Financial and Investment Services for Asia Ltd v Baik Wha International Trading Co Ltd

In Financial and Investment Services for Asia Ltd v Baik Wha International Trading Co Ltd ([1985] HKLR 103) LY Ltd had mortgaged property to Wayfoong. The mortgage had been duly registered. LY wanted to re-mortgage and FISA provided the funds to allow the loan from Wayfoong to be paid off. The following events happened:

23rd February 1982 – FISA supplied the funds to pay off the Wayfoong loan;

1st March – Baik Wha obtained a charging order;

2nd March – Baik Wha registered the charging order;

13th March – mortgage to FISA created;

8th April – mortgage to FISA registered.

Who had priority? Was it FISA or Baik Wha?

Hunter J. held that FISA had an equitable right to the same priority as that enjoyed by Wayfoong (relying on earlier English authorities). This equitable right was unregistrable. The charging order was to be treated as if it were an equitable interest. This is therefore a case of a contest between two equitable interests with the earlier interest not needing to be registered. It could be decided on the basis that where the equities are equal the first in time prevails. FISA had priority.

This seems to overlook the fact that FISA did later register its legal mortgage and that this was both created and registered after the charging order had been registered. Hunter J. pointed out, however, that FISA’s priority did not rely on its registered mortgage but on its unwritten equitable interest.

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