Posts Tagged ‘Land Registration Ordinance’

Priority contest between a charging order and an assignment

August 27, 2022

Asparouh Ianov Dimitrov v Dominic Tak Ming Lau ([2022] HKCA 1146 ) was a dispute between a creditor with a charging order over the debtor’s property (‘the Property’) and the debtor’s ex-wife to whom the debtor assigned the Property.

The sequence of events was:

  • 20 November 2017 –  charging order nisi obtained
  • 23 November 2017 –  charging order nisi registered
  • 3 January 2018         – debtor assigned the Property to his ex-wife
  • 15 January 2018       – charging order absolute obtained
  • 19 January 2018       – assignment registered
  • 25 January 2018       – charging order absolute registered

The creditor sought a declaration that the charging order had priority over the assignment and an order for sale and succeeded at first instance. The debtor’s wife appealed.

There was no difficulty in confirming that the charging order had priority over the assignment: the priority date for the charging order absolute relates back to the priority date for the charging order nisi ([20]).

Section 5A of the Land Registration Ordinance specifies that a charging order has priority from the day after its registration. The priority date of the charging order was 24 November 2017 (the day after the 23 November 2017 registration).

Section 5 of the Land Registration Ordinance says (in effect) that assignments registered within one month take effect as from the date they were executed. The priority date of the assignment was 3 January 2018.

The debtor’s wife relied (unsuccessfully) on an argument that she had a prior unwritten equitable interest to which the charging order was subject.

She argued, for example, that there was an oral gift of the Property to her before the date of the charging order nisi. She relied on Re Rose to argue that she had an equitable interest because her husband gave her the title deeds.

Hon Chow JA pointed out that her husband had not executed a deed of gift at the relevant time and so had not done everything in his power to divest himself of his interest in the land.

Arguments based on proprietary and / or promissory estoppel failed because, even assuming there to have been an assurance, the wife incurred no detriment.

The declaration that the charging order had priority and the order for sale were upheld.

Michael Lower


Registrability and priority of an assignment of the proceeds of a future sale of land

January 9, 2022

In Winland Finance Limited v Gain Hero Finance Limited ([2021] HKCA 576) the Court of Appeal looked at the registrability of a loan agreement where the borrower assigned the right to the net proceeds of any future sale of real property to the lender by way of security. It also looked at the relative priorities of such an agreement and a later charging order.

T owned a flat in Kowloon (‘the flat’). In June 2014, T entered into a loan agreement with Winland Finance Limited (‘WF’). T borrowed HK$2.1 million from WF and assigned to WF the net proceeds of any sale of the flat. T also gave WF the title deeds to the flat. WF registered the loan agreement at the Land Registry on 17 September 2014.

In November 2014, T entered into a further loan agreement with Gain Hero Finance Limited (‘GH’). In June 2015, GH obtained judgment against T for breach of the agreement. In August 2015, GH obtained a charging order absolute over the flat. In March 2017, GH obtained an order for sale of the flat. Under the terms of the order, payment would be made to GH and the surplus of the net proceeds of sale would be paid to T.

WF brought proceedings arguing that its earlier, registered loan agreement gave it priority over GH’s charging order or that the delivery of title deeds to it gave it an equitable mortgage with priority over the charging order. WF failed. Yuen JA gave the principal judgment.

First, the WF loan agreement did not relate to land and should not have been registered ([22.2]). Yuen JA expressed the hope that the Land Registry would refuse to register such agreements in the future ([23]).

Second, the WF loan agreement did not disclose any intention that the delivery of title deeds was to give rise to an equitable mortgage.

Third, while the charging order was to be treated as if it were an equitable charge over the flat (High Court Ordinance, s. 20B(3)), WF only had an equitable interest in the proceeds of any future sale. Thus, GH had priority. In fact, GH had a proprietary interest in the flat ([28.1]) and WF did not.

Fourth, it would have been prudent for the masters who dealt with GH’s charging order applications to order service direct on WF but they did not do so ([31.1]). WF, however, did not take any steps to have the order set aside. Had it done so, the court could have considered whether T was insolvent at the time of the charging orders. The court could then have considered the impact of a charging order on the fair distribution of assets.

Michael Lower

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

Land Registration Ordinance: a lis pendens involves a claim to a proprietary interest

January 27, 2016

In Wide Power Corp Ltd v Manhattan Court (IO) ([2015] 4 HKLRD 480, CFI) the incorporated owners of a building sought an injunction requiring an owner to remove unauthorised building works carried out in breach of the DMC. They registered the claim as a lis pendens. The owner successfully argued that the counterclaim did not relate to land or any interest or charge on land and so did not fall within the definition of a lis pendens in section 1A of the Land Registration Ordinance. A lis pendens must involve a claim to a proprietary interest or right in real property (Louis Chan J. at [76]). Here, the claim was an in personam claim against the owner. If the owner were to sell the property, the new owner would not be affected by the proceedings against the former owner. He would, of course, be liable under the terms of the DMC but this would involve a fresh claim against the new owner.

Michael Lower

A lis pendens must affect land

December 23, 2015

In Luen Ford Industrial Co Ltd v Woo Ming Han Juliana ([2015] HKEC 2639, CFI) D alleged that her father had procured her late mother’s execution of a transfer of the mother’s shares in a company (‘the parent company’) through the exercise of undue influence.  Her primary claim was for a declaration that the transfer was null and void. A subsidiary of the parent company (‘the subsidiary’) owned an industrial unit (‘the property’). D also sought orders preventing the subsidiary from selling the property or, alternatively, from disposing of the proceeds of sale. D’s solicitor registered the writ as a lis pendens against the property.

Deputy Judge Kenneth Kwok SC  ordered the registration to be vacated pursuant to section 19 of the Land Registration Ordinance. He referred to Thian’s Plastics Industrial Company Limited v Tin’s Chemical Industrial Company Limited and Anstalt Nybro v HK Resort Company Limited. This litigation did not affect land. There was no action against the owner of the land (the subsidiary). The action concerned the father and the parent company and their future conduct. The claim for an injunction to restrain the sale of the land was an artifice designed to give the appearance that there was a claim affecting land:

‘The registration was a blatant tactical move to bring about a standstill in the sale of the Subject Property. What is objectionable is that Juliana Woo and her then solicitors did not seek judicial approval to achieve her objective. Instead, they simply abused the registration system.’ ([33])

The alternative claim restraining the disposal of the sale proceeds was adequate protection for D.

The judgment closes with this warning:

‘Registration of a lis pendens is a clog on the owner’s title. Those who act in concert to procure registration of a lis which does not affect land should beware of possible liability.’ ([36])

Costs were awarded against D on an indemnity basis.

Michael Lower

The court’s power to vacate a lis pendens

December 2, 2015

In Join Win Holdings Ltd v City Target Ltd ([2015] HKEC 2477, CA) the first instance judge dismissed P’s claim for a declaration that it had entered into an oral contract for the acquisition of D1’s property and for specific performance of that contract. There was no writing to satisfy section 3(1) of the Conveyancing and Property Ordinance and part performance had not been pleaded. The judge had also ordered that the lis pendens registered at the Land Registry be vacated. P appealed against this judgment and registered the notice of appeal as a lis pendens at the Land Registry. D1 successfully applied for the vacation of the notice of appeal from the Land Registry.

The Court of Appeal (Cheung JA giving the only full judgment) referred to the court’s power under section 19 of the Land Registration Ordinance to order the vacation of a lis pendens when it is satisfied that ‘the litigation is not prosecuted bona fide, or for other good cause shown.’ It also pointed to its inherent jurisdiction to order the vacation of a registration.

In deciding whether or not to vacate the registration, the court had to assess the merits of the appeal. This appeal was doomed to fail given the lack of any writing to satisfy section 3(1) ([2.11]). ‘The notice of appeal should never have been registered because putting the plaintiff’s case at its highest it is not one that can be said to affect the property.’ ([2.16]).

Michael Lower


Effect of failure to register a written declaration of trust

July 15, 2014

In HKSAR v Lau Kam Ying ([2013] HKEC 1503, CFA)  Company X transferred the title to land to indigenous villagers. The villagers executed declarations of trust to the effect that each of them held his section on trust for company X. This declaration was never registered. Company X was wound up.  When the Government resumed the land, some of the villagers assigned their land to Company Y which had been set up to collect compensation on their behalf. They made false statutory declarations to the effect that the title deeds had been lost. These were then submitted to the Government as part of the process of claiming the compensation.

The leading players behind the scheme were convicted of conspiracy to defraud. They had falsely represented that company Y was a bona fide purchaser for valuable consideration and concealed the beneficial interest of company X. In this decision, the Court of Final Appeal rejected the defendants’ application for leave to appeal against the convictions.

The defendants argued, first, that the declarations were null and void as against company Y as a result of section 3(2) of the Land Registration Ordinance. This failed since sections 3 and 4 of the Land Registration Ordinance, ‘concern priorities between registered instruments but do not affect remedies which may be available whether in contract, tort or equity.’ (Tang P.J. at [19]). The second argument was that the declaration was unenforceable on the grounds of public policy. This would have failed anyway since company X would not need to plead an illegal act (Tinsley v Milligan) ([20]).

In any event, the conviction relied on the fact of the concealment not on whether company X had an indefeasible beneficial interest ([21]).



Application to vacate the registration of a writ

November 12, 2013

In Huen Wai Kee v Choy Kwong Wan Christopher ([2013] HKEC 1784, CFI) H and C were the shareholders of P Ltd. C agreed to buy H’s shares for HK$40 million. C agreed that property (‘the property’) owned by R Ltd (a company controlled by C and his wife) would be security for C’s payment obligations under the share sale agreement. R Ltd entered into an agreement to sell the property to CG Ltd (a company controlled by H for HK$38.4 million). Any amount unpaid by C in respect of the shares would be set off against the price to be paid by CG Ltd. C failed to pay the full purchase price.

H and CG Ltd brought proceedings against C and R Ltd. H / CG Ltd sought the amount unpaid under the share sale agreement and in respect of dishonoured cheques and specific performance of R Ltd’s agreement to sell the property to CG Ltd.

They obtained an order for the payments to be made and, in the alternative, for specific performance of the agreement to sell the property to CG Ltd (with the amount owed by C being deducted from the purchase price of the property).

The order was registered at the Land Registry. C then entered into an agreement to sell the property to a third party for much more than the price payable by CG Ltd. C and R Ltd sought the vacation of the registration of the writ under section 19 of the Land Registration Ordinance.

They failed. The court’s intention was that it was H and CG Ltd who, under the terms of the order that had been made, had the option as to whether or not to insist on specific performance.

This hearing was not the occasion on which to argue that the order should not have been made.

Michael Lower