Archive for the ‘registration’ Category

Registration of a personal loan agreement unjustified

May 4, 2016

In Flat 4 on 3/F of Block A, Tin Yau Court, No 1 Tin Shing Road, Tin Shui Wai, Yuen Long, New Territories ([2016] HKEC 751, CFI) title to the property had been in the joint names of a husband and wife. An order had been made to the effect that when a decree absolute had been made in the matrimonial proceedings, the husband would transfer his interest in the property to his former wife but it seems that this transfer did not take place. Over three years after the order, the husband entered into a personal, unsecured loan agreement. The lender sought to register the agreement against the property at the Land Registry. It was not registered but appeared as a deed pending registration. The wife asked the lender to withdraw the registration but it refused to do so. The wife applied for, and  was granted, a declaration that the loan agreement did not create an interest in land and so was not registrable. The court has an inherent jurisdiction to vacate the registration or purported registration of any instrument in the Land Registry which does not affect land ([16]). The question of costs was left for later but Anderson Chow J. referred to authorities where, on similar facts, costs had been awarded to the property owner on an indemnity basis; the courts are concerned to prevent the abuse of the land registration process ([9] – [10]).

Michael Lower

Part performance: contract unregistered and in breach of New Grant

May 6, 2013

In Silver Hope Ltd v Chan Kwai Wah Alice ([2013] 1 HKLRD 823, CFI) W had entered into a contract to purchase the property in 1996. The contract amounted to a breach of the New Grant covenants concerning the property. W paid the entire purchase price and entered into possession. The contract was stamped but not registered. In 2012, P obtained a charging order in respect of the property and later an order for sale. W now sought to be joined as a defendant to the proceedings and to stay the execution of the order. To succeed, W needed to show that there was an arguable case that he had an equitable interest in the property. W was met by two arguments. First, that the contract was unlawful and so void (because it was formed in breach of covenant). Second, that the charging order (which had been duly registered) had priority over the unregistered contract.

W succeeded in being joined as a party. He was not relying on the contract but on the equity that arouse out of his having paid the entire purchase price and gone into possession (presumably this is on the basis of the doctrine of part performance). Hence, it could be argued that W would not need to plead the unlawful contract (see Tinsley v Milligan).

As for registration, after Financial and Investment Services for Asia Ltd v Baik Wha International Trading Co Ltd, it is clear that the court can look at the substance of the competing interests (and then consider the impact of registration or a failure to register). This could be seen as a contest between two equitable interests (Hong Kong Civil Procedure 2012 50/9A/17). Thus, it is arguable that W’s equitable interest has priority over the charging order notwithstanding the failure to register it.

Registration of lis pendens when the dispute concerns ownership of shares of company owning the relevant land

October 22, 2012

In Lau King Teng v Cheng Miu Har ([2008] 4 HKLRD 563, CFI) D claimed that M held the shares in three companies partly in  trust for D. The companies’ assets comprised interests in land. D issued a writ seeking injunctions to prevent any dealings in the properties. The writ was then registered as a lis pendens. The Court accepted that this was legitimate even though, strictly speaking, D was claiming an interest in the shares and not in the property.

Buyer’s letter accepting seller’s alleged repudiatory breach: can it be registered?

September 26, 2012

In Dragon Fame Investment Ltd v Guo Jianjun ([2012] HKEC 1290, CFI) the parties had entered into a provisional sale and purchase agreement. The buyer alleged that the seller had failed to prove good title and the buyer’s solicitors wrote to the sellers purporting to accept the repudiatory breach. The buyers then sent the letter to the Land Registry and the registry entered the letter in the ‘deeds pending registration’ section of the register for the property. The Court held that the letter should not have been sent to the registry and ordered removal of any reference to it from the register.

Registration of application for ancillary relief as a lis pendens

May 18, 2012

In Choi Sung Po v Lai Woon Lan ([2012] HKEC 563) C and L had divorced in 2010. After that C bought a flat in his own name and C and S bought a flat as joint tenants. L amended her application for ancillary relief (Form A) to include an application for a settlement of property order and a transfer of property order in respect of these two properties. This was registered at the Land Registry against the properties. C sought to have the registration vacated. The Court pointed out that since the Form A was prima facie registable, the burden was on C to show why the registration had been vacated. He had failed to discharge this burden.

Late re-registration of charging orders does not affect priority vis-a-vis charging orders antecedent to the re-registration

July 22, 2011

The Land Registration Ordinance requires charging orders to be registered. Section 17 of the same ordinance requires them to be re-registered every 5 years. Where there are two charging orders, A and B, with A initially having priority over B, the later re-registration (or failure to re-register within the stated time period) does not give B priority over A (even during the period before B needs to re-register). Failure to re-register only affects A’s priority vis-a-vis interests that arise after A’s failure to re-register on time.

In Incorporated Owners of Century Centre v Bank of China (Hong Kong) Ltd ([2011] HKEC 864) Bank of China obtained and registered charging orders nisi and absolute in respect of certain property in 2001. HSBC obtained and registered  charging orders nisi and absolute in respect of the same property in 2002. Section 17 of the same ordinance requires them to be re-registered every 5 years. Each bank made its first re-registration within 5 years and Bank of China made its second re-registration in 2010 (a few weeks late). HSBC argued that it had priority (even if re-registration occurred within time) because the effect of re-registration was that the re-registered charging order was postponed to any existing registered charging orders. This argument failed. The re-registered charging order retained whatever priority it had previously enjoyed as against interests (including other charging orders). Were it not so, the priority of one interest over another would vary depending upon when the question of priority had to be addressed. Thus, on HSBC’s argument, it would enjoy priority from 2010 (the date of Bank of China’s registration) until the time came for it to re-register (when Bank of China would resume priority). Authority and principle were against HSBC’s submission. Bank of China had priority.

Failure to register the right to exclusive use of the roof

January 20, 2011

The exclusive right to use the roof of a building is registrable under the Land Registration Ordinance. Failure to register can result in a loss of priority under s.3 of the Land Registration Ordinance.

In Fast Forward Ltd v Magicsound Co Ltd ([1991] 2 HKLR 529, CA) undivided shares in an industrial building had been sold to Magicsound’s predecessor in title. The sale included the right to the exclusive use of the main roof of the building. The sale was registered but the registration did not mention the right to the exclusive use of the roof. Further undivided shares were sold to Fast Forward together with the exclusive right to use the main roof. Fast Forward’s registration did refer to this right. The Court of Appeal confirmed that the right was registrable. Since Magicsound’s predecessors had not registered, their right to exclusive use of the roof had lesser priority than that of Fast Forward.

Options to renew are void under LRO s.3(2) unless registered

January 14, 2011

An option to renew a lease is registrable under the Land Registration Ordinance. If not registered it is void, as a result of LRO s.3(2), as against a subsequent bona fide purchaser or mortgagee for valuable consideration. This is true even if the option is contained in a lease that falls within the exception set out in LRO s.3(2).

In Markfaith Investments Ltd v Chiap Hua Flashlights Ltd ([1990] 2 HKLR 84, PC) Chiap Hua had agreed to assign a lease of land in Kowloon to Markfaith. The sale was expressly made subject to certain leases. The sellers did not, however, disclose the fact that some of the leases contained options to renew. Neither the leases nor the options had been registered in accordance with the Land Registration Ordinance by the time the purchasers registered their agreement with Chiap Hua. The purchasers found out about the options and refused to complete the purchase on the basis that these were undisclosed encumbrances. The Privy Council confirmed the decision of the Hong Kong courts that the options were not binding on Markfaith as a result of LRO s.3(2)  (so that Markfaith had not been entitled to refuse to complete). Although there is an exception in LRO s.3(2) in favour of leases for a term not exceeding 3 years at a rack rent, this only applies to the ‘bare lease’ (per Lord Templeman at 87) and not to the separate interest created by the option.

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

October 13, 2010

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.