priority of registered instruments; effect of non-registration

(1) Subject to this Ordinance, all such deeds, conveyances, and other instruments in writing, and judgments, made, executed, or obtained, and registered in pursuance hereof, shall have priority one over the other according to the priority of their respective dates of registration, which dates shall be determined in accordance with regulations made under this Ordinance.

(2) All such deeds, conveyances, and other instruments in writing, and judgments, as last aforesaid, which are not registered shall, as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same parcels of ground, tenements, or premises, be absolutely null and void to all intents and purposes:

Provided that .....

4. Notice of unregistered instrument not to affect registered instrument

No notice whatsoever, either actual or constructive, of any prior unregistered deed, conveyance, or other instrument in writing, or judgment, shall affect the priority of any such instrument as aforesaid as is duly registered.

13. Mr Cheung's arguments were therefore that the Loan Agreement, not being an instrument by which the Property might be affected, was not registrable under the Land Registration Ordinance. In the circumstances, the facts that the Loan Agreement was not registered and that the proposed registration of the Loan Agreement was eventually cancelled did not debar VML from claiming its interest, if any, against Besteco's successors in title insofar as such successors were affected by notice of such interest of VML. Both the defendant and the plaintiff, as successors in title of Besteco in respect of the Property, were affected by notice of VML's interest through their knowledge of the contents of the Loan Agreement. If VML was in fact the purchaser and beneficial owner and Besteco only a bare trustee, then the defendant must take its interest in the Property subject to VML's, for the defendant, and for that matter, also the plaintiff, were bona fide purchasers for value but not without notice. Where VML's interest was not registrable, the lack of registration of the Loan Agreement before the registration of the defendant's purchase did not make VML's interest null and void as against the defendant, for sections 3 and 4 of the Land Registration Ordinance would not apply. It followed, so the argument went, that the defendant could not give a good title to the Property to the plaintiff. At least, in order to eliminate the risk of an attack by VML against the plaintiff's interest in the Property, as the defendant's successor in title, the requisition was properly raised.

14. Mr Chow for the defendant contented that the requisition was not properly raised, for there was no real risk that VML could successfully raise any attack on the title to the Property that the defendant was willing and ready to pass to the plaintiff. He based his arguments on mainly two grounds :

(a) there was no true case of a resulting trust in favour of VML, but rather the Loan Agreement constituted an express trust in favour of VML; and

(b) no matter whether there was a true resulting trust or an express trust, the Loan Agreement upon the particular facts of this case gave rise to the trust and as it was not registered, whatever interest that VML might have would be absolutely null and void to all intents and purposes as against the defendant whose interest was registered and the defendant's successors in title including the plaintiff.

15. It is therefore necessary to resolve the following issues to reach a decision in this case :

(1) Based on the information contained in the Loan Agreement, is there a real possibility that there is a true case of resulting trust in favour of VML? Does the Loan Agreement amount to an express trust or declaration of trust?

(2) Depending on the decision on Issue (1), is the relevant interest of VML registrable under the Land Registration Ordinance so that its non-registration bars any possible attack by VML against the defendant's registered interest? Does the non-registration of the Loan Agreement make whatever interest that VML may have in the Property absolutely null and void against a subsequent purchaser for value whose interest is registered?

The Nature of VML's Possible Interest

16. The true nature of VML's possible interest in the Property depends purely on the proper construction of the Loan Agreement. Clause 2 of the Loan Agreement shows clearly that the purchase money for the Property was to be provided by arrangements to be made by Sinolite, itself to lend 30% of it and to obtain the remaining 70% by way of a bank mortgage on the Property. It also shows that the purchase money as so arranged would be provided to VML. The combined effect of clauses 1, 2, 3, 4 and 5 give the clear idea that VML was the actual purchaser, for Besteco was but a nominee in the purchase. Clause 6 causes some difficulty in the understanding of the true nature of VML's interest in the Property. Clause 6 states that if VML wishes to redeem the mortgage, Sinolite will transfer Besteco to VML. Does it mean that what VML can get is all the shares in Besteco which holds the Property but not the Property itself? Clause 6 can be said to impose a term against Sinolite to transfer all the shares in Besteco to VML. In my opinion, this obligation of Sinolite is not intended to be, and does not create, a binding obligation on VML to take the transfer of Besteco and not the Property itself. This view is reinforced by clause 5 which imposes upon VML the obligation to charge the Property as security. If VML were not treated by the contracting parties as the true beneficial owner, it would be impossible for VML to fulfil its obligation of charging the Property as security as intended by clause 5. I therefore conclude that the information disclosed in the Loan Agreement raises a real possibility that there was a resulting trust in favour of VML in respect of the Property to be acquired in the name of Besteco. This resulting trust was given rise by the possible fact that all the purchase money of the Property acquired by Besteco was paid for and on behalf of VML, as provided for in the Loan Agreement.

17. Of course, there is always the possibility that something might have happened that detached VML from having any interest in the Property. For example, Besteco could have purchased the Property with its own money and not pursuant to the Loan Agreement, or the Loan Agreement had been cancelled by mutual agreement of Sinolite and VML, or the terms of the Loan Agreement might have been altered. The cancellation of the registration of the Loan Agreement, however, cannot be taken to mean that the Loan Agreement itself was cancelled : what was cancelled was the proposed registration. Looking at the circumstances as a whole, especially in view of the fact that an agreement for sale and purchase of the Property and a repayment schedule were expressed to be annexed to the Loan Agreement, the possibility that Besteco purchased the Property with all moneys provided for and on behalf of VML is a real one and cannot be brushed aside.

18. Mr Chow argued that the Loan Agreement was the source of the legal relationship between Sinolite, VML and Besteco in respect of the Property. Whatever rights VML might have in the Property had as their origin in the Loan Agreement, as there was no suggestion that their mutual rights and obligations in respect of the Property were created by any other instrument. So Mr Chow argued that the Loan Agreement itself created an express trust in favour of VML, in that there was either a declaration of trust by Besteco to hold the Property to be acquired in trust for VML, or the Loan Agreement itself was an agreement for a trust of the Property to be acquired by Besteco in favour of VML. If either was the case, then the Loan Agreement was registrable under the Land Registration Ordinance. I can see the attraction of the arguments. However, if the arguments are correct, then it would require Besteco who was or was to be the legal owner of the Property, or Besteco's duly authorised agent, to sign the Loan Agreement in order to render the document binding upon Besteco as an effective land contract under s. 3(1) of the Conveyancing and Property Ordinance or an effective instrument creating or disposing of an equitable interest in land under s. 5(1) of the same Ordinance. The fact remains, however, Besteco was not a party to the Loan Agreement and its signature appears no where on it. There is no evidence at all that the Loan Agreement was signed by Besteco's duly authorised agent either. Although Besteco was expressed to be Sinolite's subsidiary, there is nothing in the Loan Agreement or at all to show that Sinolite signed on behalf of Besteco.

19. In the circumstances, I hold that there was a real risk that VML was the beneficial owner of the Property on a resulting trust by operation of law, based on the possibility that all the money paid by Besteco for the purchase of the Property was provided for and on behalf of VML, as disclosed by the Loan Agreement.

20. Is VML's Possible Interest Registrable and What is the Effect of Non-registration?

21. Now I turn to examine the issues whether VML's possible interest in the Property is registrable and the effect of the non-registration of the Loan Agreement. Most of the authorities cited by counsel for both parties relate to these very interesting areas.

22. Mr Cheung submitted that a resulting trust did not have to be in writing or evidenced in writing and that it arose by operation of law. Snell's Equity, 29th Ed., p. 177-8 states :

"Another common case of an implied or resulting trust is where on a purchase property is conveyed into the name of someone other than the purchaser. The clear result of all the cases, without a single exception, is, that the trust of a legal estate, ... results to the man who advances the purchase-money. This is a general proposition supported by all the cases, and there is nothing to contradict it; ..."

23. Resulting trust is so well established that it was merely stated by the courts in Hong Kong as being the rule without any further ado. For example, Findlay, J. in Yeung Kit Lam & Anr v. Lau Yiu Shing (HCMP 3392/94, 19 January 1995, unreported), at page 3, said :

"Where property is conveyed to a person other than the purchaser, a resulting trust will be presumed in favour of the person who is proved to have paid the purchase money as a purchaser (as opposed to a donor or lender)."

24. InWong Chim Ying v. Cheng Kam Wing [1991] 2 HKLR 253, where a bona fide purchaser for value claimed possession of the property from the occupying husband of the vendor, Clough, J.A. delivering the judgment of the Court of Appeal simply observed at 261A :

"The judge had no difficulty in holding that the presumption of advancement had been rebutted in this case so that the presumption of resulting trust operated in favour of the husband whom he had found to have provided all the purchase money for the flat."

25. The particular type of resulting trust relevant to the present proceedings arose by reason of the payment of the purchase money for the Property by or on behalf of VML, and as such it is not required to be in writing. Where there is no document evidencing the resulting trust, parol evidence is admissible to prove it (see Snell p. 178), and such a trust is expressly recognized by section 5(2) of the Conveyancing and Property Ordinance.

26. Mr Cheung referred me to my decision in Lau Siu Ying v. Wong Cheung Tai (HCMP 669/93, 2 August 1993, unreported) in support of his contention that the resulting trust in favour of VML might be evidenced and/or confirmed by the Loan Agreement, but it did not become null and void or otherwise invalid because of the non-registration of the Loan Agreement. In that case, where several persons purchased a property with money provided by a club, and they made a deed of trust to state that fact and declare a trust in favour of the club, I said at page 4S to page 5C of the judgment :

"In the present case, had the trustees failed to execute the Declaration of Trust and remained silent about the fact that the purchase money was provided by the beneficiaries, then no outsiders would know the existence of the resulting trust. The trustees were not creating a new trust or declaring a trust in favour of persons other than the beneficiaries, ... The Declaration of Trust is certainly valid, though not as a document creating a trust, but as evidence and confirmation of a resulting trust."

27. Without deciding whether the non-registration of the deed of trust had the effect of barring the rights of the beneficiaries against a subsequent bona fide purchaser for value under the Land Registration Ordinance (see p.5E), I ruled that, in the particular circumstances of that case, the risk of the beneficiaries being allowed to interfere with the title to the property and the risk of their attack being successful were fanciful.

28. Mr Cheung also relied on Financial and Investment Services for Asia Ltd. v. Baik Wha International Trading Co. Ltd. [1985] HKLR 103. That case related to the priority of the right to a property of a mortgagee who had funded the discharge of a prior bank mortgage as against a person who obtained a charging order against the property where the charging order nisi was registered before the registrations of the reassignment by the bank and the mortgage to the mortgagee took place. Hunter J. held at 110H-J that the mortgagees interest arose solely from the application of equitable principles to the fact of payment, and was both unwritten and unregistrable. Consequently, the learned judge held that the mortgagee's unwritten equity being first in time prevailed over the chargee's subsequent registered equity. On section 3(1) of the Land Registration Ordinance, Hunter, J. observed at 113I :

"In my judgment s.3(1) does no more than provide for priority between valid documents of the defined classes which are registrable and registered. Such registration is only prima facie evidence of ownership. It does not exclude inquiry into the underlying transaction which is the subject matter of the registration. The validity and effectiveness of such transactions depend upon the results of such inquiry independently of the fact of registration."

29. On the other hand, Mr Chow for the defendant submitted that VML's alleged beneficial interest in the Property could only have come about as a result of the agreements embodied in the Loan Agreement, wherefore the Loan Agreement was registrable by virtue of section 2 of the Land Registration Ordinance, and that its non-registration made it, and VML's interest embodied in it, absolutely null and void to all intents and purposes as against a subsequent bona fide purchaser for valuable consideration, vide section 3(2) of that Ordinance. Mr Chow elaborated to say that by definition, an unwritten equity (which included the alleged possible interest of VML) only arose where the equitable right or interest was created otherwise than in writing. Where the whole basis of VML's alleged right or interest came from the written Loan Agreement, that right or interest could not be regarded as an unwritten equity. It would be artificial to divorce the funding arrangement, which was carried out pursuant to the Loan Agreement, from the Loan Agreement itself; they must be looked upon as one transaction giving rise to the alleged rights in favour of VML. Since the Loan Agreement provided, upon its true construction, that Besteco should hold the property for the benefit of VML, it was a case of an express trust, not resulting trust. Where there was an express trust, it was not correct to describe that VML's beneficial interest as arising from a resulting trust. Mr Chow relied on Citibank NA v. Lai Tai Cheung [1986] 2 HKLR 885 and Fullerton & Anr v. Provincial Bank of Ireland [1903] 309.

30. In Citibank, the plaintiff was the mortgagee of a piece of land. The mortgage was registered in accordance with the Land Registration Ordinance in March 1982. The first defendant was the mortgagor who defaulted. The second defendant had lived on the mortgaged land for 10 years prior to 1978. In the autumn of 1978 the first and second defendants orally agreed that the second defendant could build a house on the land and he and his family could live there for 50 years after the house had been constructed. As a result of this oral arrangement a house was built on the land by the second defendant. At the end of February 1979 the first and second defendants executed a written document which incorporated the terms that had been agreed the previous autumn with the date of the tenancy to commence on 1 March 1979. The document was not registered under the Land Registration Ordinance. The plaintiff obtained judgment in default against the first defendant for the sum outstanding on the mortgage, and sought an order for possession against the second defendant. The plaintiff conceded that it had constructive notice of the second defendant's occupation at the time of the mortgage. The only issue was whether the document was an instrument in writing so as to require registration. It was argued on behalf of the second defendant that the agreement between the first and second defendants flowed from the oral agreements made in 1978 and the document merely served an evidential purpose. At 888E-G, Jones, J. held:

"The document executed by the first and second defendants was clearly an instrument in writing which confirmed the earlier oral agreement, but with the addition of the date when the tenancy was to commence. The defendants clearly intended to rely upon this document whereby the fist defendant agreed to hold the land upon trust for the second defendant for a period of 50 years. This agreement superseded the earlier oral agreement. The document relates to an interest in land and in order to obtain priority over the plaintiff's mortgage, the document required to be registered under s.2(1) of the Land Registration Ordinance. Irrespective of the plaintiff's constructive notice of the second defendant's occupation of the premises the agreement between the first and second defendants is null and void against the plaintiff. As a result, the plaintiff is entitled to judgment against the second defendant."

31. Fullerton is a decision of the House of Lords on appeal from Ireland with land registration legislation similar to the Land Registration Ordinance. For the facts, I think I need only cite the headnote.

"A customer of a bank in Ireland having overdrawn his account and being pressed by the bank undertook by letter to deposit a title-deed of an Irish estate as security for his overdraft. He deposited the title-deed with the bank, who did not register the charge. The customer afterwards mortgaged the estate to the appellants, who registered their charge without notice of the prior charge. Upon the question of the priority of the two incumbrances :-

Held, that the customer's letter amounted to an agreement to create an equitable charge upon the estate and ought to have been registered as a conveyance under 6 Ann (Ir.), c. 2; and that in default of registration it ranked after the mortgage to the appellants."

The decision turned mainly on the proper construction of the letters sent by the customer to the bank. At 316, Lord Davey said :

"I am, therefore, of the opinion that the letters, reading them together, constituted a contract to create an equitable mortgage on the Portlemon estate as soon as the conveyance to Colonel Stevenson (the customer) was completed. On that event taking place, the contract became absolute and bound the property in his hands. The letters, therefore, constituted a transfer to the bank of the equitable interest in the property, and constituted a conveyance within the meaning of the Registration Act."

32. In Chu Yam On & Anr v. Li Tam Toi Hing (1956) HKLR 250, the Privy Council dealt with a similar point on appeal from Hong Kong. The Judicial Committee advised that a written declaration of trust, not registered under section 3 of the Land Registration Ordinance, was absolutely null and void against a bona fide purchaser for value and must be completely disregarded. At p.258 of the report, Lord Somervell of Harrow had this to say :

"The appellants had a further submission in order to avoid the consequences of the non-registration of the Declaration of Trust. There was a two days interval between the conveyance and the Declaration. In those two days the appellant would, it is submitted, have been bound by an oral resulting trust to hold the property for the school. It is then suggested that this oral trust survived the reduction of its terms into writing for the purpose of defeating the provisions of the Land Registration Ordinance. That would appear to have been the main point argued on appeal. It was rightly rejected by the Full Court. There is no suggestion that the Declaration of Trust was inconsistent with the prior position. As from its date the trust was contained in the document and in the document alone."

33. The decision of the Full Court in that case, reported in [1954] HKLR 114, gave fuller explanation on the effect of non-registration. At p.116-7, Gregg J. stated :

"In the present case we have a trust which has been declared in whole and in writing and which, although so declared on 12 December, 1932, two days after the appellants had become joint tenants of the land in question, has never been registered in accordance with the Land Registration Ordinance. (Cap. 128).

The question that now arises is: does the said declaration of trust in writing remove and replace any resulting trust that may have existed prior to the said declaration by reason of the assignment of the land in question to the appellants (see Ex. P. 21) and the fact that the land in question was bought by other people's money?

We would say that it does. In our view the declaration of trust (Ex. P. 18) has been clearly and sufficiently expressed; and, that being so, no resulting or implied trust can, in our view, possibly co-exist with it; for by its nature a resulting or implied trust can only arise in the absence of a sufficiently express declaration. Furthermore the whole purpose of registration under the Land Registration Ordinance would be defeated if a person could at will substitute a resulting or implied trust for an express written declaration of trust whenever that written declaration happened to be unregistered."

34. It is clear from Citibank, Fullerton and Chu Yam On that so long as a resulting trust is reduced into writing and sufficiently expressed in writing, the non-registration of the document will make the interest created by the resulting trust absolutely null and void against a subsequent bona fide purchaser for value whose interest is registered even though he may have had notice of the document. The reasoning in Citibank was based on the fact that the written agreement had a term added to the oral agreement between the same parties to provide for a date certain for the commencement of the 50 year lease, and the oral agreement was superseded by the written agreement. Fullerton dealt with a situation where the letters which constituted an agreement to create an equitable interest were in existence but not registered. Chu Yam On was decided on the basis that a resulting trust given rise by operation of law by reason of the payment of the purchase money which was sufficiently expressed by a declaration of trust could not possibly co-exist with the declaration of trust.

35. In Baik Wha, the solicitors for the intended mortgagee sent a letter dated 23 February 1982 enclosing two cheques for the sums necessary to discharge the bank mortgage and seeking an undertaking from the solicitors for the bank (Wayfoong) to furnish a reassignment of the existing mortgage. After citing several authorities including Fullerton, Hunter, J. dealt with the effect of the letter, at 110I :

"Upon my reading the authorities above considered, the plaintiffs' equity arises solely from the 'application of equitable principles' to the fact of payment. It is not only not dependent upon any actual agreement or documentation: it survives inconsistent agreement and documentation. Thus registration of the letter of 23rd February would have done nothing to reveal this equity because it did not disclose the plaintiffs' identity. If this letter can be said to constitute a note or memorandum of any agreement, it was an agreement between Wayfoong and the company (the mortgagor), not Wayfoong and the plaintiffs. No agreement to grant an equitable charge comparable to that in Fullerton was ever made."

36. In the present case, although the Loan Agreement shows an arrangement agreed between Sinolite and VML to the effect that Besteco was to purchase the Property on behalf of VML, it does not record any agreement between Besteco and VML so as to create any binding obligation on Besteco. As I said before, the Loan Agreement was not signed by Besteco or any person duly authorised to sign for Besteco. It cannot be treated as an instrument in writing binding upon Besteco that it had agreed to hold the Property on trust for VML or that it had confirmed the resulting trust. Nor can the Loan Agreement, by showing a resulting trust attached to Besteco in favour of VML, given rise by the payment of the purchase money for and on behalf of VML as agreed between Sinolite and VML, be properly stretched to constitute a sufficiently express declaration of trust or any other express trust made by Besteco in favour of VML. A fortiori, it did not supersede the resulting trust. In simpler terms, the resulting trust in favour of VML arose by reason of payment of the purchase money for it or on its behalf, and the Loan Agreement is not a confirmation by Besteco of the resulting trust.

37. Mr Chow conceded that if an interest in land was not required by the provisions of the Conveyancing and Property Ordinance to be contained in a document, it would not need to be registered. The resulting trust in favour of VML is, I hold, of that nature. Further, the Loan Agreement cannot properly be said to be a conveyance or instrument in writing creating such an interest, and as such, it is not registrable in respect of that interest. As there was no proper instrument sufficiently expressing the resulting trust, there was nothing to be registered in order to rank VML's interest prior to the interests of Besteco and its successors in title. The rules in Citibank, Fullerton and Chu Yam On do not apply to the facts of this case.

38. In the circumstances, I hold that there is a real risk that VML may lay claim on the Property affecting the plaintiff's interest that, but for the rescission, would have been obtained from the sub-sale agreement. The requisition raised by the plaintiff for resolving that risk was properly raised. As was conceded, there was no satisfactory answer to the requisition. Judgment is therefore given in favour of the plaintiff. I accordingly make an order in terms of paragraphs 1, 3, 4 and 6 of the originating summons. As to paragraph 5 of the summons seeking an order that the defendant do pay to the plaintiff the sum of $38,417.00 being the plaintiff's legal costs for the investigation of title, since no evidence has been adduced on this sum and hardly any argument was addressed on this matter, I am not prepared to make any order. I will, however, give the parties liberty to apply, which includes an application to the court to deal with matters relating to paragraph 5 of the summons. That application would, of course, be unnecessary if the parties could reach an agreement. I also make an order nisi that the plaintiff do have the costs of these proceedings.