Priority as between unregistered instrument and a subsequent registered instrument

A registrable but unregistered instrument ranks after the interest of a later bona fide purchaser for value  even if the latter purchaser had notice of the prior instrument. Good faith and notice are not the same.

In Kwok Siu Lau v Kan Yang Che ((1913) 8 HKLR 52) the defendant had taken a lease of property but not registered it. The plaintiff then bought the reversion and registered the agreement for purchase. The plaintiff did not know of the lease at the date of the agreement but did know of it by the time of registration. The Full Court had to consider for the first time fundamental questions about the relationship between sections 3 and 4 of the Land Registration Ordinance and the equitable doctrine of notice. It held that priority in such a case as this depended entirely on whether or not the prior interest was registered. In the absence of bad faith, the equitable doctrine of notice had no part to play. Having notice of the earlier interest did not mean that one lacked good faith for the purposes of section 3(2).

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