Brightland Corporation Ltd v. Banhart Co Ltd

HCA 1445/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1445 OF 2005

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BETWEEN

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HCA 1540/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1540 OF 2005

_________________________

BETWEEN

_________________________

(Consolidated pursuant to order of Master Lung dated 9 June 2006)

Coram : Before Master J. Wong in Chambers

Date of Hearing: 18 March 2008

Date of Decison: 10 April 2008

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D E C I S I O N

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Application

1.This is an application by the 2^nd Defendant to vacate registration of 5 instruments from the Lands Registry against the whole of 45/F, Office Tower, Convention Plaza, No. 1 Harbour Road (“the Property”), upon payment into court of securities to the Plaintiff and the 1^st Defendant.

Background

2.By a Sale and Purchase Agreement dated 30 December 2004, the 2^nd Defendant agreed to sub-divide and sell Unit C of the Property (“Unit C”) to the 1^st Defendant at $14.84 m. By a Further Sale and Purchase Agreement dated 18 January 2005, the 1^st Defendant sub-sold Unit C to the Plaintiff at $17.8 m.  Unfortunately, the 2 conveyance transactions became fallen through and they triggered the present 2 proceedings.

3.These proceedings have been consolidated.  Briefly, both the Plaintiff and the 1^st Defendant complained, inter alia, that the 2^nd Defendant wrongfully retained $200 square feet area from Unit C.  Such area further enjoyed a harbour view.  They therefore sued for repayment of the deposits paid, damages, interest and costs.

4.So far, the parties have been working on interlocutory matters, trying to get ready the case for trial.  In the meantime, in light of the current raising property market, the 2^nd Defendant intended to sell the Property.  It then issued the present application to vacate the registration of all instruments relating to the said 2 conveyance transactions and present proceedings.  Both the Plaintiff and the 1^st Defendant opposed to the same.

5.On 18 March 2008, the parties appeared before me for the substantive argument.  Mr. Bernard Man and Mr. Jin Pao, both of Counsel acted for the 2^nd Defendant and the Plaintiff respectively.  Mr. Lawrence Lam of Vincent T.K. Cheung, Yap & Co. represented the 1^st Defendant.  Having heard from the parties, I reserved my decision to be delivered.  I now do so by this written decision.

Ruling

6.Upon consideration of all the evidence authorities and submission before me, I have decided to allow the 2^nd Defendant’s application upon payment into court in the total sum of $12 m.  My reasons appear in below.

Jurisdiction?

7.Mr. Pao argued that this Court had no jurisdiction under section 19 (“section 19”)of the Land Registration Ordinance (Cap. 128) to make the order sought against his client because it only sought to register the Writ and Amended Writ in HCA 1540/2005 against the Property, but these instruments had not been registered.  Instead, the Land Registry put them under the heading of “Deeds Pending Registration”.  Hence, there was no registered instrument to be vacated.

8.Upon thoughts, I disagree with Mr. Pao.

(a)   Both Counsel confirmed with me that there was no direct authority on the jurisdictional point.  Hence, we have to look at and examine carefully the said section 19.

“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 (emphasis added) 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.”

(b)   In my view, the word “registration” in the above context includes both instruments having been registered and “pending registration” with the Land Registry.

(c)   The Land Registrar allows registrable instruments affecting land to be registered in the Land Registry.  The registration gives public notice of the registered documents.  It affects priority of interest.  However, in Hong Kong, if the Land Registrar has doubts over, inter alia, the registrability of the instruments, he will put them under “Deeds Pending Registration” as an interim measure before the doubts will be resolved.

(d)   The implication of an instrument being put under such heading is that:

“34.  … By attempting to register the Writ against the title Mr Kong [the person causing the registration] was in his effect making a statement to the public at large, and in particular to anyone who chose to search the titles, that he was asserting a right over the Properties.  It is correct that that assertion of a right had not yet been crystallised, but so long as the documents were not withdrawn from registration and remained noted on the title as “pending registration”, that assertion remained.”

(Tai Yip Dyeing Factory Ltd v Kong Hoi Sang,
Saunders J. [2007] 1 HKLRD 608)

Hence, as far as the registered owner of the property and any third party are concerned, registered instruments or deeds pending registration made no practical difference.  Any subsequent purchaser has been given notice of it and will be bound by the same.

(e)   Section 19 gives this Court a wide discretion to do justice in the particular circumstances of each case.

“… The terms of section 19 are very wide; and I think that its width is the product of the wisdom of those who framed it…

The formula “other good cause shown” in s. 19 is unrestricted by any words of the statute.”

(Ho Yau-kong v Ho Cheng Kwai-ying & Others
[1991] 1 HKLR at page 652)

(f)   I agree with Mr. Man that his client should not be put in a worse situation by an “attempted registration” than a “completed registration”.  This can never be the legislative intention of section 19.

(g)   Even assuming that I was wrong in the above interpretation, this Court still has an inherent jurisdiction to vacate the deeds pending registration.

“The court has both statutory and inherent jurisdiction to order vacation on ‘other good cause’, and the inherent jurisdiction of the court is co-extensive with that of the High Court of Justice in England: see Thian’s Plastics Industrial Co v Tin’s Chemical Co [1970] HKLR 498 at 522 per Blair-Kerr J; Heywood v BDC Properties Ltd (No 2) (1964) 1 WLR 971; Taylor v Taylor (1968) 1 WLR 378 followed …”

(The Annotated Ordinances of Hong Kong
– Land Registration Ordinance, at page 41)

Discretion?

9.I now move to see if the registration should be vacated by section 19.

10.Section 19 allows this Court to vacate the registration on 2 grounds:

(a)       litigation not prosecuted bone fide, or

(b)       for other good cause shown.

There is no suggestion by the 2^nd Defendant that the Plaintiff and the 1^st Defendant has any malice in prosecuting the proceedings.  In relation to the 2^nd limb, useful guidance can be located in the said case of Ho Yau-kong to show how the Court should approach to exercise his discretion.

“It seems to me that the courts may, and should, approach it by reference to what they normally do when dealing with interlocutory injunctive relief, subject to this.  The position of somebody with a lis penden which he or she can register is stronger than that of someone seeking or seeking to maintain such relief.  First of all, the registration may be made without reference to a court and without the burden of having first to make out a case.  Secondly, I think it is right to be even more reluctant to vacate a registration than to refuse or discharge an injunction which would have similar effect.  That is my approach here.”

11.With this approach in mind, I take the view that discretion should be exercised in favour of the 2^nd Defendant in the circumstances.

(a)       The registration of the 5 instruments as a whole affect the Property, i.e. the whole of 45/F when the subject disputes only concern Unit C only.

(b)       Both the Plaintiff and the 1^st Defendant are not asking for specific performance.  They seek, among others, damages only.  The 2^nd Defendant is willing to put security to protect the claims.  Provided sufficient security will be provided, I see no reason to stop the 2^nd Defendant to dispose the Property.

(c)       The property market fluctuates.  There is evidence before this Court that the current market value of the Property has risen to $170 m and the 2^nd Defendant is intending to sell the same.

Quantum?

12.Before moving to see how much payment-in should be made, I should point out that the amount of security should be awarded in the discretion of this Court having regard to all the circumstances of the case.  The security should be sufficient but not necessarily a complete one.

13.By the summons, the 2^nd Defendant suggested $1,893,082 and $2,481,447 for the 1^st Defendant and the Plaintiff respectively.  At the hearing before me, Mr. Man increased the offer for the 1^st Defendant to $5,778,326.56.  However, he refused to pay anything to the Plaintiff because it was said that it would amount to double security.  In short, he argued that the Plaintiff’s lien was premised on that of the 1^st Defendant.  Once the lien of the 1^st Defendant was protected, the 2^nd Defendant should not be required to pay more ( Aberaman Ironworks v Wickens (1868-1869) 4 LR Ch App 101, 110).

14.On the argument of lien, I agree with Mr. Man only as a matter of principle.  However, when we come to security, it is entirely different matter.  The chasing of lien on law is only one factor to be taken into account by the Court.  In our present case, there are other considerations.

(a)       Parties are not arguing merits of their respective cases before me.  Chances of success and failure therefore remain neutral for the time being.  The crux of the parties’ dispute turns primarily on the correctness or wrongfulness on the part of the 2^nd Defendant in retaining the said 200 square feet area enjoying a sea view.  If this Court found the 2^nd Defendant at fault in the end, it would be required to return deposits paid, and pay damages, interests, costs and so forth to both the 1^st Defendant and the Plaintiff.  In short, the 1^st Defendant might shoulder all the compensation.  Hence, I see no reason why the Plaintiff’s position should not be protected as distinct from that of the 1^st Defendant.

(b)       The 2^nd Defendant initiated the application by offering to pay something to both the 1^st Defendant and the Plaintiff.  It appears to me that it is rather unfair if the 2^nd Defendant suddenly changed its position fundamentally towards the Plaintiff.

Security for the 1^st Defendant

15.Mr. Man and Mr. Lam had a narrow dispute on quantum only.  In short, they disputed on their estimate of costs for the proceedings up to trial.  Mr. Man said 1 m and Mr. Lam, 2.5 m.  To resolve the dispute, I will adopt a lump-sum assessment or board brush approach usually employed by this Court.

		$	$
(a)	Conveyance costs		30,000
(b)	HCA 1445/2005 (26/7/05 – 8/6/06)
	(i)   Pleadings ($4,000 x 10hrs)	40,000
	(ii)  Discovery: list of documents        ($4,000 x 10hrs)	40,000
	(iii) Miscellaneous	20,000	100,000
(c)	Consolidated proceedings (9/6/06 – trial)
	(i)   New pleadings, including subsequent amendments and further & better particulars    ($4,000 x 20hrs)	80,000
	(ii)  New discovery, including new list, witness statements ($4,000 x 50hrs)	200,000
	(iii) Counsel fee so far	200,000	480,000
	(iv)  Further preparation before trial        ($4,000 x 20hrs)	80,000
	(v)   Coming trial for 8 days - Counsel ($100,000 + $30,000 x 7) - Solicitor ($4,000 x 5hrs x 8)	310,000 160,000
	(vi)  Miscellaneous	50,000	600,000
			1,210,000

16.Hence, I have the following assessment for the 1^st Defendant on the security.

		$
(a)	Loss of profit	2,960,000
(b)	Return of deposit	857,750
(c)	Interest (2,960,000 + 857,750) x 8.125% x 3	930,576
(d)	Costs	1,210,000
		5,958,326

Say 6 m

Security for the Plaintiff

17.As to quantum for the Plaintiff, both Counsel also differed in their opinion, especially the loss of profit.  Mr. Man said $958,229 and Mr. Pao, $13,400,000.  The big difference is caused by the adoption of different timing for the further sale of Unit C by the Plaintiff.  The 2^nd Defendant said that the value of Unit C on 22 January 2006 should be adopted, i.e. 6 months after the alleged breach by the 2^nd Defendant.  It was said that, by such time, the Plaintiff should have mitigated its loss.  On the other hand, the Plaintiff elected the date of 22 January 2008.  On such date, Unit C was estimated to be $32,000,000.

18.To these arguments, I have the following observations.

(a)   It is indisputable that the Plaintiff owed a duty to mitigate.

(b)   On the evidence before me, I do not see what the Plaintiff has been done to mitigate its loss.  With respect, I have doubt if this Court will accept the adoption of the value at 22 January 2008.  The Plaintiff cannot simply sit there and allow the loss to be accumulated without doing anything.

(c)   I therefore prefer the opinion of Mr. Man.

19.In relation to the costs, I say the followings.

		$	$
(a)	Conveyancing costs		30,000
(b)	HCA 1540/2005 (5/8/05 – 8/6/06)
	(i)   Pleadings ($4,000 x 10hrs)	40,000
	(ii)  Discovery: list of documents        ($4,000 x 10hrs)	40,000
	(iii) Miscellaneous	20,000	100,000
(c)	Consolidated proceedings (9/6/06 – trial)
	(i)   New pleadings, including subsequent amendments and further & better particulars    ($4,000 x 20hrs)	80,000
	(ii)  New discovery, including new list, witness statements and expert reports ($4,000 x 60hrs)	240,000
	(iii) Interlocutory application(s) ($4,000 x 20hrs)	80,000
	(iv)  Counsel fee so far, including assistance in interlocutory application	300,000	700,000
	(v)   Further preparation before trial ($4,000 x 20hrs)	80,000
	(vi)  Coming trial for 8 days     - Counsel ($100,000 + $30,000 x 7)     - Solicitor ($4,000 x 5hrs x 8)	310,000 160,000
	(vii)       Miscellaneous	50,000	600,000
			1,430,000

20.The security for the Plaintiff therefore is:

		$
(a)	Loss of profit	958,229
(b)	Return of deposit	2,670,000
(c)	Interest (958,229 + 2,670,000) x 8.125% x 3	884,380
(d)	Costs	1,430,000
		5,942,609

Say also 6 m

Order

21.In conclusion, I order that

(1)       Upon the payment into court a sum of $6 m as security for the claim by the 1^st Defendant in HCA 1445/2005 and further upon the payment into court another sum of $6 m as security for the claim made by the Plaintiff in HCA 1540/2005, the registration of the following instruments in the Land Registry be vacated forthwith:

(a)   Writ of Summons in HCA 1445/2005 by Memorial No.05072700970010;

(b)   Preliminary sale and purchase agreement by Memorial No.UB9450060;

(c)   Provisional Agreement for sale and purchase by Memorial No.UB9477266;

(d)   Writ of Summons in HCA 1540/2005 by Memorial No.05080901710014; and

(e)   Amended Writ of Summons in HCA 1540/2005 by Memorial No.06063001980010.

(2)       Liberty to apply for further directions, if necessary.

22.As to costs, I have not been benefited from parties’ submissions.  However, it appears to me that each of them have succeeded in some issues but also lost in some others.  To balance them against one another, I believe that costs of the application, including costs reserved and certificates for counsel on 18 March 2008, if applicable, should be costs in the cause.  Such order nisi will become absolute 14 days from today.

23.Finally, since the decision herein has touched on a rough estimate of the assessment of compensation to the 1^st Defendant and the Plaintiff, I further direct that this Decision shall not to be seen by the trial judge, unless otherwise directed the Court.

Mr. Jin Pao instructed by Messrs. Kao, Lee & Yip for Plaintiff.

Mr. Lawrence Lam of Messrs. Vincent T.K. Cheung, Yap & Co. for 1^st Defendant.

Mr. Bernard Man instructed by Messrs. Wilkinson & Grist for 2^nd Defendant.