Ho Yuk Lan v. Hui Tsz Hang and Another

HCA 2042/2020
HCMP 110/2021
(tried together)

[2025] HKCFI 4562

HCA 2042/2020

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 2042 OF 2020

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AND

HCMP 110/2021

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 110 OF 2021

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J U D G M E N T

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Introduction

1.There are two actions before me, HCA 2042/2020 and HCMP 110/2021, which were heard together. HCA 2042/2020 are proceedings commenced by Madam Ho Yuk Lan (“Plaintiff”) against her son Hui Tsz Hang (“1^st Defendant”) and Konew Capital International Ltd (“2^nd Defendant”) in relation to the beneficial ownership of some properties. HCMP 110/2021 are mortgagee proceedings commenced by the 2^nd Defendant as against the 1^st Defendant (with the Plaintiff having joined as the Intervener), seeking repayment of money advanced and secured by mortgages over the relevant properties, and vacant possession thereof in lieu of payment.

2.The three properties concerned in these proceedings are:

(1)  Factory Unit 21, 4^th Floor, Sing Win Factory Building, Nos 15-17 Shing Yip Street, Kowloon, Hong Kong (“Property 1”);

(2)  Unit 14, 5^th Floor, New City Centre, No 2 Lei Yue Mun Road, Kowloon, Hong Kong (“Property 2”); and

(3)  1^st Floor and flat roof of No 10 Choi Hung Road, Kowloon, Hong Kong (“Property 3”).

(collectively, the “Properties”)

3.The 2^nd Defendant is a licensed money lender which granted mortgage loans to the 1^st Defendant secured by the Properties.

4.On 17 January 2020, the 1^st Defendant borrowed HK$3,500,000 from the 2^nd Defendant using Property 1 as security (the “1^st Konew Mortgage”). He further borrowed HK$5,000,000 on 21 September 2020 from the 2^nd Defendant, with Property 2 and Property 3 as security (the “2^nd Konew Mortgage”) (together, the “Konew Mortgages”).

5.The key issues in these proceedings are: (1) whether the Plaintiff has established beneficial ownership under a resulting trust or a common intention constructive trust over the Properties, and (2) if so, whether the 2^nd Defendant had actual or constructive notice of her interest at the time the Konew Mortgages were granted.

Background

6.There is no dispute between the Parties that at the time when the Konew Mortgages were granted, the 1^st Defendant was the sole registered owner of the Properties. However, the Plaintiff asserts that she was the sole beneficial owner of the Properties, having provided the funds (either directly or through her daughter) for their purchase, made mortgage repayments, and paid for their ongoing management.

Property 1

7.In respect of Property 1, the Plaintiff alleges that in early 2010, she entered into an oral agreement with two friends, Ms Ho Kwai Lin (“Ms Ho”) and Ms Lo Kwun Ying (“Ms Lo”), whereby the Plaintiff would acquire 70% interest in Property 1, and Ms Ho and Ms Lo would acquire the remaining 30% interest (in shares of 20% and 10% respectively) under their joint purchase.

8.It is the Plaintiff’s case that in or around June 2010, she and the 1^st Defendant had a common intention under an arrangement for the 1^st Defendant to hold Property 1 on trust for the Plaintiff, Ms Ho and Ms Lo in accordance with their respective beneficial shares. The 1^st Defendant further agreed that he would apply for and obtain a mortgage loan to partially fund the Plaintiff’s purchase of the 70% share.

9.The Plaintiff claimed that pursuant to said common intention for Property 1:

(1)  The 1^st Defendant entered into a sale and purchase agreement to purchase Property 1 in his sole name, and subsequently obtained a mortgage loan from Shanghai Commercial Bank Limited.

(2)  The Plaintiff paid the purchase price of HK$1,458,000, together with all related costs and expenses.

(3)  The 1^st Defendant rented out Property 1 on the instruction of the Plaintiff.

(4)  The Plaintiff used her own funds and the rental income from Property 1 to repay the mortgage.

10.In or around early 2012, the Plaintiff alleges that she acquired the 30% shares in Property 1 by purchasing the respective shares of Ms Ho and Ms Lo for the sums of HK$700,000 and HK$300,000 respectively.

11.The Plaintiff further alleges that the 1^st Defendant, pursuant to her instruction, obtained loans by entering into the following mortgages:

(1)  a mortgage loan from Industrial and Commercial Bank of China (Asia) Limited (“ICBC”), the proceeds of which were applied to discharge the prior mortgage. The 1^st Defendant also executed a rental assignment in favour of ICBC; and

(2)  a mortgage loan from Dah Sing Bank Limited (“Dah Sing Bank”), the proceeds of which were likewise used to discharge the prior mortgage. Again, the 1^st Defendant executed a rental assignment in favour of Dah Sing Bank.

Property 2

12.With respect to Property 2, the Plaintiff alleges that in or around January 2013, she and the 1^st Defendant reached a common understanding that the Plaintiff would acquire two-thirds of the interest in Property 2, while the Plaintiff’s sister, Ho Yuk Ying Cindy (“Cindy Ho”), would acquire the remaining one-third interest. Pursuant to this common understanding and intention, Property 2 was held in the names of the 1^st Defendant and Cindy Ho as tenants in common, and the 1^st Defendant was to hold the Plaintiff’s two-thirds share on trust for the Plaintiff.

13.The Plaintiff further claims that, on 31 July 2013, pursuant to her own instructions, the 1^st Defendant and Cindy Ho jointly applied for and obtained a mortgage loan from OCBC Wing Hang Credit Limited (“OCBC”) using Property 2 as security. A rental assignment was also executed in favour of OCBC.

14.A “Confirmation of Ownership” in Chinese dated 1 December 2013 (“業權確認書”) was signed by the 1st Defendant and Cindy Ho, which stated that Cindy Ho was unable to pay her share of the outstanding purchase price for Property 2, which was instead paid by the 1st Defendant (“2013 Confirmation”). The 2013 Confirmation further states that Cindy Ho relinquished any ownership interest in Property 2, thereby acknowledging that the 1^st Defendant held full ownership of the said property.

15.Subsequently, the 1st Defendant and Cindy Ho jointly sold Property 2 to the 1^st Defendant, as the sole legal owner, for HK$4.7 million. In about March 2017, a new mortgage was obtained from Public Bank (Hong Kong) Limited (“Public Bank”) by the 1^st Defendant, to discharge the prior mortgage.

16.The Plaintiff claims she paid the balance of the purchase price and mortgage repayments for Property 2 using her own funds and/or rental income, and that the 1^st Defendant held the entire beneficial interest in Property 2 on trust for her.

Property 3

17.With respect to Property 3, the Plaintiff alleges that in or about October 2017, she and the 1^st Defendant reached a common understanding and had the common intention that she would purchase Property 3, and the 1^st Defendant would hold Property 3 on trust for the benefit of the Plaintiff.

18.On 16 November 2017, the 1^st Defendant entered into a sale and purchase agreement to purchase Property 3 as sole owner.

19.On 31 January 2018, the 1^st Defendant applied to the Public Bank to obtain a mortgage loan for the balance of the purchase price.

20.The Plaintiff alleged that the 1^st Defendant let out the property in accordance with her instructions.

21.On 27 March 2019, the 1^st Defendant made a declaration in writing to confirm that the Properties belonged to the Plaintiff, that he held them on the Plaintiff’s behalf, and that he had no authority to sell them without the Plaintiff’s consent (“2019 Declaration”). Counsel for the 2^nd Defendant confirms that the 2^nd Defendant does not challenge the authenticity of the 2019 Declaration.

The 1^st Konew Mortgage

22.On 16 January 2020, the 1^st Defendant submitted an application to the 2^nd Defendant for a loan of HK$3,000,000, providing Property 1 as security.

23.The 2nd Defendant reviewed, inter alia, the following documents in relation to Property 1, either through its own investigations or by requesting and obtaining them from the 1^st Defendant:

(1)  A copy of a tenancy agreement dated 14 June 2018, entered into between the 1^st Defendant as landlord and 周慶棟 as tenant (“Property 1 Lease”);

(2)  A land search of Property 1, which revealed, inter alia, the Mortgage and the Rental Assignment in favour of Dah Sing Bank, as well as a second mortgage in favour of Everfaith Capital Group Limited;

(3)  A statement of account issued by Dah Sing Bank dated 4 November 2019;

(4)  A credit report issued by TransUnion Limited dated 9 January 2020;

(5)  An internal valuation of Property 1; and

(6)  An assessment of the net value of Property 1.

24.On 17 January 2020, a second mortgage on Property 1 was made between the 1^st Defendant as borrower and the 2^nd Defendant as lender. This 1^st Konew Mortgage over Property 1 was then registered in the Land Registry by Memorial No 20020500610016 on 5 February 2020.

The 2^nd Konew Mortgage

25.On 18 September 2020, the 1^st Defendant submitted to the 2^nd Defendant another application seeking a loan for HK$4,000,000, putting up Property 2 and Property 3 as security.

26.The 2^nd Defendant reviewed the following documents in relation to Properties 2 and 3, either through its own investigations or by requesting and obtaining them from the 1^st Defendant:

(1)  A copy of the tenancy agreement dated 18 February 2019 in respect of Property 2 made between the 1^st Defendant as the landlord and 李柏堂and 黃偉中as tenants, for a term from 1 March 2019 to 28 February 2021 at a monthly rent of HK$14,000.00;

(2)  A copy of the tenancy agreement dated 28 August 2018 in respect of Room A of Property 3 made between the 1^st Defendant as the landlord and 王莉娜as the tenant, for a term from 3 September 2018 to 2 September 2020;

(3)  A copy of the tenancy agreement dated 11 March 2019 in respect of Room B of Property 3 made between the 1^st Defendant as the landlord and 司徒炎華as the tenant;

(4)  A copy of the tenancy agreement dated 7 April 2019 in respect of Room C of Property 3 made between the 1^st Defendant as the landlord and 周振宣as the tenant, for a term from 12 April 2019 to 11 April 2021;

(5)  A copy of the tenancy agreement dated January 2019 in respect of Room D of Property 3 between the 1^st Defendant as the landlord and 李虹林as the tenant.

(The copies of the tenancy agreements above are referred to collectively as “Property 2 and Property 3 Leases”.)

(6)  Land search of Property 2, which reveals that there was a Mortgage and an Assignment of Rentals in favour of Public Bank;

(7)  Land search of Property 3, which reveals there was a mortgage in favour of Public Bank;

(8)  The Land search of Property 2 and Property 3 also revealed that there was a Second Mortgage in favour of Zero Finance Hong Kong Limited registered against Property 2 and Property 3;

(9)  Statement of account issued by Public Bank dated 31 March 2020 regarding the mortgage in its favour over Property 2;

(10)  The loan agreement between the 1^st Defendant and Zero Finance Hong Kong Limited dated 28th May 2020;

(11)  A credit report of the 1^st Defendant from TransUnion Limited dated 18 September 2020;

(12)  An internal valuation of Property 2 and Property 3; and

(13)  An assessment of the net value of Property 2 and Property 3.

27.On 21 September 2020, a second mortgage was made between the 1^st Defendant as Borrower and the 2^nd Defendant as Lender, which was subsequently registered in the Land Registry by Memorial No 20092501730031 on 25 September 2020 for both Property 2 and Property 3.

28.On 21 September 2020, the 1^st Defendant signed two declarations to declare and confirm that no third party had any right or interest in Property 2 and Property 3. The first is an “Owner-occupier Confirmation” that “no third party (whether related or otherwise) had any right or interest whatsoever, whether legal or equitable, in Property 2 and Property 3 (“2020 Confirmation”), and that he had the absolute right and interest” in Property 2 and Property 3. The second, of the same date, was a declaration in Chinese (“2020 Declaration”), whereby the 1^st Defendant as borrower declared that the first payment of the purchase price for Property 1 and Property 2, and the mortgage loan repayments had all along been made by the 1^st Defendant, and no one else. It was also stated in the 2020 Declaration that the 1^st Defendant owned the entire property interest in Property 1 and Property 2, and that the Plaintiff had no interest whatsoever in the Properties. These were apparently supplied to the 2^nd Defendant at the time of the 2^nd Konew Mortgage.

The disputes

29.The Plaintiff claims that she became aware of the two Konew Mortgages on 3 October 2020 after conducting land searches. She denies having authorised or consented to the Konew Mortgages being entered into. The Plaintiff’s case of ownership of the Properties is that she is and was at all material times the sole beneficial owner of these Properties by reason of a common intention constructive and/or resulting trust.

30.On its part, the 2^nd Defendant contends that it is a bona fide mortgagee for valuable consideration without notice of the Plaintiff’s alleged beneficial interest in the Properties, and that it had made all the usual and proper inquires before granting the Konew Mortgages to the 1^st Defendant.

31.The actions were consolidated for trial by order made on 14 February 2025. The 1^st Defendant did not file any defence or evidence, and did not participate in the actions. He was absent at the trial.

32.There are two main issues before this Court, namely:

(1)  Whether the Properties are beneficially owned by the Plaintiff by way of common intention constructive trust and/or resulting trust; if so, whether consent was required before the 1^st Defendant applied for the Konew Mortgages and the effect (if any) in the absence of such consent; and

(2)  Whether the 2^nd Defendant had constructive notice of the Plaintiff’s interest in the Properties.

33.I will deal with these issues in turn.

Whether there was a Common Intention Constructive Trust or Resulting Trust

34.In Leung Hang Lin and Li Kwai Fuk v Lam Mei Yung [2019] HKCFI 2819, Deputy High Court Judge Alexander Stock SC in §§7-8 summarised the legal principles on common intention trust as follows:

“7. The principles applicable to common intention constructive trusts are set out in various Hong Kong authorities, notably: Luo Xing Juan v Estate of Hui Shui See (2009) 12 HKCFAR 1 per Ribeiro PJ at §§35 – 38; Liu Wai Keung v Liu Wai Man [2013] 5 HKLRD 9; Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985; Primecredit Ltd v Yeung Chun Pang Barry [2017] 4 HKLRD 327.

8. In summary:

(1) The starting point is that equity follows the law. There is a presumption that the beneficial interest follows the legal interest. Where the property is registered in a defendant’s name, the plaintiff bears the burden of showing, on the balance of probabilities, that the defendant held the property on trust for him or her such that the beneficial ownership differs to the legal ownership. See: Liu Wai Keung §44; Mo Ying §5.16; Primecredit §17.

(2) The burden may be discharged by showing that: (i) there was a common intention held by the plaintiff and the property owner at the time of the purchase (or exceptionally, thereafter) that the beneficial ownership was to be different to the legal ownership; (ii) the plaintiff altered his or her position in detrimental reliance upon the common intention; and (iii) it is unconscionable for the property owner to assert ownership in reliance on the legal title. The constructive trust is constituted by the plaintiff’s detrimental reliance on the common intention and the unconscionability of the legal owner departing therefrom. See: Luo Xing Juan §38; Liu Wai Keung §46.

(3) The approach to ascertaining common intention is objective. One looks to the intention of each party which was reasonably understood by the other party to be manifested by the first party’s words and conduct. See: Liu Wai Keung §47; Mo Ying §5.16.

(4) The doctrine is sometimes described as having two limbs. First, where at any time prior to the acquisition (or exceptionally, at a later date), there is an agreement, arrangement or understanding reached between the parties as to how the property is to be held beneficially, based on evidence of express discussions. Second, where there is no evidence to support such a finding but the court relies on the parties’ conduct as a basis from which to infer a common intention. There is some authority that under the second limb, direct contributions to the purchase price by a party who is not a legal owner will readily justify the inference. See: Mo Ying §5.8; Primecredit §§2.3 and 2.4.

(5) However, the modern approach is to assess the parties’ common intention by a holistic approach having regard to the context and the particular facts. The court is not constrained to consider only pure direct monetary contributions to the purchase price. In a Chinese setting, especially for the older generations, where explicit discussions on property rights within the family are not that common, the court has to pay more regard to circumstantial matters. See: Mo Ying §§5.14 and 5.15; Primecredit §1.6.”

35.The burden rests on the Plaintiff to establish her claim that she holds the beneficial ownership of the Properties, despite the fact that they are all registered in the name of the 1^st Defendant. The prima facie evidence is in favour of the party who has legal ownership of the property: Mo Ying v Brillex Development Ltd [2015] 2 HKLRD 985 at para 5.5.

36.The Plaintiff called three witnesses: herself, her daughter Ms Kong Ga Li (formerly known as Ho Ka Lam Ada) (in short “Ada”), and her younger son Mr Kong Zi Lung. The 2^nd Defendant called two witnesses: Mr Wong Chung Kwan, a manager of the 2^nd Defendant, and Mr Tsang Tak Wah, the head of the legal department of the 2nd Defendant.

37.The Plaintiff’s evidence is that her children either contributed to the household expenses or handed over their salaries for her to manage. The Plaintiff’s daughter, Ada, had a good monthly income of $200,000 to $300,000, and she entrusted all of her income and savings to the Plaintiff, allowing her to handle her finances and to make decisions for her regarding property transactions. Ada’s evidence confirmed that the money she gave to the Plaintiff belonged to the Plaintiff entirely, and she agreed that any property purchased with her funds belonged beneficially to the Plaintiff.

38.As regards the 1^st Defendant, the Plaintiff maintained that she and the 1^st Defendant shared a common intention, that she would be the beneficial owner of the Properties purchased in his name, and that the 1^st Defendant only held the Properties on paper (ie the legal title) for the Plaintiff. The Plaintiff also asserts that it was part of the common intention that the 1^st Defendant was not required to make any financial contribution to the purchase, as all necessary funding was to be provided by the Plaintiff (either personally or through Ada’s contributions).

39.It is also the Plaintiff’s evidence that, at all material times, she was responsible for managing all substantive matters relating to the three Properties. These included, but were not limited to, the repayment of mortgage loans and letting out the Properties. When asked in cross-examination why the Plaintiff did not apply for and seek the respective mortgages for the Properties herself, the Plaintiff’s evidence was that she did not have income, and as a result would not have qualified for a mortgage loan in her name. It was for this reason that she instructed the 1^st Defendant, who was employed at the time, to apply for the mortgages for the Properties.

40.The Plaintiff’s oral evidence on the common intention is supported by some contemporaneous documentary evidence.

(1)  As for Property 1, the bank repayment schedule letters were sent to the Plaintiff’s address (which was not same as the 1^st Defendant’s address), although they were addressed to the 1^st Defendant by name. Several tenancy agreements for Property 1 were signed by the Plaintiff, on behalf of the 1^st Defendant, consistent with her role in managing the property.

(2)  As regards Property 2, the evidence similarly shows that the bank repayment schedules, statements of account, and facility letters were sent to the Plaintiff’s address. The tenancy agreements were signed by the Plaintiff on behalf of the 1^st Defendant.

(3)  For Property 3, a receipt issued by Sunshine Property indicates that the Plaintiff paid the estate agency’s commission. Two repayment schedule letters from Public Bank list the Plaintiff as the addressee, using Ada’s address. Most tenancy agreements were executed by the Plaintiff on behalf of the 1^st Defendant.

41.Counsel for the 2^nd Defendant made two submissions.

(1)  When a person, without explanation, fails to call a witness who might reasonably be expected to be called, the court may draw an adverse inference that the person’s evidence would not have helped that party’s case – and in the present case the Plaintiff failed to call the 1^st Defendant.

(2)  The propriety of the Plaintiff’s evidence should be questioned due to her failure in producing bank records on which she relies to prove her control over the 1^st Defendant’s bank account and in showing that she is the beneficial owner, and/or that the 1^st Defendant had given her full authority to use his accounts for repaying the mortgages.

42.Where a party against whom a prima facie case is established fails, without explanation, to call a witness who might reasonably be expected to give direct evidence on the matters in question, the court may draw adverse inferences against him. In Pacific Electric Wire & Cable Co Ltd v Texan Management Ltd , unreported, CACV 90-91, 93-96/2012, 17 September 2013, the Court observed at [106] to [107]:

“106. The relevant principles are as set out by Brooke LJ in Wisniewski v Central Manchester Health Authority [1998] PIQR 324 at 340:

‘(1) In certain circumstances a court may be entitled to draw adverse inferences from the absence or silence of a witness who might be expected to have material evidence to give on an issue in an action.

(2) If a court is willing to draw such inferences, they may go to strengthen the evidence adduced on that issue by the other party or to weaken the evidence, if any, adduced by the party who might reasonably have been expected to call the witness.

(3) There must, however, have been some evidence, however weak, adduced by the former on the matter in question before the court is entitled to draw the desired inference: in other words, there must be a case to answer on that issue.

(4) If the reason for the witness’s absence or silence satisfies the court, then no such adverse inference may be drawn. If, on the other hand, there is some credible explanation given, even if it is not wholly satisfactory, the potentially detrimental effect of his/her absence or silence may be reduced or nullified.’

107. And as Lord Sumption has stated in Prest v Petrodel Resources Ltd [2013] UKSC 34 at §44:

‘There must be a reasonable basis for some hypothesis in the evidence or the inherent probabilities, before a court can draw useful inferences from a party’s failure to rebut it. For my part I would adopt, with a modification which I shall come to, the more balanced view expressed by Lord Lowry with the support of the rest of the committee in R v IRC, ex parte TC Coombs & Co [1991] 2 AC 283 , 300:

‘In our legal system generally, the silence of one party in face of the other party’s evidence may convert that evidence into proof in relation to matters which are, or are likely to be, within the knowledge of the silent party and about which that party could be expected to give evidence. Thus, depending on the circumstances, a prima facie case may become a strong or even an overwhelming case. But, if the silent party’s failure to give evidence (or to give the necessary evidence) can be credibly explained, even if not entirely justified, the effect of his silence in favour of the other party may be either reduced or nullified.

Cf Wisniewski v Central Manchester Health Authority [1998] PIQR 324, 340.’ ”

43.Counsel for the 2^nd Defendant drew the Court’s attention to the case of R (on the application of Stapleton) v Revenue & Customs Prosecution Office [2008] EWHC 1968 (QB) and the observations made by the Court at para 39:

“39 I am instinctively opposed to the notion that evidential matters, and the weight to be given to evidence, should be hedged around by ‘principles’. Whether it is appropriate to draw adverse inferences from a failure by a party to call a witness depends entirely, as I see it, on all the relevant circumstances in each case. Here the burden of proof to establish that Nicola was a front for her father rests upon RCPO. They have statutory powers to investigate events and those inquiries and investigations have been diligently pursued. If Nicola did not give credible evidence, then her case, without supporting evidence, would have been rejected; but if her evidence were credible, as it was on the issue of her contribution to the purchase of Silver Lane and the arrangements made as a family, then the failure to call corroborative evidence is not evidentially significant. It is only in those cases where her evidence is open to real doubt, as in the case of the source of the £25,000 referred to above, that a failure to call the uncle in that instance might be significant, but the failure to call the mother to agree with Nicola's credible account about the agreement or understanding that the property would be held equally does not weaken her case on that issue.” (Emphasis added)

44.In my view, the Plaintiff’s testimony is supported by unchallenged documentary evidence and is sufficient to establish that the 1^st Defendant held the Properties on trust for the Plaintiff pursuant to a common intention constructive trust. The absence of evidence from the 1^st Defendant to corroborate the Plaintiff’s evidence is not significant. There is no evidence to the contrary to show that the common intention asserted by the Plaintiff was rebutted, and the evidence given by the Plaintiff and Ada (that the purchase money was given to the Plaintiff by Ada unequivocally) is inherently probable. Any adverse inference to be drawn against the Plaintiff would not materially affect this Court’s overall assessment of the Plaintiff’s evidence. The authenticity of either the 2019 Declaration or the 2020 Declaration is not challenged by the 2^nd Defendant. Taking the evidence as a whole, any potential adverse inference does not undermine the Plaintiff’s case.

45.In disputing the Plaintiff’s beneficial ownership of the Properties, Counsel for the 2^nd Defendant submits that the Plaintiff’s assertion is contradicted by other contemporaneous documents which show that the 1^st Defendant had all along been the sole owner of the Properties.

46.I have borne in mind that the various mortgage documents, including the Deed of Mortgage with Shanghai Commercial Bank dated 30 August 2010, the Deeds of Mortgage with ICBC dated 27 August 2012, the Deeds of Mortgage with Dah Sing Bank dated 27 June 2014, the mortgage deeds for Properties 2 and 3, and the mortgage deed dated 3 January 2018, all indicate and state that the 1^st Defendant is the beneficial owner of the relevant Properties. Counsel for the 2^nd Defendant further pointed to the fact that although all tenancy agreements were signed by the Plaintiff, she signed as agent for the 1^st Defendant, and the rental proceeds were all deposited into the 1^st Defendant’s bank accounts. Counsel submitted that these are inconsistent with the Plaintiff’s case that she holds the beneficial interest in the Properties.

47.It is true that the documents registered at the Land Office show the 1^st Defendant as the owner of the Properties. Hence, the Plaintiff bears the burden of proof that she in fact held the beneficial interest.

48.According to the Plaintiff, the reason for the 1^st Defendant holding the legal title was to enable the Plaintiff to secure mortgage loans from the banks. This is confirmed by Ada and Kong Zi Lung. It was on that basis that the 1^st Defendant declared himself as the sole beneficial owner in the mortgage documents. The Plaintiff’s further explanation is that since the 1^st Defendant is the registered legal owner of the Properties, the tenancy agreements with the tenants had to be made in the name of the 1^st Defendant, and she had to sign as his agent and on his behalf, and she acted in the same capacity in the course of managing the properties.

49.Counsel for the 2^nd Defendant also relied on the 2013 Confirmation, the contents of which contradict the Plaintiff’s assertion and position as reflected in the 2019 Declaration. In this regard, I accept the Plaintiff’s explanation that the 2013 Confirmation was for the purpose of confirming and setting out the arrangement between herself and her sister Cindy Ho. The Plaintiff’s evidence was that her concern at the time was to ensure that her sister would not be able to assert any rights of ownership to Property 2 in the event of the Plaintiff’s demise. It is reasonable that upon Cindy Ho’s failure to come up with the contribution to the purchase price for Property 2, the Plaintiff’s intention at the time of the 2013 Confirmation was only to clarify the relinquishment of interest by Cindy Ho.

50.Accordingly, I accept that the 2013 Confirmation does not undermine the common intention or understanding between the Plaintiff and the 1^st Defendant, which was later recorded in writing in the 2019 Declaration.

51.In conclusion on the issue of common intention constructive trust, I accept the common understanding as alleged by the Plaintiff as between herself and the 1^st Defendant, with regard to the Plaintiff’s beneficial ownership of the Properties. On her case, she had informed the 1^st Defendant of such understanding prior to the purchase of the Properties on each occasion, and she had never intended to benefit the 1^st Defendant, only to use his name to hold the Properties. On the Plaintiff’s evidence, this was all agreed to by the 1^st Defendant. There is no evidence to contradict the Plaintiff’s claim, that the 1^st Defendant had not made any financial contribution towards the purchase price of any of the Properties, and that in 2020, at the time of the Konew Mortgages, all the direct contributions had been made by the Plaintiff. The common intention and trust arrangement was evidenced and acknowledged by the 1^st Defendant, in the 2019 Declaration. It was not registered at the Land Office because, on the Plaintiff’s evidence, she was advised and believed (rightly or wrongly) that it was not possible to do so. The fact that it was not registered is relevant to the issue of priority of the competing equitable interests, which will be dealt with below.

52.Since I am satisfied that the Plaintiff has successfully established her case on the basis of a common intention constructive trust, it is not necessary to deal with the case on resulting trust. It follows from my finding, that the beneficial interests in the Properties are vested in the Plaintiff by virtue of a common intention constructive trust, that the Plaintiff’s consent would be necessary for the 1^st Defendant to encumber the Properties by the Konew Mortgages. In the absence of the Plaintiff’s consent, the Konew Mortgages would not be effective, subject only to the defence that the 2^nd Defendant is a bona fide mortgagee for valuable consideration without notice of the Plaintiff’s proprietary interest.

Unclean Hands?

53.The 2^nd Defendant sought to argue at trial that the 1^st Defendant had been asked by the Plaintiff to act as a trustee for the purpose of disguising the Plaintiff’s ownership, so that mortgage loans could be obtained from the banks in the name of the 1^st Defendant, to finance the purchase of the Properties. It was submitted that if the Plaintiff’s evidence is accepted by the Court, the alleged agreement made between the Plaintiff and the 1^st Defendant amounted to deception against the banks to deceive them into believing that the Properties belonged to the 1^st Defendant, and to advance loans to the Plaintiff and the 1^st Defendant on that assurance and false representation. Counsel for the 2^nd Defendant further highlighted the fact that on the Plaintiff’s own evidence, she had not wanted to disclose her ownership of the Properties or to register the Properties in her name, because she did not want the Housing Authority to know of her interests in the Properties, as that would adversely affect her occupation of her public housing.

54.As such, it was argued for the 2^nd Defendant that the Plaintiff has come to the Court to enforce her equity with unclean hands, and that the alleged common intention trust was tainted by dishonesty (citing National Resources Capital Ltd v Tsang Kin Man DCCJ 3175/2002, 11 December 2002).

55.Whilst there is merit in the arguments made by Counsel for the 2^nd Defendant, I have to accept the submission made by Counsel for the Plaintiff, that the issue of unclean hands or the common intention trust being tainted by dishonesty is not pleaded. This is particularly since the facts of the common intention and the various mortgages including the Konew Mortgages have been pleaded and formed a part of the Plaintiff’s case from the inception of the proceedings, but the alleged dishonesty/deception/unclean hands have never been pleaded in the Defence. For this reason, I will not consider the arguments made for the 2^nd Defendant on these issues.

56.The more material and determinative issue is the 2^nd Defendant’s notice, or lack thereof, of the interests of the Plaintiff.

Whether the 2^nd Defendant had actual and/or constructive notice of the Plaintiff’s interest

57.It is the 2^nd Defendant’s case that even if the Plaintiff had any interest in the Properties, as she alleged, the 2^nd Defendant was at all material times a bona fide mortgagee for valuable consideration, without any notice of any proprietary interest of the Plaintiff. On behalf of the 2^nd Defendant, Counsel argued that none of the facts disclosed to or were known to the 2^nd Defendant were facts which would lead to any inquiries that should reasonably have been made by the 2^nd Defendant.

58.The principles relating to the doctrine of notice have been helpfully summarized by Recorder Eva Sit SC in CS Credit Limited v Marspan Limited & Anor [2021] HKCFI 3707 at §52:

“(1) The doctrine of notice is relevant because one is dealing with a situation where there are 2 innocent parties, each enjoying rights. The earlier right prevails against the later right if the acquirer of the later right knows of the earlier right (actual notice) or would have discovered it had he taken proper steps (constructive notice): Barclays Bank plc v O’Brien [1994] 1 AC 180 , 195G-H.

(2) Specifically with respect to constructive notice, if the party asserting that he takes free of the earlier rights of another knows of certain facts which put him on inquiry as to the possible existence of the rights of that other and he fails to make such inquiry or take such other steps as are reasonable to verify whether such earlier right does or does not exist, he will have constructive notice of the earlier right and take subject to it: 195H op.cit.

(3) The standard required of the purchaser, where constructive notice is in issue, is to make all usual and proper inquiries: Megarry & Wade §5-017. One asks what enquiries would have been made as a matter of prudence (“ought reasonably”), having regard to what is usually done by men of business under similar circumstances: Sun Sek Haw v Au So Kum [1999] 3 HKLRD 12, 22B-E. This is said to be a high standard: Sun Sek Haw 21E.

(4) The inquiry as to whether a purchaser has made all usual and proper inquiries is a fact-sensitive one and depends on all the circumstances of the case: Sun Sek Haw 21H.

(5) Given the inquiry is fact-sensitive, it would not be possible to conclusively define the circumstances in which a purchaser will have constructive notice, but generally speaking:-

(a) If the purchaser (X) in fact appreciates that a proprietary right in the property probably exists, he has actual notice.

(b) If a reasonable person with the attributes of X should have appreciated based on facts already available that the proprietary right probably existed, X has constructive notice of the existence of the right, and further inquiry would not be necessary.

(c) If the facts known to X would give a reasonable purchaser in his position serious cause to question the propriety of the transaction, X must make inquiries which would have revealed the probable existence of a proprietary right.

See Papadimitriou v Credit Agricole Corpn and Investment Bank [2015] 1 WLR 4265, §§12-20; see also Megarry & Wade §5-018 (adopted in Ho Lai Lei v Mang Wan Kwan Simon [2020] HKCFI 527, §112).

(6) In scenarios (b) and (c) in (5) above, it is important that there must be facts already known to the purchaser that would point to the probable existence of a right, or that there is serious cause to question the propriety of the transaction.

(7) Further, in scenario (c) in (5) above where the purchaser should make inquiries, there must be a causal link between such further inquiries and the revelation of the probable existence of the right. See also Sun Sek Haw 22D-E, where Rogers JA held that “the question which should be asked is would the enquiries which a conveyancing solicitor would have made as a matter of prudence have revealed the fact which would have given the purchasers constructive notice”.

(8) It is argued by Mr Fung (whose argument is adopted by Mr But) that relying on Asian Oceanic Bank Ltd v Lambang Maju Sdn Bhd, HCMP 4151/1993 (unrep ., 26 May 2000) §25, as a matter of principle the court should assume that any inquiry that ought to have been made by the purchaser would have yielded an honest answer, such that there is no need to consider causation. I do not think Asian Oceanic Bank is in any way inconsistent with the need to establish a causal link. In that case the bank was found to have constructive notice that the shares charged to it were subject to trusts. The trusts were documented in various declarations of trusts, and the bank never made any inquiry. The court found that had the bank inquired into the root of the title, that would have led to the declarations of trust, and the prior interest would have been revealed. Similarly, in Pillgrem v Pillgrem [1881] 18 ChD 93 (which was cited in Asian Oceanic Bank §25), no inquiry was made at all, and the usual and proper inquiry would have led to the purchaser calling for an abstract of title, which would have revealed the prior trust. In both cases, the court had examined and were satisfied, on the facts, that had inquiries been made, they would have led to revelation of the existence of the prior right. Thus, they in fact support, and not negate, the need for causation.

(9) While each case turns on its own facts (see (4) above), the fact of possession by someone other than the purchaser’s counterparty is a highly relevant factor: Wong Chim-ying v Cheng Kam-wing [1991] 2 HKLR 253. That said, whether there is constructive notice ultimately turns on the application of (2) and (3) above to the facts of the case, and the benchmark is what is usually done by men of business under similar circumstances. Thus, it is said that if a purchaser has made a reasonable inspection of the property and cannot discover the residence of the beneficiary, he will not be fixed with constructive notice of the beneficiary’s rights: Goo & Lee, Land Law in Hong Kong (4th edn) §7.32, and an inspection does not require an in-depth scrutiny of everything present: Cousins on The Law of Mortgages (4th edn), §9-58.”

59.The burden is on the party raising this defence of bona fide purchaser without notice to plead and prove all its elements. It is also said to be a “single defence”: Barclays Bank plc v Boulter [1998] 1 WLR 1 at 8G.

60.As highlighted by Counsel for the 2^nd Defendant, in order for constructive notice to arise in this case, there have to be facts shown to have been known to the 2^nd Defendant. It will further have to be shown then that the information known to the 2^nd Defendant calls for further inquiry, and that upon such inquiry, such facts would point to the probable existence of a right or interest in the Properties belonging to the Plaintiff.

61.In the context of the present case, it is important to understand what the term “put on inquiry means”. The explanation was given by Lord Sumption NPJ in PT Asuransi Tugu Pratama Indonesia TBK v Citibank NA (2023) 26 HKCFAR 1:

“17 The phrase “on inquiry” is traditional, but it is apt to mislead unless one appreciates what it involves in a commercial context. It is not the same as constructive notice. There is no general obligation spontaneously to inquire into an agent’s authority and no rule that fixes the third party with notice of what might be discovered upon such an inquiry. The starting point is what is actually known to the third party without inquiry (or would actually be known to him if he appreciated the meaning of the information in his hands). The question is whether the information which he actually has calls for inquiry. If, even without inquiry, the transaction is not apparently improper, then there is no justification for requiring the third party to make inquiries. But if there are features of the transaction apparent to a bank that indicate wrongdoing unless there is some special explanation, then an explanation must be sought before it can be assumed that all is well. In other words, if a bank actually knows of facts which to their face indicate a want of actual authority, it is not entitled to proceed regardless without inquiry.” (Emphases added)

62.Earlier in the judgment, Lord Sumption NPJ had explained, at para 16, that:

“The critical question, whether one looks at a bank’s duty of care or at the law relating to ostensible authority, is what constitutes sufficient notice of a want of actual authority, so as to require a bank to make inquiries before paying out in accordance with its mandate. The basic rule is stated in Bowstead & Reynolds on Agency, 22nd ed. (2021), at article 73:

“No act done by an agent in excess of actual authority is binding on the principal with respect to persons having notice that in doing the act the agent may be exceeding the agent’s authority.”

The editors’ comment, at para. 8-048, as follows:

“The problem is to know what constitutes notice, and when there is a duty to inquire. It is often said that neither constructive nor presumed notice apply in commercial transactions. This certainly excludes the full doctrine of constructive notice of equitable interests in land, whereby a person is expected to take the initiative and make inquiries, being deemed to have notice of property interests which would have come to that person’s knowledge if such inquiries and inspections had been made as ought reasonably to have been made. But there can be no doubt that in many situations where it is relevant to know whether one person has knowledge of facts, including those raising the doctrine of apparent authority, the court may infer from the circumstances that the person concerned must have known of the facts in question or at least ought to have been suspicious to the extent that further inquiries would have been appropriate in the context.

It seems that the proper approach in commercial cases is to apply the objective interpretation which one person is entitled to put on another’s words and conduct in the light of the facts known to the former.” ”

63.According to the Plaintiff’s pleaded case, to be found in her voluntary particulars, her claim of the 2^nd Defendant’s constructive notice is premised on the fact that “the 2^nd Defendant had failed to make all usual and proper inquiries including but not limited to the Plaintiff’s beneficial interest in the 3 Properties”, in that it had failed:

(1)  to carry out any proper credit assessment on the 1^st Defendant’s income;

(2)  to inquire into the authenticity of the tenancy agreements provided by the 1^st Defendant to prove his rental income;

(3)  to carry out physical site inspection of the Properties;

(4)  to inquire with the Plaintiff as to whether she had beneficial interests in Property 3, despite knowing that she was a co-borrower with the 1^st Defendant when a mortgage was obtained from Public Bank before the Konew Mortgages.

64.It is not the purpose of the Judgment to record or set out in full the evidence given by all the witnesses. I will only refer to the material parts of the evidence which explain my decision and findings.

65.First, I agree with Counsel for the 2^nd Defendant that none of the facts pleaded in support of the claim of the 2^nd Defendant’s notice of the Plaintiff’s interests in the Properties reasonably required the 2^nd Defendant to make further inquiry, or to conduct further investigations into the state of the Properties and whether the 1^st Defendant indeed had sole legal and beneficial ownership of the Properties, as he claimed.

66.This Court heard evidence from Mr Wong Chung Kwan (“Wong”), the 2^nd Defendant’s Manager at the time who handled the 1^st Defendant’s loan and mortgage applications for the Konew Mortgages. In gist, Wong’s evidence, as summarized in the submissions of Counsel for the 2^nd Defendant, is as follows:

(1)  By the 2^nd Defendant’s standard practice, the 1^st Defendant’s income proof was not of primary concern to the 2^nd Defendant, as the Properties offered adequate security for the loan. At most, in granting the mortgage, the 2^nd Defendant was assuming the risk of the value of the Properties falling below the debt value. The 1^st Defendant’s creditworthiness was not a matter that raised suspicion. The loan was not dealt with as a simple personal loan to the 1^st Defendant, but was considered, processed and approved as a mortgage loan (with the Properties offered as security).

(2)  There was nothing to put the 2^nd Defendant on alert that the tenancy agreements provided by the 1^st Defendant were not genuine.

(3)  Site inspection was not possible given that the Properties were tenant occupied.

(4)  The 1^st Defendant had confirmed to the 2^nd Defendant that there was no third-party interest in the Properties. More importantly, he had made the 2020 Declaration and the 2020 Confirmation in writing, that he was the sole owner and that the Plaintiff had no interest.

67.In submitting that the 2^nd Defendant had actual notice of the Plaintiff’s interests in Property 3, Counsel for the Plaintiff relied heavily on the contents of the 2020 Declaration.

68.The Plaintiff also highlighted the fact that the 2020 Declaration was only discovered in the mortgagee action commenced by the 2^nd Defendant (ie HCMP 110/2021) and that the document was not disclosed by the 2^nd Defendant in HCA 2042/2020. It was contended that viewed together, the 2020 Declaration, and the Statement of Account which had been issued by the Public Bank (under the Public Bank mortgage for Property 3), show that the 2^nd Defendant must have known that the Plaintiff was named as a borrower in the Public Bank mortgage, and was a beneficial owner of Property 3. The Plaintiff highlighted the fact that the Statement of Account from the Public Bank in respect of the mortgage for Property 3 shows the Plaintiff, and not the 1^st Defendant, as the addressee. It was argued that Wong must have considered the Public Bank mortgage when approving the 1^st Defendant’s application for loan from the 2^nd Defendant, and must have had notice that both the 1^st Defendant and the Plaintiff were named as borrower in the Public Bank mortgage, which means that the Plaintiff must have beneficial interests in Property 2 and Property 3.

69.Wong’s evidence is that he was not certain if he had actually looked at the Public Bank mortgage document for the Properties, but he accepted that it was clear from the loan application document that what the 1^st Defendant offered was a “2^nd Mortgage”, and that it would have been easy and possible for the 2^nd Defendant to download the Public Bank mortgage documents when a property search is conducted online.

70.However, even if the information in the Public Bank mortgage documents had been made available, or had been obtained by Wong or his staff, such information only revealed that the Plaintiff was a “borrower”, and not the registered owner of the Properties in question. This was the result of the 2^nd Defendant’s land search which was conducted, that only the 1^st Defendant was the registered owner of the Properties. On that basis, any further investigation which could or would have been made, if the 2^nd Defendant had been put on inquiry, could only have revealed that it was the 1^st Defendant, and not the Plaintiff, who was the only registered owner.

71.In any event, the 2^nd Defendant had sought the assurance from the 1^st Defendant and had obtained from him the 2020 Declaration and the 2020 Confirmation, both of which contained the 1^st Defendant’s acknowledgment in writing that (notwithstanding that the Plaintiff was named as a borrower in the Public Bank mortgage documents) no third party in fact held any right or interest in Property 2 and Property 3. The 2020 Declaration specifically named the Plaintiff, and stated that she did not own any property interest.

72.I cannot see what further steps the 2^nd Defendant ought reasonably to have taken in light of the facts actually known to it, and in the light of the declarations that the 2^nd Defendant had procured from the 1^st Defendant. As Wong correctly pointed out, the fact that the Plaintiff was named as a borrower in the Public Bank mortgage documents does not necessarily mean that she had any legal or beneficial interest in the Properties. The Properties could have been put up as security by the other named borrower as the legal and beneficial owner.

73.As the authorities make clear (see para 52(3) of the cited judgment in CS Credit above), the standard required of the party where constructive notice is concerned is “to make all usual and proper inquiries”, and depends on the inquiries which ought reasonably have been made as a matter of prudence. The steps are what men of business would usually do under similar circumstances.

74.With such a standard, I cannot accept the submissions made for the Plaintiff, that the 2^nd Defendant ought to have called into question the genuineness of the tenancy agreements produced by the 1^st Defendant, and/or to have conducted physical inspection of the Properties which were occupied by the tenants. On their face, the tenancy agreements were made in the name of the 1^st Defendant as owner/landlord, and although some were signed by the Plaintiff, it was stated in such agreements that she signed on behalf of the 1^st Defendant. There was nothing apparent from the tenancy agreements, which would reasonably call for the 2^nd Defendant to verify the identities of the tenants, or as to the existence of the tenancies. Counsel for the Plaintiff argued that the period of one tenancy was stated to be from 29 January 2019 to 28 January 2019, and that Wong’s assumption of this being a simple mistake should not be believed. It was contended that the 2^nd Defendant should have asked the 1^st Defendant to supply the identity cards or proof of identity of the named tenants to verify the genuineness of the tenancy agreements, and that the 2^nd Defendant had failed to do this. Wong’s evidence is that even if a tenancy had expired, it could have been renewed or was being renewed, but even if a new tenant had not yet been identified, the mistakes identified by Counsel were not sufficient to rouse any serious suspicion. I accept his evidence that the tenancy agreements did not reasonably raise any questions to call for further verification.

75.As for any discrepancies in the 1^st Defendant’s declared monthly income, I accept Wong’s explanation, that the 2^nd Defendant’s main concern was whether the value of the mortgaged Properties was sufficient to cover the risk of the secured loan, and that the 2^nd Defendant was at the material time satisfied in this important respect.

76.Considered in the round, I am not persuaded at all that any reasonable or prudent bank or finance company ought, with the information and documents already provided, and in all the circumstances of the 1^st Defendant’s application for a mortgage loan in this case, to have treated a potential customer with such suspicion as to require any further proof of either the 1^st Defendant’s income, or to verify the identity of the tenants by site visits.

77.To reiterate, the standard is that of a prudent and reasonable mortgagee. It is necessary to take into account commercial realities, and to bear in mind that these financial institutions or money lenders are also operating a client-facing business. These institutions can and should seek confirmation as to a client’s interest in the property offered as security and should review such documents which may reasonably reveal the proprietary interest of a third party, but it should be borne in mind that further investigatory steps which are subject to the co-operation of the client in question and third parties such as tenants would set an unreasonably high standard for these businesses, and may go beyond what is reasonable to be expected of a prudent commercial entity. In my judgment, the list of documents which the 2^nd Defendant sought from the 1^st Defendant was reasonable to seek out proprietary interests if there were any present. To require a deep dive into each and every application received by these financial institutions, in the manner contended by the Plaintiff, would be unreasonable.

78.Significantly, I accept the submissions made by Counsel for the 2^nd Defendant that any further investigation into the 1^st Defendant’s income, any site inspection of the Properties, and any further inquiries into the genuineness of the tenancy agreements would not have disclosed, or revealed, the alleged title or interests of the Plaintiff in the Properties at all. The Public Bank mortgage documents only show the 1^st Defendant as the sole registered owner of the relevant Properties. Inspection of the Properties would not reveal that the Plaintiff was either the landlord or the owner, since there is no dispute that even for those tenancy agreements signed by her, she had acted as agent for and on behalf of the 1^st Defendant. There is no evidence that the tenants knew of the Plaintiff as the actual owner. Asking for the identity cards of the tenant, to prove the existence of the tenancy agreements, as suggested by the Plaintiff, would not have cast any light on the identity of the owner of the Properties. Nor is there any evidence that this was a common and usual practice of banks and other lending institutions.

79.The bank documents showed that the rental income from the Properties were paid into the bank account of the 1^st Defendant, from which the mortgage repayments were deducted. Again, these were not inconsistent with the Properties being owned by the 1^st Defendant. Any records showing that the Plaintiff had been in charge of the affairs of the Properties would not have proven or assisted the Plaintiff’s case that she was the owner, rather than acting as the agent of the 1^st Defendant.

80.In short, as Counsel for the 2^nd Defendant submitted, the Plaintiff has failed to show that there was any causal link between the inquiries suggested by the Plaintiff and the revelation of the probable existence of the Plaintiff’s rights or interests in the Properties.

81.Counsel for the Plaintiff relies on the case of Kingsworth Finance Co. v Tizard [1986] 1 WLR 783 to submit that the 2^nd Defendant had failed to make the usual and proper inquiries that a prudent finance company would have made.

82.I find the case of Kingsworth distinguishable from the present situation. In Kingsworth, an inconsistency was expressly brought to the attention of the plaintiff, where the husband described himself as single in the loan application form which stood in stark contrast with the surveyor agent’s report which referred to a son and a daughter on the concerned premises, which should have prompted further inquiries to be made by the plaintiff. The situation in Kingsworth prompted further inquiries to be made, which the plaintiff in the case failed to do. On the other hand, the facts of the present case prompted no further and reasonable inquiries to be made, on the basis of the various documents which were provided by the 1^st Defendant. To Wong’s and thereby the 2^nd Defendant’s knowledge, there was nothing which prompted further investigations.

83.As such, even if there was a common intention constructive trust in relation to the Properties, I accept and find that the 2^nd Defendant was at all material times a bona fide mortgagee for valuable consideration, without notice of the Plaintiff’s proprietary interest.

The 2019 Declaration and the LRO

84.There was no serious dispute at trial, that as the 2019 Declaration was not registered at the Land Office at the time of the Konew Mortgages, it could not affect either the 2^nd Defendant’s interest in the Properties, nor its priorities over any interest of the Plaintiff under the 2019 Declaration.

85.Section 3 is applicable to instruments which are registerable under the Land Registration Ordinance (Cap.128). Where the instruments are registered, section 3(1) determines priority; and where a prior instrument that is registerable is not registered, section 3(2) applies to render it “absolutely null and void to all intents and purposes” as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same [land]”: Winland Finance Ltd v Gain Gero Finance Ltd (2022) 25 HKCFAR 17 per Chief Justice Cheung at para 26.

86.The 2019 Declaration being a registerable interest, was only delivered for registration on 8 October 2020 (by memorial no: 20100800940016), which was after the Konew Mortgages were granted to the 1^st Defendant and registered accordingly (see paragraphs 24 and 27 above). The 2^nd Defendant’s registered interest clearly takes priority over the Plaintiff’s interests under the 2019 Declaration.

Disposition

87.The 2^nd Defendant has proved its defence as a bona fide mortgagee for valuable consideration and without notice of the Plaintiff’s interests in the Properties, and the Plaintiff’s claims are accordingly dismissed.

88.In the premises, I make the following orders:

(1)  There be a Declaration that the Second Mortgage granted in favour of Property 1, and the Second Mortgage granted in favour of Property 2 and Property 3 take priority over the Plaintiff’s beneficial interest in the Properties.

(2)  The 1^st Defendant do pay the sum of HK$8,500,000 secured by the Konew Mortgages with interest at contract rate from the date of default to the date of judgment, and thereafter at judgment rate to payment.

(3)  Unless the 1^st Defendant do make payment of the sums referred to in paragraph (2) hereinabove within 56 days after service of this Order, the 1^st Defendant do deliver to the 2^nd Defendant vacant possession and title deeds and documents in his possession (if any) of the Properties.

(4)  There be liberty to apply for any necessary consequential orders or directions.

89.The costs of HCA 2042/2020 are to be paid by Ho Yuk Lan and the costs of HCMP 110/2021 are to be paid by Hui Tsz Hang and Ho Yuk Lan to Konew Capital International Limited.

Mr Bryan Lee, instructed by YTL LLP, for the plaintiff in HCA 2042/2020 & for the intervener in HCMP 110/2021

The 1^st defendant in HCA 2042/2020 & the defendant in HCMP 110/2021 was not legally represented and did not appear

Mr Sunny Chan, instructed by V Hau & Chow, for the 2^nd defendant in HCA 2042/2020 & for the plaintiff in HCMP 110/2021