Shing Shu Lung v. Shing Kam Chuen

HCA 2067/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2067 of 2013

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Before: Deputy High Court Judge Kwok SC in Chambers (Open to public)

Date of Hearing: 22 June 2017

Date of Handing Down Decision: 7 July 2017

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D E C I S I O N

The applications before me

1.(1) The defendant issued two summonses on 14 November 2016.  Both summonses were heard by me on 22 June 2017.

(2) One summons asked for:

(a) striking out of the Statement of Claim (“Striking Out Application”); and

(b) the “Writ of Summons in this action registered by the Plaintiff on 31 October 2015 as a lis pendens on the following pieces of land [repeating the Lot Nos. listed in the Amended Statement of Claim] be vacated” (“Vacation of Registration of lis pendens Application”).

(3) The other summons asked for summary judgment on the Counterclaim under Order 14 (“Summary Judgment Application”).

(4) After hearing the two summonses, I said my decision would be handed down in due course.  This I now do.

Relevant background       

2.On 29 October 2013, the plaintiff issued the Writ in this action against the defendant. 

3.On 20 November 2013, the plaintiff amended the Writ.  The Amended Endorsement of Claim signed by Kong & Tang, solicitors for the plaintiff, read as follows:

“This claim is brought on the grounds of breach of trust and the Plaintiff claims the following relief:

1. An order directing the Defendant to render full and proper accounts of trust properties;

2. An order restraining the Defendant from selling the lands below in his capacity as trustee:

a. [the Deceased’s] share in the Family Property situate and known as Lot Nos 78,79,80,82,91,93,188,190 in D.D. 243. Sai Kung, New Territories and Lot No. 105, 109, 111, 122, 133, 138, 258, 265, in D.D. 243, Sai Kong, New Territories; and

b. [the Deceased’s] Own Property situate and known as Section A of Lot No. 142 in D.D. 234, Sai Kung, New Territories; Lot Nos. 223, 224 in D.D. 239, Sai Kung, New Territories and Lot No. 1405 Ext. in D.D. 243, Sai Kung, New Territories.

3. An order to appoint the Plaintiff as trustee;

4. Equitable compensation for losses caused by the breaches of trust, alternatively, account of profits;

5. Interests (sic);

6. Costs; and

7. Such further and other relief as the Court may think fit.”

4.On 21 November 2013, Chow Fu Chun, Edwin, a solicitor of the firm Kong & Tang, signed Memorial No. 13103102120032, and caused it to be presented for registration.  It was said to be received for registration on “31/10/2013”.  The Memorial was registered against the lots listed in §2 of the Amended Endorsement of Claim. 

5.More than 2 years 7 months after the registration of the lis pendens, the plaintiff filed his Statement of Claim on 29 June 2016, claiming an account of all trust properties.

6.(1) The defendant filed his Defence and Counterclaim on 29 August 2016.

(2) The defendant counterclaimed an injunction requiring the plaintiff to move out of certain properties; an order vacating the lis pendens; and damages.

(3) The plaintiff filed his Reply and Defence to counterclaim on 12 October 2016, raising a number of factual issues.

Vacation of Registration of lis pendens Application

7.I shall deal first with the Vacation of Registration of lis pendens Application.

8.The defendant applied for the “Writ of Summons in this action registered by the Plaintiff on 31 October 2015 as a lis pendens … be vacated”.  The Writ cannot be “vacated”.  What can be vacated is the registration in the Land Registry of the lis pendens.

9.Neither party questioned my Judgment in Luen Ford Industrial Company Limited v Woo Ming Han Juliana. HCMP 1715/2015, 10 December 2015.  I repeat below the law and principle as stated by me in Luen Ford.

Land registration legislation

10.Section 1A of the Land Registration Ordinance, Cap 128, defines “lis pendens (待決案件)” as:

“(a) any action or proceeding pending in a court or tribunal that relates to land or any interest in or charge on land …”

11.Section 2(1) provides for registration of “judgments”:

“(1) The Land Registry shall be a public office for the registration of … judgments; and … all judgments, by which … judgments, any parcels of ground, tenements, or premises in Hong Kong may be affected, may be entered and registered in the said office in the prescribed manner.”

12.Section 14 extends the “provisions of [the] ordinance relating to judgments (subject to the provisions hereinafter contained)” to “lites pendentes”.

13.Section 19 provides for vacation of registration of lis pendens in certain circumstances:

“The court or judge before whom any property sought to be bound is in litigation, may on the determination of the lis pendens, or during the pendency thereof, where the said court or judge is satisfied that the litigation is not prosecuted bona fide, or for other good cause shown, make an order for the vacating of the registration in the Land Registry of such lis pendens without the consent of the party who registered it, and may direct the party on whose behalf the registration was made to pay all the costs and expenses occasioned by the registration or the vacating thereof, including the costs of the application to vacate, or may make such other order as to such costs or any of them as to the said court or judge may seem just.”

14.Section 23A(b) confers immunity on the Land Registrar or any other person employed in the Land Registry for registering, in good faith, any deed, conveyance, or other instrument in writing, or judgment, which does not affect any parcels of ground, tenements or premises in Hong Kong:

“… the Land Registrar or any other person employed in the Land Registry … shall not be liable in damages … for registering, in good faith, any deed, conveyance, or other instrument in writing, or judgment, which does not affect any parcels of ground, tenements or premises in Hong Kong.”

15.The immunity is confined to the Land Registrar or “any other person employed in the Land Registry”.  It does not cover solicitors who procured registration such as Chow Fu Chun, Edwin who verified a memorial and procured the registration of the Amended Writ of Summons in this action.

16.Regulation 6(2)(e) of the Land Registration Regulations, Cap 128A, provides that:

“A memorial of an instrument being a lis pendens … shall contain the following particulars … a description of the land and premises affected or intended to be affected, including the lot number and address (including the address in the Chinese language if known).”

17.Regulation 7(b) provides that:

“Every memorial shall be verified … by the certificate of a solicitor.”

Thian’s Plastics v Tin’s Chemical

18.In Thian’s Plastics Industrial Company Limited and others (No 2) v Tin’s Chemical Industrial Company Limited and another [1971] HKLR 249, the then Full Court (now Court of Appeal) held that:

(1) the only lites pendentes which are registrable are those which “affect” land; and

(2) the court had an inherent jurisdiction to vacate lis pendens which was not registrable.

19.Thian’s was a case where the lis pendens was registered against properties owned by the 1st plaintiff (referred to by Briggs J as “Plastics”) and the 2nd plaintiff (referred to by Briggs J as “Enterprises”).  The relevant five paragraphs of the endorsement on the writ in that case were:

“(g) that the first and/or second plaintiffs be declared the beneficial owners of the property known as New Kowloon Inland lots No. 4755 and 4756.

(h) that the first defendant and/or the second defendant be prevented or otherwise restrained from selling or advertising the sale of the properties (referred to above).

(i) Consequential injunctions.

...

(l) that the second defendant be prevented or otherwise restrained from dealing with the properties and/or assets of the first or second plaintiffs or otherwise interfering in the management of the first and/or second plaintiffs.

(m) that the second defendant be restrained from acting as a Director of the first and/or second plaintiffs respectively.”

20.Briggs J approved the following passage of the judgment in the court below:

“Before a plaintiff registers an action as a lis pendens it is his bounden duty to ensure that it is an action in which a claim to land or some interest in land is asserted: that there is a claim of right or a claim to charge some specific property. In other words that the landed property mentioned in the memorial is (in the words of section 19) ‘in litigation’.” (emphasis added)

21.Briggs J went on to explain and held that the lis pendens is not registrable:

“Paragraphs (g), (h) and (i) can be disposed of together. We are here dealing with a lis namely with a dispute. There is no dispute as to the ownership of the properties mentioned in paragraphs (g) and (h) of the writ. They are registered in the name of Enterprises. I cannot see how in these circumstances the first or third defendants can ‘sell’ such properties. Enterprises may sell but not the first and second defendants. If relief is sought to prevent the sale of these properties it must be directed to the person who has the power to sell i.e. to Enterprises: not to the Managing Director of Enterprises or the first defendant Company. These paragraphs obviously refer to a dispute within the Company. There is no lis, no dispute here. It is clear, I think that the writ is not registrable as a lis pendens affecting land because of these paragraphs.

The other two paragraphs ask for relief against the second defendant. If judgment is given in accordance with the terms of the relief sought in these paragraphs the second defendant will be enjoined not to exercise any of his powers as Managing Director of both Plastics and Enterprises. For example, he would be forbidden by the court to sign a conveyance on behalf of either of the companies.

The court is not being asked to make an order that the second defendant shall cease to be the Managing Director of Plastics. Such would not be possible because of the Articles of Association. The order sought is that he shall not exercise any of his powers. And if such an order were granted he would remain Managing Director.

But this would not affect the land. A mandatory order forbidding a Managing Director to use his power to sign a conveyance of land of his company as Managing Director does not affect the land. It affects the Managing Director. It is a personal order to him and disobedience to it may involve contempt of court. But such an order would not prevent the proprietors of the land, the Company, from dealing with the land.

None of these paragraphs affect the ownership of the land. There is no claim to any land or to any interest in land, nor is there a claim to charge some specific property.

In my view this lis pendens was clearly not registrable.” (Emphasis added)

22.Huggins J pointed out that the land must be affected by the lis itself:

“The important point to notice is that the land must be affected by the lis itself. My Lord has set out those remedies sought by the plaintiffs which are relied upon as showing that the land is affected. The title to the land is not in dispute. What is in dispute is whether the second defendant has acted in a manner which makes it equitable that he be restrained from exercising legal powers which have admittedly been given to him. Those powers are not dependent upon the title to the land, although as the land is owned by the first or second plaintiffs and the second defendant is the authorised agent of those companies the existence of those powers would enable him to deal with the land. But how can it be right to prevent the companies, who have an unchallenged right to deal with the land, to act through such agent as they think fit? What the third plaintiff is endeavouring to do is to regulate the internal affairs of the companies. If he succeeds in the action the judgment will affect the persons who are entitled to deal with the properties on behalf of the companies, but it will not affect the properties themselves. A preservation order is distinguishable because by its very nature it is intended in effect to ‘freeze’ the title to the land.”

23.Thian’s holding on the court’s inherent jurisdiction was applied by the Court of Appeal recently in John’s Win Holdings Limited v City Target Limited and another, CACV 190/2015, 23 November 2015.

24.Thian’s was a decision in 1971 by the then Full Court.  It is binding on me. I regard the law as settled many years ago.  Every conveyancing solicitor should be familiar with this case.

25.I regard Thian’s as indistinguishable from this case and I apply it when considering each claim in the Amended Endorsement of Claim:

(1) The claim for an account of trust properties has nothing to do with land.

(2) The claim for an injunction against the defendant from selling the lands is a personal claim against the defendant.

(3) The claims for appointment of the plaintiff as trustee, for equitable compensation or an account, “interests”, costs and [unspecified] other relief are all personal claims, not a claim by which land “may be affected”.

26.Ms Athena Wong devoted 2 short paragraphs (§§50 & 51) of her Skeleton Argument on lis pendens.

“Lis Pendis

50. An action might qualify as a lis pendens without there being any direct or express claim to a proprietary interest in land. The test was whether the judgment or order given might affect the land in question: Re Ching Yue Chong (Deceased) [1997] 3 HKC 548.

51. In the instant case, if D is found to be in breach of his fiduciary duties and/or be removed by Court as trustee, this shall impact on the land in question.”

27.At the hearing, Ms Athena Wong did not seem keen to develop her written arguments.

28.The first sentence in §50 of her Skeleton Argument was a direct quote from Re Ching Yue Chong (Deceased).  But it was quoted out of context.  The second sentence “The test was whether the judgment or order given might affect the land in question” was a great leap forward which did not follow from the first sentence.

29.In the judgment in Re Ching Yue Chong (Deceased), what follows from the sentence an “action might qualify as a lis pendens without there being any direct or express claim to a proprietary interest in land” is the sentence “the critical issue is whether the judgment of order given affects the land in question”.  The critical issue is whether the judgment or order given “affects” the land, not “might affect” the land. 

30.The difference between something which “affects” the land and something which “may affect” the land can be explained by the following example.  A plaintiff sues a defendant on a debt and obtains judgment on the debt.  The judgment plainly does not affect land.  If the defendant does not pay up and if the defendant owns landed property, the judgment creditor may obtain a charging order against the judgment debtor’s landed properties.  Thus the claim in debt “may affect” the land, but it does not affect land.

31.Ms Athena Wong contended that in “the instant case, if D is found to be in breach of his fiduciary duties and/or be removed by Court as trustee, this shall impact on the land in question”.  I reject this contention.   The Court’s finding that the defendant was in breach of fiduciary duties affects the defendant personally, but does not affect land. The removal of the defendant as a trustee affects the defendant personally, but does not affect land.

32.The registration of the Amended Writ of Summons was a juvenile tactical move to bring about a standstill in the sale of the land lots listed.  It is similar in effect to obtaining an injunction.  If the plaintiff, Shing Shu Lung (成樹龍), should proceed by the injunction route, their claim would be vetted by the [ex parte] judge.  What is objectionable here is that the plaintiff in this case, Shing Shu Lung (成樹龍), and his solicitors, Kong & Tang did not seek judicial approval to achieve Shing Shu Lung’s (成樹龍) objective of preventing any sale.  Instead, what the plaintiff, Shing Shu Lung (成樹龍), and his solicitors, Kong & Tang, did, was simply to abuse the land registration system.

Vacating registration

33.The Amended Writ of Summons was clearly not registrable.  Its registration was an abuse of the registration system.  In the exercise of the court’s inherent jurisdiction, I order its registration to be vacated.

34.To mark the court’s strong disapproval of the abuse, I order costs on indemnity basis.

35.I warned in §36 of Luen Ford that:

“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.The relevant memorial in this case, Memorial No. 13103102120032, was certified by Chow Fu Chun, Edwin, a solicitor of Kong & Tang, who acted as solicitors for the plaintiff in this case.  The Amended Writ of Summons was plainly not registrable. 

37.I raised the question whether I should order Chow Fu Chun, Edwin, a solicitor of the firm, Kong & Tang, to show cause why he should not personally pay costs of the Vacation of Registration of lis pendens Application.

38.After hearing Ms Athena Wong, I ordered at the hearing on 22 June 2017 that Chow Fu Chun, Edwin, should write to the Court by 4:00 pm on 30 June 2016, explaining how he came to be involved in signing the Memorial and presenting it for registration when it should be plain and obvious to any competent solicitor that the Amended Writ of Summons did not affect land and was not registrable.

39.I order that the registration by Memorial No. 13103102120032 of the Amended Writ of Summons in this Action as a lis pendens against the properties listed in the Memorial be vacated and that the plaintiff do pay the defendant the costs of the Vacation of Registration of lis pendens Application to be taxed on indemnity basis, if not agreed.

Striking Out Application

40.I turn now to the defendant’s application to strike out the Statement of Claim.

41.(1) The Statement of Claim was filed on 29 June 2016.

(2) The defendant did not immediately apply to strike out the Statement of Claim.

(3) What the defendant did was to file a Defence & Counterclaim  on 12 October 2016.

(4) The Defence ran to 9 pages and the Counterclaim began at page 10.  There was no contention in the Defence that the plaintiff’s Claim was an abuse of process or was frivolous and vexatious.

(5) The Defence pleaded that “certain” steps taken by the defendant had been agreed by the beneficiaries and that proceeds of sale of “a large part” of the Estate disposed of had been duly distributed to the beneficiaries. 

(6) The Striking Out Application was made on 14 November 2016.

(7) It follows from the defendant’s own pleaded case that:

(a) there is no allegation that  all the steps taken were taken with the agreement of the beneficiaries; and

(b) there is no allegation that all proceeds of sale had been distributed to the beneficiaries.

(7) The defendant admits that he is the trustee.  On his own pleaded case, some of the steps taken by him had not been accounted for.  On his own pleaded case, some of the proceeds of sale had not been accounted for.  In the circumstances, I do not see how the plaintiff’s claim for breach of trust can be said to be an abuse of process or frivolous and vexatious.

42.I dismiss the Striking out Application with costs to be paid by the defendant to the plaintiff to be taxed, if not agreed.

Summary Judgment Application

43.The defendant took out the Summary Judgment Application on 14 November 2016 after the plaintiff had served his Defence to Counterclaim on 12 October 2016. 

44.The Defence to Counterclaim raised a number of factual issues.  The factual issues should be resolved at trial and not by a trial on affidavits.

45.I dismiss the Summary Judgment Application with costs to be paid by the defendant to the plaintiff to be taxed, if not agreed.

He costs orders

46.So far as the 3 costs orders I made in §§39, 42 and 45 above are concerned, as explained in my judgment in Xcelom Ltd and another v BGI-Hongkong Co Ltd and another (No 2), [2017] 1 HKLRD 436, the party in whose favour the cost order was made is entitled to immediate taxation and payment of their costs. 

Ms Athena Wong, instructed by Kong & Tang, for the plaintiff

Ms Yvonne Fong, instructed by Wong Poon Chan Law & Co., for the defendant