Read the full judgment text of CACV 167/2017 on BabelCite. This Court of Appeal judgment was delivered on 30 April 2018 before Cheung CJHC, Cheung JA, G Lam J.
Civil appeal – land and trusts – charging orders – priority of interests – resulting trust – Land Registration Ordinance (Cap 128) – District Court Ordinance (Cap 336) s.52AA – declaration of trust – whether declaration binds non-party – estoppel by conduct – whether charging orders registrable where judgment debtor has no beneficial interest. The plaintiff and her husband purchased a property in 1999 and held it as registered joint owners. The husband later incurred judgment debts to the defendant, and four charging orders were obtained against the property and registered in the Land Registry in 2009. The husband was adjudicated bankrupt. In HCMP 3339/2013, the plaintiff obtained a declaration from Lok J dated 26 November 2015 that the husband had always held the property on trust for her; the Official Receiver did not contest the application, and the defendant (though not joined) was aware of the proceedings, had notice of hearing served on it, and its director Mr Wong appeared at material hearings including the substantive hearing. The plaintiff then sought to discharge and vacate the four charging orders; the deputy district judge dismissed the application on the basis of priority under s.3(1) of the Land Registration Ordinance, taking the view that the charging orders, having been registered before the declaration in January 2016, had priority. On appeal, the Court of Appeal allowed the appeal. The Court of Appeal held that a charging order under s.52AA of the District Court Ordinance can only be imposed on a beneficial interest or a specified trust interest of the judgment debtor, so where the husband held the property on trust for the plaintiff and had no beneficial interest, the court had no jurisdiction to make the charging orders and they must be discharged (s.52AB(4) and s.52AB(5)). The Court of Appeal further held that only instruments that affect land are registrable under s.2(1) of the Land Registration Ordinance; a charging order against a person with no beneficial interest does not affect the property and is not registrable, and the court has inherent jurisdiction to vacate any unauthorised registration (Thian's Plastics Industrial Co Ltd (No 2) v Tin's Chemical Industrial Co Ltd [1971] HKLR 249). Accordingly, s.3(1) priority has no application where one of the instruments is not registrable. The declaration merely confirmed a pre-existing resulting trust that had subsisted since 1999, and in any event the prior resulting trust prevailed in equity because a charging order holder is not a bona fide purchaser of the legal estate for value without notice (s.52AB(3) District Court Ordinance; Re Cosslett (Contractors) Ltd [1998] Ch 495; Financial and Investment Services for Asia Ltd v Baik Wha International Trading Co Ltd [1985] HKLR 103; Ng Kam Ha v Vincent Sina Traders (HK) Ltd [1987] 2 HKC 517). On the defendant's new point, the Court of Appeal held that the declaration was a judgment in personam and not a judgment in rem (Pattni v Ali [2007] 2 AC 85) and therefore did not automatically bind a non-party such as the defendant, but the defendant was nevertheless estopped by its conduct from re-opening the matter (Nana Ofori Atta II v Nana Abu Bonsra II [1958] AC 95; Wytcherley v Andrews (1871) LR 2 P & M 327; House of Spring Gardens Ltd v Waite [1991] 1 QB 241), because it was fully aware of the proceedings, was served with notice of hearing, attended through Mr Wong, had a common interest with the Official Receiver, and knowingly stood by while the declaration was made. The new point was therefore rejected, and leave to run it was refused. The appeal was allowed, the deputy judge's order set aside, the charging orders discharged and their registration vacated, costs of the proceedings below awarded to the plaintiff with a certificate for counsel, the defendant's new-point application dismissed with costs, and an order nisi made that costs of the appeal be borne by the defendant.
Legal issues: Whether charging orders can be made against property where judgment debtor has no beneficial interest · Whether registration of the charging orders should be vacated in the Land Registry · Whether the prior resulting trust has priority over subsequent registered charging orders in equity · Whether the declaration in HCMP 3339/2013 is a judgment in rem or in personam · Whether the defendant is estopped by conduct from challenging the declaration · Application to run a new point on appeal
Outcome: Appeal allowed; the deputy district judge's order is set aside; the four charging orders are discharged and their registration in the Land Registry is vacated; the defendant's application to run a new point is refused.
Cited by 14 cases · Cites 2 cases