Wide Power Corporation Ltd v. The Incorporated Owners of Manhattan Court

HCA 1485/2013

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 1485 OF 2013

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DECISION
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1.This is the plaintiff’s appeal against the dismissal by Master Leong on 20 February 2015 of its summons filed on 22 September 2014. The plaintiff’s summons asked for an order to vacate from the Land Registry the defence and counterclaim in this action (“the Counterclaim”) as registered by the defendant against the property known as Apartment 8/F, 7/F (with a portion of the roof above) Manhattan Court, No. 1 Alnwick Road, Kowloon, Hong Kong (“Apartment 8/F”).

2.The plaintiff used to be the owner of Apartment 8/F. It brought a claim against the defendant for various reliefs.  The defendant file the Counterclaim alleging that the plaintiff and/or its predecessor-in-title had undertaken among other things, unauthorized building works (“UBWs”) within Apartment 8/F.  The defendant counterclaims a mandatory injunction requiring the plaintiff to remove the UBWs and restore the apartment to its previous condition.  It also seeks an injunction enjoining repetition by the plaintiff of the matters it complains of.  It registered the Counterclaim as a lis pendens at the Land Registry against Apartment 8/F on 16 October 2013.

3.The plaintiff issued the summons to vacate the registration of the Counterclaim on 22 September 2014.  About two months after the issuance of the summons and before it was heard before Master Leong on 25 February 2015, the plaintiff sold Apartment 8/F to a third party who is not named in the action.

4.The defendant is at all material times the incorporated owners of Manhattan Court (“IO”).

5.The Counterclaim is based on alleged breaches by the plaintiff and/or its predecessor of clauses in the DMC that enjoin the owners of Manhattan Court from constructing certain alternations or illegal structures to their premises.  The DMC also empowers the manager to remove the UBWs and to enforce due observance of the DMC by the owners.  The Counterclaim also refers to section 34I of the Building Management Ordinance, Cap 344 which prohibits any owner from converting any common part of a building to his own use without the approval of the owners’ committee or from using the common parts unreasonably to interfere with the use and enjoyment of the same by other owners or occupiers.

6.The plaintiff has removed the UBWs in May and June 2014.  It then issued the summons on 22 September 2014 under section 19 of the Land Registration Ordinance, Cap 128 and the inherent jurisdiction of the court to vacate the Counterclaim from the Registry.  The IO, however, procured an expert report saying that the plaintiff had not removed all UBWs.

The plaintiff’s submissions

7.In this appeal, Mr Cheung, counsel for the plaintiff framed the issues of the appeal as follows:

“(a) Whether the Counterclaim ‘relates to land or any interest or charge on land’, thus a lis pendens within the definition of s. 1A of LRO.

(b) If the answer to the first issue is affirmative, whether the Master was correct to hold that there was no good cause to vacate the registration despite the fact that the remedy sought in the Counterclaim can no longer be enforced against the Plaintiff.”

8.Mr Cheung submitted that the Counterclaim is not registrable as a lis pendens.  He further submitted that in order to be registrable, an action should have a claim to land or assert some interest in land or that it should be a claim of right of or to charge some specific real property.

9.The first case Mr Cheung relied on is Thian’s Plastics Industrial Co Ltd & Ors (No. 2) v Tin’s Chemical Industrial Co Ltd & Anor [1971] HKLR 249, 252-254.  It is a decision of the Full Court on appeal from a decision of Blair-Kerr J in Thian’s Plastics Industrial Co Ltd & Ors v Tin’s Chemical Industrial Co Ltd & Anor [1970] HKLR 498.  Briggs J said in the decision at 252 to 253 as follows:

“In order to succeed in this appeal the appellants must show that the lis pendens is registrable under the Land Registration Ordinance (Cap. 128).

For our present purposes the only lites pendentes which are registrable are those which “affect” land. …

The learned Judge in the court below had this to say: -

‘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’’.

…

I do not think that the above quotation from the learned Judge’s judgment in the court below is wrong. The expression “affects” is not a term of art. It can have a very wide meaning. In one sense any judgment given against a person who owns land may affect that land. For the successful litigant may only be able to recover any damages awarded to him by the sale of such land. However it has not been suggested that any proposed action can be registered as a lis pendens simply because the intended defendant owns landed property. Various authorities were quoted from other branches of the law in an effort to arrive at a more exact definition of the word “affects” but I did not derive any help therefrom.

That the doctrine of lis pendens does not apply to personal property other than chattel interests in lands is settled law:  See Wigram v. Buckley. In In re Barned’s Banking Company ex parte Thornton, Cairns L.J. said that a lis pendens “always implied a claim of right, or a claim to charge some specific property.  That was always a necessary ingredient in a lis pendens…”

I adopt these words and accept the words I have quoted from the judgment of the court below as being a correct statement of the law.”

10.The next case relied on by Mr Cheung is the decision of Liu J in Kwan Sec Wah v Mei Fung Co Ltd & Ors (HCA 2747/1980, unreported 18 July 1980). 

11.The plaintiff in that case claimed damages against the 2nd to 4th defendants for their alleged fraudulent or negligent management of the 1st defendant, their breach of fiduciary duty owed to the plaintiff, their oppression of minority shareholders, and for the purchase by the 1st to 4th defendants of the plaintiff’s shareholding and other relief of rendering of account and payment of profits.  There is also a claim for an injunction to restrain the 1st defendant from further charging, encumbering, disposing or parting with possession of any of its properties in particular the premises listed in the schedule of the endorsement of claim.  The endorsement was then registered at the Land Registry as a lis pendens against the premises in question.  Liu J (as he then was) ordered the vacation of the registration on the following ground on p 3 of the judgment:

“An injunction is claimed in this case as a remedy in aid of enforcement of a cause of action successfully prosecuted. An injunction constitutes no independent cause of action, and it is not a subject-matter in litigation on its own. It seems plain that there have been disputes within the Company. In my view, no part of the general endorsement on writ is or may be taken as a lis affecting land. There has been no quarrel over ownership for the property in question. There has been no proprietary claim to any land or any interest therein; nor has there been any endeavour to charge it. None of the matters contained in the general endorsement affects land, and following the decision in the case of Thian’s, in my judgment, the writ in this action is not registrable.”

12.The third case relied on by Mr Cheung is Chow Chiu Tai v Chan Tak Ming [1994] 1 HKLR 274.  In this case, the defendant owned factory premises one floor above the plaintiff’s premises.  The plaintiff alleged leakage of oil from the defendant’s premises.  The plaintiff brought an action against the defendant in nuisance, with alternative claims based on Rylands v Fletcher, negligence, and breach of the DMC.  The defendant gave undertakings to cease the nuisance.  The action proceeded for damages only.  The action was registered by the plaintiff as a lis pendens at the Land Registry against the defendant’s premises.

13.Section 1A of the Ordinance defined a lis pendens as “any action or proceedings pending in a court or tribunal that relates to land or any interest in or charge on land”.  The defendant contended that the registration of the lis pendens should not have been made as the action did not fall within that definition.

14.Counsel for the defendant in that case relied on Thian’s Plastics Industrial Co Ltd (No. 2) v Tin’s Chemical Industrial Co Ltd [1971] HKLRD 249, In re an Application by Lo Ling Leung-chai [1980] HKLR 910, Regan and Blackburn Ltd v Rogers [1985] 1 WLR 870, Heywood v BDC Properties Ltd (No. 2) [1964] 1 WLR 267 and Calgary and Edmonton Land Co Ltd v Dobinson [1974] 1 Ch 102.

15.Counsel for the plaintiff in that case however contended that the nature of the action was as such to affect the defendant’s use of his land and thus related to the defendant’s land.

16.P Chan J (as he then was) said at p 276 line 10 to line 38 as follows:

“Counsel for the plaintiff agreed that the action was based on nuisance, negligence and breach of the DMC. It was however argued that the writ also related to the defendant’s land within the meaning of s. 1A of the Ordinance in that it sought a court order to restrict the defendant’s way of using or enjoying his own property. … It was submitted that in the absence of a registration of the action against the premises, a purchaser would not be bound by any order or judgment which the court might give in the present action and that this was something which the court should also take into consideration.

The definition of lis pendens in s. 1A of the Land Registration Ordinance was only added in 1992.  Prior to that, there was no statutory definition and a lis pendens would be registrable in the same manner as a judgment by which land in Hong Kong might be affected (see s. 14 of the Ordinance).  This was dealt with by the Full Court in 1971 in the Thian’s case.  Briggs, J. (as he then was) adopted the dictum of Cairns, L.J. in In re Barned’s Banking Company, ex parte Thornton, (1867) 2 Ch App C 171, at 178 which said that a lis pendens, “always implied a claim of right, or a claim to charge some specific property. That was always a necessary ingredient in a lis pendens.”

Lis pendens is now defined is s. 1A of the Ordinance as “any action or proceedings pending in a court or tribunal that relates to land or any interest in or charge on land”. It is in more or less the same terms as “pending action” as defined in s. 2 of the Land Charges Act 1929 and the more modern term of “pending land action” as defined in s. 17(1) of the Land Charges Act 1972. The English cases on these terms are therefore relevant in the interpretation of lis pendens under the Hong Kong Ordinance. The keywords are “relating to land”. In Heywood v. B.C.D. Properties Limited (No. 2), Plowman, J. was of the opinion that:

‘The words relating to land in s. 2(1) of the Land Charges Act are confined to or referred to an action in which a claim to land or an interest in land is asserted.’”

17.P Chan, J further said at p 278 line 15 to p 279 line 40:

“In Greenhi Builders Limited v. Allen, Browne-Wilkinson, J. (as he then was) went further to explain on this.  In that case, the owners of some houses situated at the top of a slope alleged that the owners of the houses at the bottom of the slope had withdrawn the support to the houses at the top and brought an action claiming inter alia an easement of support, damages, injunctions, and an order that the loss of support be made good. The action was registered under the provisions of the 1972 Act.  The court held that the claim for an easement over land was an action relating to an interest in that land within the definition of a “pending land action” under the 1972 Act. The learned judge said at p. 159:

‘It is consistent with the scheme of the Act that an action which makes a claim to a right over the land, which affects the title to that land and which will operate as an incumbrance (in a loose sense) on the land against which it is registered is a pending land action.

Stamp, L.J.’s judgment (in Whittingham v. Whittingham [1978] 2 WLR 936 at 948) says that it is material to take into account whether, in the absence of the registration of the pending action, a third party acquiring the land before judgment in the action without notice will take free of the plaintiff’s claim. In this case, a purchaser from the company would not take free of the easement which is claimed if the cautioners succeeded in establishing such an easement for the easement claimed is a legal easement and it would take effect under the Land Registration Act without registration as an overriding interest.  But it is on this aspect of the matter that, in my judgment, the claim for a mandatory injunction in the pleadings in the action becomes material.  If the company retained the land until judgment, there can be no reason why, if other considerations are satisfied, the court should not specifically order the company to restore the support which has been allegedly wrongly removed.  If, on the other hand, the land has in the interim cease to belong to the company and has come into the hands of third parties who have no notice of the claim and no notice of the claim to the easement, there may be very substantial difficulties in getting mandatory relief against the persons who are the owners at the date of judgment.  It is, in my view, exactly for this type of purpose that the registration of pending land actions was introduced so as to ensure that anybody taking the land during the pendency of a land action should know that the action was going on and should be on notice as to the relief claimed in it. Having taken with notice of the relief being claimed, it would present very formidable difficulties in a purchaser to resist an order under which the cautioners’ rights were enforced specifically by a mandatory injunction.’ (my emphasis)

…

I now turn to the Land Registration Ordinance.  Lis pendens is defined is s. 1A in the same terms as “pending land action” in the Land Charges Act 1972.  It is somehow not expressly included in s. 2 as one of the various documents (which include judgments) that are registrable under the Ordinance.  Section 14, however, provides that “the provisions of this Ordinance relating to judgment (subject to the provisions hereinafter contained) shall extend to lites pendentes”. So an action or proceeding which falls within the definition of lis pendens is registrable in the same manner as a judgment.  But not every judgment is registrable under the Ordinance; only those by which “any parcels of ground, tenements, or premises in Hong Kong may be affected may be registered at the Land Office” (see s. 2).  It follows that not every lis pendens falling within s. 1A is registrable; only those by which land may be affected are.  In other words, not every action or proceeding pending in a court that relates to land or any interest in or charge on land is registrable unless it affects the land or any interest therein.

One of the main purposes of the Ordinance is to confer priority on an interest in land over another interest in the same piece of land by means of a system of registration at the Land Office of the documents affecting these respective interests.  Under s. 16, a regisrable lis pendens which is not registered “shall not bind any purchaser or mortgagee of the estate intended to be thereby affected”.  In my view, the consideration formulated by Stamp, L.J. in the Whittingham’s case and followed by Browne-Wilkinson, J. in the Greenhi’s case is equally appropriate in the Hong Kong context.  A lis pendens, to be registrable, must be one which affects an interest in land so that if it is not registered or registered in time, the interest affected by it may lose priority to some other interest in the same land if the document relating to that other interest is registered.  In other words, the question to be answered is: will the interest which is to be affected by the action or proceeding be adversely affected by or deferred to some other interest in the land if the action or proceeding is not registered or registered in time?  An action which claims some proprietary right in land, as referred to by Megarry, J., would be registrable as such a lis pendens because in the absence of registration, a subsequent purchaser or mortgagee bona fide and without notice of the action will certainly take free from the proprietary right under claim even if at the end of the day such a claim is upheld by the court.  Similarly an action for the reinstatement of an easement support of land or the maintenance thereof, as in Browne-Wilkinson, J.’s case, will also be registrable under the Ordinance, because if the action is not registered or registered in time, any subsequent purchaser in title of this land will not be affected by any judgment which may be given in the action. (Emphasis added)”

18.The English Court of Appeal also held in Whittingham v Whittingham [1978] 2 WLR 936 at 949E-G, that an application by the wife in divorce proceedings for transfer of property held by a company in the control of husband was registrable against the property as a pending land action under section 5(1)(a) of the Land Charges Act 1972.

19.Mr Cheung further relies on Regan & Blackburn Ltd v Rogers & Ors [1985] 1 WLR 870.  In that case, the landlords of a building were under an obligation contained in the leases of the flats in the building to keep in repair some steps from the roadway to the fields.  The leasees had easements entitling them to use these steps.  The lessees commenced proceedings against the landlords in the county court seeking a mandatory order for repair to the steps by the landlords.  The lessees then entered a caution at the Land Registry in respect of the action as a “pending land action”.  The landlords applied as plaintiffs against the lessees as defendants to have the caution vacated.

20.Scott J said at 874B-G:

“… In the county court proceedings with which I am concerned, there is no claim by the defendants to an interest over the steps. Their entitlement to their easement is not in dispute and is not an issue in the county court action at all. In the action the defendants are relying, so far as the steps are concerned, on their contractual right to have the landlord, for the time being, carry out the requisite repairs.

… The contractual obligation to repair the steps is an obligation which lies on the landlord for the time being. If, when the county court case comes to judgment, the present landlords are still the landlords, then if the case of non-repair is established no doubt the defendants can obtain a mandatory order against them requiring them to carry out their repairing obligation. If the plaintiffs are not the landlords at the time the case comes to judgment then it does not seem to me that a mandatory order that the repairs should be done could be made against them. On the other hand, if the case of non-repair is a good one, it does not seem to me that the defendants would have any more difficulty in obtaining a mandatory order against a successor in title than they would have against the present landlords. …

21.The learned Judge further said at 875C-D:

“But, in the present case, there is no relevant claim to an interest in the relevant land—i.e., the steps. The obligations sought to be enforced in the action are the landlord’s contractual obligations of repair contained in the leases. The caution is not in any real sense, in my view, effective or necessary to protect any interest of the defendants. I have already explained the reasoning by which I come to that conclusion. Accordingly, in my view, the action in the Brighton County Court is not in relation to the steps a pending land action.”

22.Mr Cheung then submitted that the cause of action in the Counterclaim is the alleged breach by the plaintiff of the DMC.  The Counterclaim is for enforcing the provisions of the DMC as referred to above.  It is an action in personam against the plaintiff only.  It is not claiming any interest in the property.  It does not affect any interest in or the title of the property. Furthermore, no subsequent purchaser or mortgagee will take a title in the land free of the obligation of the DMC or that the DMC would lose priority if the action is not registered.  The DMC has been registered on 24 September 1982.  The plaintiff’s successor is undoubtedly bound by it.  Hence, the Counterclaim is not regisrable as a lis pendens.

23.I also wish to refer to Re Lo Ling Leung Chai & Ors [1980] HKLR 910, a decision of Mr Commissioner Litton QC.  The facts of the case is summarized in the headnote:

“During his lifetime Lo Sum carried on a shipyard business in equal partnership with his brother Lo To and Law Tsoi. The three brothers used partnership funds to form a number of companies. They also used partnership funds to purchase several properties, some in the name of such companies and others in the name of individual members of the family. After the death of Lo Sum in October 1970 the surviving partners continued to carry on the business for their own benefit. Lo Sum’s son, the sole beneficiary and executor of his will, instituted proceedings (High Court action No. 2015 of 1980) against Lo To and Law Tsoi for an account of the deceased’s share. His solicitors effected registration of the statement of claim filed in the action as a “lis pendens” against each of the properties which it was alleged had been purchased with partnership funds. The registered owners of such properties applied for an order that the “lis pendens” be vacated.”

24.One of the grounds relied on by the owners is that:

“(iii) The plaintiff’s claim in Action No. 2015, when properly examined, does not amount to a claim to land or an interest in land and it is therefore in any case not registrable as a lis pendens under Cap. 128.”

25.At the material time of this case, the definition of lis pendens had not yet been enacted in section 1A of the Ordinance. However, I do not think the meaning of lis pendens as enacted later in section 1A is any different from the meaning as referred to in Thian’s Plastics or in cases like Wigram v Buckley and In re Barned’s Banking Company ex parte Thornton as referred to in Thian’s Plastics.  

26.Counsel for the plaintiff in Re Lo Ling Leung Chai accepted that the only lites pendentes which are registrable are those which “affect land”.

27.The learned Commissioner held that upon the dissolution of the partnership, the partnership properties had become personal properties. The learned Commissioner further said (p 919 lines 10-19):

“I find it unnecessary in this judgment to go into the history of lites pendentes, although interesting and helpful arguments have been advanced before me by counsel on the point. In the more recent English Statutes the expression “lis pendens” has given way to the term “pending land action” but it is clear from the judgment of Megarry, J. in Calgary Land Company v. Dobinson that in scope and concept there has been no change. Megarry, J. in his judgment (p. 107) refers to the old cases such as Bellamy v. Sabine, in re Barned’s Banking Co. and Wigram v. Buckley from which it is clear that the doctrine of lis pendens applies not to every suit, but to a suit the object of which is to recover or assert title to specific property.”

28.Since the plaintiff’s claims were for a share of the personal properties, the registrations of the claims were vacated from the Land Registry.

The IO’s submissions

29.Mr Yeung disagreed with Mr Cheung.  He relied on Re Ching Yue Chong (Deceased) [1997] 3 HKC 548. 

30.The 3rd defendants in this case were the tenants in common of a 3-storey village house erected on a lot in the New Territories. The first named 3rd defendant had the exclusive right to occupy the groundand 1st floors while the 2nd named 3rd defendant had the exclusive right to occupy the 2nd floor.  The plaintiff was the owner of an adjacent lot. 

31.The plaintiff brought an action against the 3rd defendants for trespass because of the presence of certain illegal structures on the plaintiff’s lot.  The writ was registered against the 3rd defendants’ lot and the building thereon. The parties later entered into a consent order which was also registered against the 3rd defendants’ properties.  The illegal structures were removed save one item, i.e. an external staircase which served as the sole access to the 2nd floor of the 3rd defendants’ building.

32.The first named 3rd defendant then applied to vacate the registrations.  Le Pichon J (as she then was) crystallized the issue as whether the removal of the staircase is an encumbrance against the 3rd defendants’ lot and the building thereon so as to render the registrations of the writ and the consent order proper (p 551C-D) or whether the writ and/or consent order are properly registrable as lis pendens (p 552D).

33.The learned Judge referred to the judgment in Chow Chiu Tai and quoted various parts from it including the parts I quoted above. The learned Judge emphasised the part that I underlined on p 279 of the judgment. The learned Judge then concluded as a matter of principle at p 555C-F as follows:

“It is clear from the judgment in Chow Chiu Tai that an action may nevertheless qualify as a lis pendens without there being any direct or express claim to a proprietary interest in land. The critical issue is whether the judgment or order to be given affects the land in question. What the learned judge appeared to have in mind were situations where the complaint can only be properly addressed through something being done to the land against which the action is registered particularly where a mandatory injunction is sought. It is implicit from the judgment that registration in those circumstances would be proper. On the facts of that case, the nuisance had already been addressed and so the registration could no longer be sustained. In the present case, the cause of action is trespass. But if the trespass can only be removed by work being carried out to the land in question, it falls squarely within the parameters set out in Chow Chiu Tai. Here the complaint has not been satisfactorily addressed in as much as the staircase has yet to be removed. Applying the principles set out in Chow Chiu Tai (with which I agree), both the writ and the order are registrable and I so hold.”

34.Mr Yeung further referred to Fairview Park Property Management Limited v Top Express Development Ltd [1999] 3 HKC 625.  The plaintiff there was the manager of the estate Fairview Park in Yuen Long.  The defendant was the owner of a property in the estate.  The plaintiff brought the action against the defendant to enforce the terms of the DMC and Estates Rules.

35.The writ was registered against the defendant's property as a lis pendens. The defendant applied to vacate the registration. The Master allowed the application. The plaintiff appealed.  Cheung J (as he then was) considered whether the writ was registrable as a lis pendens within section 2(1) of the Ordinance read in conjunction with section 14.

36.The learned Judge said (627C-628E):

“The meaning of lis pendens had been extensively considered by Patrick Chan J. (as he then was) in Chow Chiu-tai and Chan Tak-ming [1994] 1 HKLR 274 and by Le Pichon J. in Re Ching Yue Chong (Deceased) [1997] CPR 237. It is not necessary for me to tread the same grounds that had been extensively covered by the learned judges. I respectfully adopt their approach. In my view, the test to be applied is this: Does the present action which obviously relates to land affects an interest in the land? The requirement as suggested in cases such as Yu Jing Jenn v. Wong Pe Wun & Ors [1986] HKC 624 that some propriety right must be asserted is not the only basis in which a writ can be registered as a lis pendens.

In the present case, the answer to the question I have formulated must be “yes”. The Plaintiff is seeking an order in the nature of a mandatory injunction requiring the Defendant to remove the unauthorised structures and to reinstate the property to its original state. This obviously affects an interest in the land.

Furthermore, the Plaintiff's interest in the land, by reason of its position as the manager of Fairview Park, to enforce the DMC will no doubt be adversely affected against subsequent purchasers from the Defendant if the writ is not registered. In Whittingham v. Whittingham [1978] 2 WLR 936, Stamp L.J. stated that : “Some assistance in answering the question will no doubt be obtained by considering whether in the absence of registration a purchaser or mortgagee might obtain a title to the land as a bona fide purchaser without notice of, and so defeat, the plaintiff’s claim...”

The Defendant argued that as the DMC which expressly provides for the observation of the Estate Rules is already registered against the Defendant’s property, any subsequent purchaser must have notice of the DMC and bound by the provisions of the DMC.

This may be so, but what is more important is to put any subsequent purchaser on notice of the actual breach of the DMC. This is the very purpose for which the registration is intended. A purchaser who buys the property with notice of the Plaintiff’s claim to enforce its right pursuant to the DMC would have great difficulties in resisting the Plaintiff’s claim for mandatory injunction pursuant to the terms of the DMC. This point in fact is covered by Browne-Wilkinson J. in Greenhi Builders Limited v. Allen [1979] 1 WLR 156:

‘… In this case, a purchaser from the company would not take free of the easement which is claimed if the cautioners succeeded in establishing such an easement for the easement claimed is a legal easement and it would take effect under the Land Registration Act without registration as an overriding interest. But it is on this aspect of the matter that, in my judgment, the claim for a mandatory injunction in the pleadings in the action becomes material. If the company retained the land until judgment, there can be no reason why, if other considerations are satisfied, the court should not specifically order the company to restore the support which has been allegedly wrongly removed. If, on the other hand, the land has in the interim ceased to belong to the company and has come into the hands of third parties who have no notice of the claim and no notice of the claim to the easement, there may be very substantial difficulties in getting mandatory relief against the persons who are the owners at the date of judgment. It is, in my view, exactly for this type of purpose that the registration of pending land actions was introduced so as to ensure that anybody taking the land during the pendency of a land action should know that the action was going on and should be on notice as to the relief claimed in it. Having taken with notice of the relief being claimed, it would present very formidable difficulties in a purchaser to resist an order under which the cautioners’ rights were enforced specifically by a mandatory injunction.’

What the learned judge said in that judgment covers the present situation.” (Emphasis added)

37.Mr Yeung further said in §36 of his submissions that it is trite that a DMC runs with the premises and is binding on a subsequent purchaser or mortgagee.  He is certainly correct on this.  He then submitted that any judgment on the Counterclaim which finds that the UBWs in Apartment 8/F needed to be removed and the roof thereof needed to be reinstated will not only bind the plaintiff, but also the subsequent purchaser of Apartment 8/F.  However, Mr Yeung has not provided any authority directly on the point. 

38.When asked to support this proposition, he referred to other authorities on the title to real properties in his supplemental submissions.  He referred to Sun Ngai International Investment Ltd v Zhang Su Hua [2009] 1 HKLRD 48, a decision by Deputy Judge Carlson.  This decision is of the same reasoning as in Whittingham v Whittingham.  This case is different from the Counterclaim.

39.He also referred to Chi Kit Co Ltd v Lucky Health International Enterprises Ltd (2000) 3 HKCFAR 268 at 281 C-I.  This case is on the effect of section 17(1)(b) of the Building Management Ordinance which provides:

“17(1) (b). If a judgment is given or an order is made against a corporation, execution to enforce the judgment or order may issue —

…

(b) with the leave of the tribunal, against any owner.”

40.The effect of the decision of the CFA is that where a judgment has been obtained against incorporated owners, section 17(1) (b) empowers the Lands Tribunal to grant leave for the judgment to be enforced against the owners of the building at the time of the application for leave.

41.There is however no similar mechanism to enforce a judgment that may be given in the Counterclaim against a subsequent purchaser or mortgagee of Apartment 8/F.  This decision therefore does not support Mr Yeung’s proposition that any judgment given on the Counterclaim requiring the plaintiff to remove the UBWs and restore the roof will bind the subsequent purchaser or mortgagee of Apartment 8/F.

42.The next case in Mr Yeung’s supplemental submissions is Modern Sino Ltd v Art Fair Ltd [1999] 3 HKLRD 847.  Yuen J (as she then was) held in the case that the presence of substantial building works not included in the approved plans gave rise to (a) a risk of enforcement by the Building Authority; (b) a risk of re-entry by the Government as lessor; and (c) a risk of action against the owner by co-owners under the DMC.

43.The risk of enforcement by the Building Authority is because the UBWs constituted an infringement of the Buildings Ordinance, Cap 123.  The risk of re-entry is owing to the contravention of a special condition in the Government lease as caused by the presence of the UBWs.  The risk of action by the co-owners stemmed from the infringement of the DMC.  These risks as stemmed from the existence of UBWs rendered the title of the premises objectionable and the title could not be forced upon a purchaser.  But this case is not an authority to the effect that a judgment in terms of the Counterclaim will bind any purchaser or mortgagee of Apartment 8/F.

44.The last case in the supplemental submissions is Lo Chi Wai Arthur v Liu Wing Cheung Wilfred [1983] 1 HKC 416.  Mantell J decided in that case that an alienation of the exclusive right to occupy a carpark and part of the undivided shares that together carried the exclusive right to occupy a flat and two carparks (including the one alienated) contrary to the terms of the DMC would create a continuing risk of an action for breach of DMC to be brought by the other parties to the DMC and the real risk that future attempt at assignment of the remaining undivided shares with the flat and the remaining carpark might be blocked by injunction.  This case is also irrelevant to Mr Yeung’s proposition that a judgment in terms of the Counterclaim will bind a subsequent purchaser or mortgagee of Apartment 8/F.

45.At the end of the supplemental submissions, Mr Yeung made the proposition that the registration of the Counterclaim as a lis pendens can serve to impute notice upon a buyer of the existence of the UBWs and the determination of the lis would create an issue estoppel or cause of action estoppel binding on all assignees or successors in title of Apartment 8/F.  He filed his 2nd supplemental submissions to explain and justify this further proposition. 

46.He referred to Parakou Shipping Pte Ltd v Jinhui Shipping and Transportation Ltd [2011] 2 HKLRD 1.  In that case, the plaintiff had lost ad hoc arbitration proceedings with G, the disponent owner of a ship that P had entered into a charter party with.  P then commenced an action against G’s holding company the 1st defendant and its associates 2nd to 4th defendants on similar issues.  The action was struck out by Reyes J on the ground of abuse of process because of privity of interest.  However, there is no privity of interest between the plaintiff and the subsequent purchaser or mortgagee of Apartment 8/F in relation to the Counterclaim.

Summary of the positions of the parties

47.It is Mr Cheung’s case that the Counterclaim is merely a claim in personam.  It is to enforce some covenants in the DMC against the plaintiff.  Though it requires the plaintiff to execute some works on Apartment 8/F, it is not a claim for any proprietary right or interest therein.  It is not a claim of right in or to charge some specific property.  Even if the Counterclaim is not registered, a third party acquiring Apartment 8/F before judgment is given on the Counterclaim will not take Apartment 8/F free of the covenants in the DMC as the DMC has been registered against this property.  The Counterclaim is to enforce some of the covenants of the DMC only.

48.Mr Yeung however argued that the Counterclaim is an action in rem.  It is an exercise of the rights in the DMC and is independently registrable.  He submitted that despite the fact that it is not claiming any interest in Apartment 8/F, it still affects or relates to the apartment as it seeks a mandatory injunction for the UBWs to be removed and the reinstatement of the apartment to its original state.  I think it is also Mr Yeung’s case that if the Counterclaim is not registered, the position of the IO in enforcing the DMC will be adversely affected as against the subsequent purchaser or mortgagee of Apartment 8/F.  It is thus important to put any potential subsequent purchaser or mortgagee on notice of the breach of the DMC and that is one of the purposes of registration at the Land Registry.

The Land Registration Ordinance

49.In order to understand the purpose and effect of registering a lis pendens and, hence, what may be registered as a lis pendens, it is necessary to consider the meaning and effect of the key sections of the ordinance that deal with or affect the registration of a lis pendens.   I quote the sections below with the omission of some words that do not relate to a judgment and lis pendens to facilitate easy reading.  The sections are:

“Preamble: WHEREAS it is expedient to prevent secret and fraudulent conveyances, and to provide means whereby the title to real and immovable property may be easily traced and ascertained:

1A. “lis pendens” (待決案件) means-

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

…

2. (1) The Land Registry shall be a public office for the registration of deeds, conveyances, and other instruments in writing, and 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.

3. (1) Subject to this Ordinance, all such … judgments, made, executed, or obtained, and registered in pursuance hereof, shall have priority one over the other according to the priority of their respective dates of registration, which dates shall be determined in accordance with regulations made under this Ordinance.

(2) All such … judgments, as last aforesaid, which are not registered shall, as against any subsequent bona fide purchaser or mortgagee for valuable consideration of the same parcels of ground, tenements, or premises, be absolutely null and void to all intents and purposes:

Provided that nothing herein contained shall extend to bona fide leases at rack rent for any term not exceeding 3 years.

4. No notice whatsoever, either actual or constructive, of any prior unregistered … judgment, shall affect the priority of any such instrument as aforesaid as is duly registered.

5. All … judgments, which are duly registered within the respective times next mentioned, that is to say, … all judgments which are registered within one month after the entering up or recording thereof, shall severally be in like manner entitled to priority, and shall take effect respectively by relation to the date thereof only in the same manner as if this Ordinance had not been passed.

5A. Notwithstanding section 3 or section 5a … lis pendens which is duly registered shall have priority from the commencement of the day following the date of its registration.

14. The provisions of this Ordinance relating to judgments (subject to the provisions hereinafter contained) shall extend to lites pendentes:

16. No lis pendens shall be registered in the Registry of the High Court, or elsewhere than in the Land Registry; and a lis pendens not registered in the said office shall not bind any purchaser or mortgagee of the estate intended to be thereby affected.

17. The registration of a judgment, order or lis pendens shall cease to have effect at the end of 5 years from the date of registration, but the judgment, order or lis pendens may be re-registered from time to time and, if so re-registered, shall have effect for 5 years from the date of re-registration.

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 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.” (Emphasis supplied)

The IO’s submissions on the Land Registration Ordinance

50.After the hearing on 2 July 2015, I asked the parties to file further submissions on the effect and applicability of the sections in the ordinance on the registration of the Counterclaim as a lis pendens.  Mr Yeung in response filed his 3rd supplemental submissions.  He referred to the preamble of the Ordinance and emphasised that registration was to facilitate the tracing and ascertaining of title.

51.He submitted that it was unduly restrictive to confine the meaning of the words “relates to land” in section 1A only to “proprietary claims” or “secured interests”.  He however changed his stance and accepted that the Counterclaim is a claim in personam.  Nevertheless, he maintained that the outcome of the claim for removal of UBWs for breach of the DMC as contained in the Counterclaim would affect Apartment 8/F and hence the nature of its title.

52.By way of analogy, Mr Yeung referred to non-compliance with land covenants under a government leave.  He said the non-compliance would give rise to a claim in personam by the government against the lessor or his assignee or successor in title.  I do not think this is a correct analogy as a breach of the government lease can give rise to forfeiture of the lease and such is not a claim in personam but a claim in rem.  It is not analogous to a breach of the DMC that prohibits the construction of UBWs.

53.Mr Yeung also referred to a building order issued under section 24 of the Buildings Ordinance, Cap 123 which is also a claim in personam but registrable under section 24(2C).  Section 24(2C) and (4A) provide as follows:-

“(2C) The Building Authority may, upon the service of an order under subsection (2)(a), (b) or (c)(iii) or (2A), cause the order to be registered in the Land Registry against—

(a) if the order has been served on the owner of any land or premises in accordance with subsection (2)(a) or (c)(iii), the land or premises;

…

(4A) Where the order has been registered with the Land Registry in accordance with subsection (2C), the cost of any demolition or alteration under subsection (3) in relation to the building, building works or street works to which the order relates shall be recoverable from—

(a) if the order had been served on the owner of any land or premises in accordance with subsection (2)(a) or (c)(iii), the person who, as at the date of completion of the demolition or alteration, is the owner of that land or premises;”

54.It can be seen from section 24(2C) that the building order is made registrable by virtue of that section.  Furthermore, the registration can make the owner of the property at the date of completion of the works liable for the costs of such works as incurred by the Building Authority.  There are however no similar provisions in the Building Management Ordinance to make a claim similar to the Counterclaim registrable and the judgment on the claim binding on the subsequent purchaser or mortgagee. Registration of building orders under section 24(2C) is thus not a proper analogy for registration of the Counterclaim.

55.Mr Yeung also submitted that prospective purchasers or mortgagees should be entitled to be given full notice of such claims to assess whether title should be accepted.  He said this can fulfil the purposes of the Ordinance as set out in the preamble which is to prevent secret and fraudulent conveyances and allow purchasers to trace and ascertain title.

56.However, if the Counterclaim is a claim in personam, as Mr Yeung now accepts, the judgment that it may establish will not bind a subsequent bona fide purchaser or mortgagee.  Res judicata does not apply as between the defendant and a subsequent bona fide purchaser or mortgagee of Apartment 8/F.  The judgment is also not a matter of title although it may be evidence of breach by the existing owner of the DMC.  What binds the subsequent purchaser or mortgagee is the DMC which has been registered. Even if the Counterclaim is not registered, no bona fide purchaser or mortgagee of Apartment 8/F can obtain a title to it that is free of the DMC.  It is for the subsequent purchaser or mortgagee to be satisfied if there is any breach of the DMC before completion.  If the owner should have covered up such breaches when conveying the premises to the purchaser, then the purchaser can resort to contractual remedies against the previous owner. 

57.If the legislature should consider that claims like the Counterclaim should be registrable for the purpose of giving notice of such claims to prospective purchasers and mortgagees, the Building Management Ordinance can be amended to make such claims registrable.  Section 24(2C) of the Buildings Ordinance is an example.

58.Mr Yeung also submitted that if such claim is not registrable, the owner being sued can avoid his liability upon his sale of the property to another party.  The claimant like the IO in the Counterclaim would have to sue the new owner from a fresh.  But I think the need to start fresh proceedings is because the claim is in personam.  In any event, the new owner would not be bound by the judgment on the claim and fresh proceedings will be necessary in case of dispute by the new owner.  To allow the claim to be registered may force the defendant to the claim to yield if he wants to have a smooth conduct of the sale of the property.  But if the claim is in personam and does not bind the subsequent purchaser or mortgagee, there is no reason why it should be allowed to be registered.

59.Mr Yeung also relies on the cases of Fung Kan Wai & Anor v Leung Shui Fat & Ors [1998] 2 HKC 115 and Jimmy Investments Ltd v Lam Fong Chun (HCA 18720/1998, 7^th September 1998 by Yeung J).  As pointed out by Mr Cheung, these two cases are different from the Counterclaim.  They are claims for return of deposits paid by purchasers under sale and purchase agreements.  The claims include a declaration of an equitable lien on the property for the repayment.  The claim of an equitable lien is a claim of an interest in the property.  Such claims, if not registered, will be defeated by the purchase of a bona fide purchaser for value and without notice.

60.Finally, Mr Yeung relies on Lau King Ting Katie v Cheng Miu Har [2008] 4 HKLRD 563 (at §§ 54 to 59).  As pointed out by Mr Cheung, the plaintiff in that action made claims against the transfer of properties and sought a declaration that certain assignments of properties were null and void.  Such claim is of course registrable, otherwise, a subsequent bona fide purchaser or mortgagee will take free from the claim.  The Counterclaim here makes no such claim and is of a different nature.  Its effect depends on the DMC that has been registered.

61.The reference to these cases therefore does not assist the IO.

Analyses of the key sections

62.I now consider the provisions of the ordinance. The preamble provides that the ordinance is to prevent secret and fraudulent conveyances, and to provide means for tracing and ascertainment of title to real and immovable property.

63.Section 14 provides that the provisions of the Ordinance relating to judgments “shall” extend to lites pendentes.

64.Section 2 provides for the registration of all judgments (and hence lis pendens) by which any parcels of ground, tenements, or premises in Hong Kong may be affected.  Mr Cheung, counsel for the plaintiff in his reply submission referred to Chow Chiu Tai at 270 lines 5-24 where P Chan J said “not every action or proceeding pending in a court that relates to land or any interest in or charge on land is registrable unless it affects the land or any interest therein.”

65.Section 3(1) provides that all judgments (and lites pendentes) registered at the registry shall have priority one over the other according to their respective dates of registration.  If the purpose of registration of the Counterclaim is to put the subsequent purchaser of Apartment 8/F on notice of actual breaches of the DMC, I cannot see why it is necessary to provide for priority of registration.  I cannot see how the subsequent purchaser can escape from his obligation to perform and comply with the DMC even if his sale and purchase agreement or assignment should have a higher priority than the Counterclaim.  I reiterate that the Counterclaim itself does not give rise to any obligation but is only to enforce the obligation that stems from the DMC.  If the Counterclaim itself does not give rise to any right or obligation in respect of the property, I fail to see any need to consider its priority of registration.

66.However, if the lis pendens claims a proprietary right or interest or a transfer of property as in Sun Ngai International Investment Ltd or Whittingham, then the question of priority is important.  If its priority should be after an assignment or mortgage of all the interests in the property in question, then it cannot affect the prior purchaser or mortgagee.  But the Counterclaim is not claiming any proprietary interest in or to charge any specific property. It merely seeks an order to compel the plaintiff to comply with the DMC.  Hence, it may not be the lis pendens that section 3(1) is aiming at.

67.Regarding section 3(2), it says that all judgments (and lites pendentes) which are not registered shall, as against any bona fide purchaser or mortgagee for valuable consideration of the same property, be absolutely null and void to all intents and purposes.  If the Counterclaim should be subject to this provision, then the consequence of its non-registration is the absence of all its effect on a bona fide purchaser or mortgagee for value.

68.However, the registration of the Counterclaim at the registry will not make the judgment that it may establish binding on the subsequent purchaser or mortgagee.  Now that Apartment 8/F has been sold to a new owner, if the IO should be desirous of enforcing the same obligations against the new owner, it has to issue fresh proceedings against this owner.

69.In the premises, if the Counterclaim cannot bind the subsequent purchaser (or the current owner) in any event, then it is illogical to say that it will be null and void as against a subsequent bona fide purchaser or mortgagee.  Hence, section 3(2) thus does not appear to aim at the Counterclaim as a lis pendens.

70.Regarding section 4, it provides that no notice whatsoever of any prior unregistered judgment (or lis pendens) shall affect the priority of any registrable instrument which is duly registered.  My observation under section 3(1) on the issue of priority applies to this section as well. 

71.There is also the issue of notice.  This section provides that if a judgment (lis pendens) is not registered, then even if the subsequent purchaser should have actual notice of it, the assignment of the subsequent purchaser will still have a higher priority over it.  If the importance of registration lies in the giving of notice of claim to the subsequent purchaser and the claim is not for any proprietary interest of or charge on the property, then there is no reason to limit the mode of giving of notice only to registration at the Land Registry and to compel such registration with the sanction of losing priority. 

72.There are many ways and means for giving notice of infringement of the DMC to potential purchasers.  To post a copy of the writ on the notice board of the building or estate of which the premises form part can also achieve such purpose.  Hence, section 4 should not be for compelling registration for the mere purpose of giving notice of claims against breaches of DMC to subsequent purchasers, but to compel registration of judgment (or lis pendens) that claims an interest of or charge on the property in question.  This can facilitate the tracing and ascertaining of title.

73.Sections 5 and 5A are also for regulating priority. My observation under section 3(1) applies to them as well.  These sections therefore are not to provide for the registration of a claim like the Counterclaim as a lis pendens. 

74.Section 16 restricts the registration of a lis pendens to the Land Registry.  It further provides that a lis pendens not registered will not bind any purchaser or mortgagee.  My observation under section 4 also applies here.  Section 16 therefore also appears to govern a lis pendens that claims an interest of or charge on the property in question and not the Counterclaim under consideration.

75.Section 17 stipulates the need for re-registration of a lis pendens and judgment once every five years.  If the purpose or one of the main purposes of registration of a lis pendens is to give notice of claim against breaches of DMC like the Counterclaim, then there is no reason why such lis pendens needs to be re-registered once every five years.  I cannot see why a lis pendens can only give notice of its contents for five years after its registration and will no longer give any notice after five years.

76.To sum up, all the provisions of the ordinance considered above are to provide for and regulate the registration of a lis pendens that claims a proprietary interest or right in a real property.  They also regulate the priority of the claim in the lis.  The need to re-register a lis pendens is to ensure that it is a live claim.  The registration of a lis pendens is not for the purpose of giving notice to a subsequent purchaser or mortgagee of allegations of breaches of DMC committed within a property and the claim for restoration to be executed within the property as in the Counterclaim.

77.Regarding the words “relates to” in section 1A, I respectfully borrow what Briggs J said in Thian’s Plastics about the word “affects” (p 253 lines 2-12) and apply the same to these words.  The learned Judge was referring to the meaning of the word “affected” as used in sections 2 and 15 of the Ordinance.  Section 15 has been repealed, but section 2 remains.  I would say that the words “relates to” are not a term of art and can have a very wide meaning. But I think their correct meaning should be ascertained by reference to the meaning and effect of the sections in the Ordinance that I have considered above.

78.Mr Yeung has also sought to argue that notice of a claim of injunction can be given to the subsequent purchaser by registration. The purchaser, having such notice, will find it very difficult to resist such relief being claimed against him.

79.However, the injunctive relief is merely for enforcing the claim.  If the claim itself is not registrable, the injunctive relief is likewise not registrable as it is not an independent cause of action (see Kwan Sec Wah above).

80.Furthermore, the incorporated owners or manager of an estate or building has no obligation to notify any potential purchaser or mortgagee of breaches of DMC committed inside any property or of any claim for restoration of the property.  I cannot see how any subsequent purchaser or mortgagee can dispute liability for such claim or to resist any particular kind of relief by alleging that the incorporated owners or building manager has failed to give him notice of such claim or prayer for relief that had been made against his predecessor in title before his purchase.  It is for the purchaser to find out whether there are any UBWs in the property or any existing and unrequited breaches of the DMC before completion.

81.To allow a lis pendens like the Counterclaim to be registered at the Land Registry may facilitate the enforcement of the covenants in the DMC.  However, this requires new legislation to be enacted preferably in the Building Management Ordinance. 

Decision

82.Having found for the plaintiff on the question of registrability, I do not think it necessary for me to consider the plaintiff’s 2nd ground; namely that even if the Counterclaim is registrable, there is a good cause to vacate the Counterclaim from the registry.

83.Regarding the source of the power of the court to vacate the registration of the Counterclaim, I do not think I should rely on section 19 of the Ordinance.  That section gives the court the power to vacate a lis pendens that is registrable as such.  I would instead rely on the inherent jurisdiction of the court and order the vacation of the Counterclaim from the Land Registry (see Thian’s Plastics, p 255 lines 5-16). 

84.In the premises, I allow the plaintiff’s appeal. I also make a costs order nisi that the IO do pay the plaintiff the costs of the appeal and below.

Mr Anthony P W Cheung, instructed by Tung, Ng, Tse & Heung, for the plaintiff

Mr Yeung Ming Tai, instructed by Kwok, Ng & Chan, for the defendant