Archive for the ‘equitable lien’ Category

No equitable lien where no part of the purchase price has been paid

October 2, 2015

In Wong Kam Fung v Smart Profit Enterprises Ltd ([2014] 5 HKLRD 853, CA) S entered into a provisional sale and purchase agreement for the sale of property to P. P sent S a cheque for the deposit but the cheque was never presented. P registered the agreement at the Land Registry. P later repudiated the agreement and this was accepted by S. P refused to vacate the registration of the agreement at the Land Registry. S sought an order requiring P to remove the registration. P counterclaimed for the return of the deposit and for damages for breach of contract.

The agreement was clearly no longer in existence. P argued, however, that it had an equitable lien over the property arising out of the delivery of the deposit cheque to S and that this lien entitled it to maintain the registration. It argued that the equitable lien also covered the claim for damages (P did not register the lis pendens). P’s argument failed and it was ordered to vacate the registration.

Given that the deposit cheque had not been presented, there had been no part payment of the purchase price and so there could be no equitable lien:

‘[T]here are two requirements to be satisfied before a purchaser can claim an equitable lien over the vendor’s property, namely (a) money has been paid on account of the purchase price, and (b) the money has been paid to the vendor.’ (Kwan JA at [30]).

There were cases in which the court had accepted that an equitable lien could cover a claim for damages in addition to the part payment of the purchase price where justice demanded it. They were not authority that the lien could cover a damages claim on its own ([29]).

Michael Lower

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Extinguishing a purchaser’s lien

June 16, 2011

A purchaser’s lien can be extinguished by operation of law, by the common intention of the parties or by a holder of the lien. The test of intention is objective. Unless the intention is express, the burden is on the party denying the existence of the lien to prove by clear and manifest inference that such was the parties’ intention.

In Re Bank of China (Hong Kong) Ltd ([2011] HKEC 660, CFI) V and P entered into an agreement for the sale of a flat and P paid very substantial deposits to V. By operation of law, a purchaser has an equitable lien over property as security for the deposit paid. V and P later entered into a cancellation agreement that terminated the sale agreement and contained a clause purporting to give security for repayment of the deposits. V and P later sought a consent order under which V would repay the deposits and the agreement would be terminated. Between the cancellation agreement and the application for the consent order, various other interests were created in respect of the property. This case concerned the priority between P’s equitable lien and the other later interests.

To J explained that a purchaser’s lien can be extinguished by operation of law, by the common intention of the parties or by a holder of the lien. The test of intention is objective. Unless the intention is express, the burden is on the party denying the existence of the lien to prove by clear and manifest inference that such was the parties’ intention. The more extensive security arrangements contained in the cancellation agreement showed a common intention to extinguish the lien. In the circumstances, the application for the consent order had the same effect. The equitable lien was extinguished and the later claims were not subject to it.