Selling the same property to two different buyers

When there are two competing contracts for the purchase of the same land, where the equities are equal, the first in time prevails and that purchaser will be entitled to specific performance. The purchaser under the later contract can seek damages against the seller.

In Chu Kit-Yuk v Country Wide Industrial Ltd ([1995] 2 HKLR 162, CA) S agreed to buy two flats on terms that allowed them to sub-sell. They entered into a sale agreement with B1 and then approached the developer to negotiate a novation in favour of B1. The developer would not agree and negotiations for the completion of the contract failed. B1 registered the contract at the Land Registry. S then sold the same flats to B2. The question was whether B1 or B2 was entitled to specific performance. The Court of Appeal held that B1 was entitled to specific performance. Each contract had created an equitable interest in the property. This was a question of the priority as between two competing equitable interests. The rule is that when the priorities are equal the first in time prevails. B1 was entitled to specific performance. B2 could seek damages from S.

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2 Responses to “Selling the same property to two different buyers”

  1. Chu Wa Tim Says:

    well if the first-in-time was equitable but at the same time was reduced to instrument in writing, and therefore registrable and in fact registered, then why did not the court directly apply LRO such that B1 binds B2?

    • Michael Lower Says:

      Thanks. This shows that the common law and equitable rules are still at the core of the law on priorities in Hong Kong. The rules are modified, not replaced, by the Land Registration Ordinance. I have just looked again quickly at the judgment and there is no mention of the LRO that I can see. Once the first purchaser had protected priority by registration, the position was dealt with as one of competing equitable interests. There is no obvious way to apply section 3(1) if the second purchaser had not registered, nor would there be any benefit in doing so.

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