WONG CHUNG KEUNG AND ANOTHER v. CHEUNG YIK TUNG

HCMP 799/2018

[2018] HKCFI 2722

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 799 OF 2018

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REASONS FOR JUDGMENT

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Introduction

1.  This is a vendor-purchaser summons taken out by the plaintiffs (the vendors) in May 2018, pursuant to s 12, Conveyancing and Property Ordinance (Cap 219), to seek principally an order that the defendant’s requisition on title has been sufficiently answered and a good title to the suit property has been shown.

2.  After hearing the parties, I granted the relief sought by the plaintiffs.  The reasons for doing so appear below.

Background

3.  By a formal sale and purchase agreement dated 5 March 2018 (“the said agreement”), the plaintiffs agreed to sell, and the defendant agreed to purchase, a residential unit at Wing Fat Lane, Tuen Mun (“the suit property”).

4.  The price of the said sale was $3.2 million. Completion date was to be on or before 16 April 2018.

5.  Clause 15 of the said agreement provided that the plaintiffs should give good title to the suit property; clause 12 of the said agreement provided that requisitions and objections to title should be delivered to the plaintiffs within 7 working days after receipt of title deeds.

6.  Land registration search of the suit property shows the following court orders having been registered against the suit property:

(a) Order dated 7 February 1990 imposing a charge (memorial No. TM422026 registered on 27 March 1990);

(b) Charging order dated 27 February 1995 (memorial No. TM677131 registered on 20 March 1995);

(c) Charging order dated 3 May 1995 (memorial No. TM681712 registered on 16 May 1995);

(d) Order dated 7 February 1990 imposing a charge (memorial No. TM701417 registered on 14 December 1995).

(collectively “the said orders”)

7.  Thus, the said orders were registered more than 5 years before the date of the said agreement.

8.  By a letter dated 7 March 2018, the defendant’s solicitors (among other things) asked for the certified copies of the said orders (“the said title requisition”).

9.  By a letter dated 19 March 2018 (and effectively repeated in a letter dated 9 April 2018), the plaintiffs’ solicitors answered that:

“… [the said orders] … all ceased to have any effect [on the suit property] under Section 17 of the Land Registration Ordinance … ”.

Good title and answer to requisition

10.  The said title requisition was in effect the only issue which required the court’s determination in this action.

11.  The defendant put forth two points during the hearing:

(1) the plaintiffs could not show good title to the suit property because s 17, Land Registration Ordinance (Cap 128) merely deals with the relative priority of the registered instruments, but not the validity of the registered orders;

(2) in any event, the plaintiffs’ answer to the said title requisition were inadequate.

12.  In support of his first point (para 11(1) above), the defendant relies on the District Court decision in Si Tou Choi Kam v Wealth Credit Ltd, [2017] 1 HKLRD 1074, where the court said:

“The plaintiff [wife of a bankrupt husband] further relied on s. 17 [Cap 128] …

The plaintiff argued the respective charging orders have expired in 2014. The charging orders should have already ceased to have effect because such registration is only valid for 5 years from the date of registration. … I agree, but only to the extent that the effect of failure to re-register the said two charging orders are that they lost priority vis-à-vis subsequent registered interests … but not invalidating the orders itself.” (emphasis supplied) (para 19 thereof)

13.  For the reasons given below, and assuming the legal proposition propounded in the Wealth Credit decision is correct, it still cannot advance the defendant’s case.  The facts of that decision concerned a co-owner wife who sought to have charging orders registered in 2009 against her co-owner husband for debts owed by the husband (who later became bankrupt) to be declared invalid.  The property was purchased in the couple’s names before 2009 (that is, before the 2009 charging orders were registered). The District Court’s quoted comments were made (and have to be understood) in such factual context.

14.  In the present case, however, the said agreement was entered into in March 2018, subsequent to (and much later than) the registration of the said orders.  According to the Wealth Credit decision, the said orders would have lost priority as against the said agreement. 

15.  Further, the High Court decisions below do not appear to have been considered by the District Court in the Wealth Credit decision.  In both decisions, the court found that registered orders which were caught by s 17, Cap 128 would not render the title defective.

16.  In Ocean Rich Investment Co Ltd v Leung Yiu Biu and Chan Po Lin, HCMP 1903/1998 (6 May 1999), another vendor-purchaser summons, the court decided:

“[after referring to ss 17 and 3(2), Cap 128] The charging orders registered in 1991 ceased to have any effect by the lapse of time [the sale and purchase agreement therein was executed in March 1998]. They have not been re-registered. Even if they were to be re-registered, they only start to have effect from the date of re-registration.”

17.  In Hung Heung Keng v Challenge Way Investment Ltd, HCMP 789/2006 (14 June 2006), also a vendor-purchaser summons, the court decided:

“… a difficulty has arisen concerning the registration of a Prohibitory Order dated 25 March 1950 … which says that the Lot to which it relates was ‘subject to the rights of Chung Pak Woo and Chung Kan Wan’ …

… a Prohibitory Order was a form of attachment of property in execution of a judgement for a sum of money … [Judge Downey] said that … ‘It is perhaps akin to a charging order over land … ’

[Counsel for the vendor] refers to sections 3 and 4 [of Cap 128] … and, crucially importantly, to section 17 which provides that registration of an order ceases at the end of five years unless re-registered. I am entirely satisfied therefore that absent re-registration the 1950 Prohibitory Order ceased to have effect.” (para 1, 3 and 7 thereof)

18.  It is clear from the conclusion reached in this respect, in both the Ocean Rich decision and the Challenge Way decision, the courts have concluded that, in relation to a subsequent sale and purchase, the phrase “shall cease to have effect at the end of 5 years” literally means what it says.

19.  Because of the factual difference between the Wealth Credit decision on the one hand, and the Ocean Rich decision and the Challenge Way decision on the other hand, I do not consider the Wealth Credit decision to be inconsistent with the two High Court decisions.

20.  In the event there should somehow be an inconsistency, it has been accepted that High Court decisions on the same point should be binding on the District Court: Clever Full Investment Ltd v Leung Kwan Kee Decoration Co & Iron Works, DCCJ 10147/1990 (13 June 1991); The IO of Tropicana Gardens v Tropicana Gardens Management Ltd and Another, LDBM 374/1998 (18 September 2001), para 10.

21.  In view of the above matters, I do not consider the said orders to amount to a “blot on title”.  There being no other basis to suggest the plaintiffs have failed to show good title, I conclude that a good title to the suit property has been shown by them.

22.  As regards the plaintiffs’ duty to answer the said title requisition (para 11(2) above), that duty has been described in Active Keen Industries Ltd v Fok Chi-keong [1994] 1 HKLR 396:

“If the matter was self-evident, the purchaser’s solicitors cannot insist upon a fuller reply. … A requisition as to title is not an occasion for the parties’ solicitors to bandy propositions of law: each party must decide for himself, ultimately, what the legal position is, based upon the facts known to himself … ” (p 407)

23.  All the relevant facts (concerning the said orders) were known to both parties.  The plaintiffs’ solicitors have already informed the defendant they were relying on s 17, Cap 128 (para 9 above). In these circumstances, the argument that the plaintiffs have not sufficiently answered the said title requisition has no substance.