COMPLETION

Completion =
 Payment of the purchase price by P
 In return for V to
o Execute the assignment, and
o Hand over all title deeds
In reality, more complex – 4-party completion
 P’s mortgagee – if P purchases property with the help of a mortgage
 V’s mortgagee – if V intends to pay off outstanding mortgage from purchase price)

Post-completion: stamping and registration of assignment

1. COMPLETION STATEMENTS

Two forms of completion statement drawn up and sent to P (to assist P in knowing what he will have to pay at completion)

(i) Statement by the V’s solicitors which sets out the amount required to be paid by the purchaser at completion
 Sum includes:
o balance of the purchase price;
o apportioned outgoings due to V from P and due from V to P;
o any legal costs payable by P to the V’s solicitor (see the Solicitors Costs Rules attached)

(ii) A statement from P’s solicitor to P informing him as to the total sum of money he must have available at completion to pay
V and his own solicitor
 Sum includes:
o balance of the purchase price;
o balance of the apportioned outgoings due from P to V;
o any legal costs payable by P to V’s solicitor; and
o P’s solicitor's fees for approving the sale and purchase agreement, for drafting the assignment and for drafting
the mortgage (assuming P's solicitor is instructed by the mortgagee)

2. SOLICITORS’ COST

(a) The scope of the Solicitors' (General) Costs Rules (scale fee)

The Solicitors (General) Costs Rules covers solicitors' costs (fees) for:
(i) First Schedule Part I: Assignments and mortgages;
(ii) First Schedule Part III: Leases and Agreements for leases;
(iii) Second Schedule: Sale and Purchase Agreements; Reassignments and Releases; Deeds of Mutual Covenant; and
(iv) Third Schedule: photocopy charges; attestation fee; fee for administering oath/affirmation; fee for certifying
power of attorney

Included in these costs will be the time and effort in investigating and checking title, raising requisitions and answering them.

(b) Charging for other work

For other work a solicitor may charge in accordance with clause 5; his fee will be based upon the complexity of the work
involved; skill and specialised knowledge required; number of documents prepared; time expended; value of property involved;
and importance of matter to client. E.g. drafting power of attorney; drafting confirmatory assignment.

(c) Undercutting

It used to be the case that there must be no undercutting of scale fees (see Law Society Circular No 146 of 1984). It is now no
longer a disciplinary offence to charge less than scale fee and this has had a severely adverse effect on solicitors' income from
conveyancing work.

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(d) Scale fee for drafting and approval

If scale fee is applied, the charging solicitor can charge full scale fee for drafting a document and half scale fee for approving a
document.

3. MANNER OF COMPLETION

Completion may take place in person (formal completion) OR by way of solicitor undertakings

3.1 Completion by way of undertakings

 (1) Cashier order / cheque for the residue of purchase price  sent to V’s solicitor on or before the agreed completion
date
 (2) In return for an undertaking by V’s solicitor to provide the requisite docs (including the executed assignment) to P
within a specified number of days
 HK: completion by undertaking is more common
o Chong Kai Tai Ringo v Lee Gee Kee; Cheng Jui Lung Kris v Perfect Best Ltd
 Must be stated expressly in SPA that completion is effected by way of mutual undertakings
 A term will not be implied in SPA that parties may complete by undertaking
 Nature of solicitor’s undertaking: Ying Ho Co Ltd v Man Kwok Leung t/a David Man & Co (a firm)
o V solicitor given undertaking to provide the duly executed assignment
o V was an imposter
o Held:
 Obligation of V’s solicitor under the undertaking was not absolute to the extent that it guaranteed
against fraud
 Duty of solicitor only to take reasonable care
 Whether reasonable care had been taken = a question of fact

3.1.1 Payment methods

(i) Split cheques
 Cheqeue must be split if property purchased is subject to a mortgage that will be discharged before completion
o Edward Wong Finance Co Ltd v Johnson Stokes and Master – PC laid down advice as to split cheques:
 (1) Sum of money required to discharge the mortgage – payable to mortgagee
 (2) Residue – payable to V’s solicitor
 Implied term in SPA: V will supply the necessary details as to how the cheques are to be split in good time before
completion (Whale View Investment Ltd v Kensland Realty Ltd)
o Tse Chun Hung Herby v Chang Chung Paul:
 P’s solicitor asked for instructions from V’s solicitor on how the payment of purchase price should be
split
 No response from V’s solicitor  sale fell through
 Held:
 Under the implied term, V must give instructions in good time as to how the payment of
balance of purchase price must be split
 V failed to do so  breached SPA

(ii) Bouncing cheques

 P will commit a repudiatory breach of SPA  V entitled to rescind + forfeit deposit + sue for damages
o Insufficient funds in client’s account  completion cheque bounces
 P’s solicitor may be liable for negligence for allowing such state of affairs to occur:
o Chua Ming Yuen v Hentron Investments Ltd:
 Cheque from P’s mortgagee only received on the day of completion and funds not cleared in time
 P’s cheque bounced
 Held: P’s solicitors liable in negligence for leaving the securing of cheque from mortgagee to such a
later stage, when it must have been foreseeable that it would not be cleared in time

3.1.2 Standard forms of undertakings

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  As a result of Edward Wong Ltd v Johnson, Stokes and Master, Law Society issued standard forms of undertakings which
should be used
Privy Council mocked HK conveyancing system – 4 remedial measures by Law Society
 (i) require residue of purchase price paid to V’s solicitor as V’s agent (in case V’s solicitor absconds)
 (ii) split cheque rule
 (iii) standard letters of undertaking
o Not mandatory, but almost invariably used
o Part 1 letters – first sales, new sales
o Part 2 letters – second hand sales, subsequent sales
o 3 letters of undertaking in total:
 Theses letters usually drafted by P solicitor with the standard forms  P solicitor will send
one to P’s mortgagee, one to V and one to V’s mortgagee
 (iv) If completion is to be by undertaking, the undertaking must be given subject to the Law Society
qualifications
o Use is not mandatory
 Comprises of 8 letters in 2 series
o Part 1 (4 letters) – used for first sales of recently completed units
o Part II (4 letters) – used for subsequent sales of completed units
 P (or V (in new development)) usually prepares the draft letters of undertaking  agreed by V’s solicitors + mortgagee’s
solicitors before completion
o Sent out together with draft assignment
o If agreement not reached, the parties may complete by way of formal completion
 The letters of undertaking may have other clauses added
o E.g. P might require V to demolish UBW / pay off outstanding management fees
o E.g. V may require his mortgagee to provide statutory declaration by way of proof that PoA under which the
discharge is executed by the bank has not been revoked

First Letter
 From P’s mortgagee to P’s solicitor
 Only used when P is buying with assistance of mortgage
 (a) P’s mortgagee sends cheque for the mortgage sum
 (b) In return for an undertaking by P’s solicitor to return the relevant documents to him within 21 days
o (i) The assignment to P and memorial
o (ii) Cheque for registration of mortgage and assignment (unless paid in advance)
o (iii) Title deeds, including discharge from present mortgage (if any) and DMC
o (iv) SD questionnaire and cheque for $100

Second Letter
 From P’s solicitor to V’s solicitor
 Used when property is not subject to a mortgage, which will be discharged prior to completion
 (a) P sends cheque for purchase money to V’s solicitor
 (b) In return for an undertaking by V’s solicitor to send P within 17 days [where there is P’s mortgagee] or 21 days
[where there is no P’s mortgagee]
o (i) The assignment
o (ii) Title deeds
o (iii) The keys to the property where vacant possession will be given Second and third letters
are alternatives
Third Letter
 From P’s solicitor to V’s solicitor
 Used when property is subject to a mortgage, which will be discharged prior to completion
 (a) P solicitor sends split cheques (one for V; one for V’s mortgagee)
 (b) In return for an undertaking by V’s solicitor to send within 17 days [where there is P’s mortgaee] or 21 days [where
no P’s mortgagee]
o (i) The assignment
o (ii) Discharge of mortgage
o (iii) Title deeds

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 o (iv) The keys to the property where vacant possession will be given

Fourth Letter
 From V to his mortgagee
 Used only where property is subject to a mortgage, which will be discharged prior to completion
 (a) V sends a cheque for discharge of mortgage to V’s mortgagee
 (b) In return for an undertaking by V’s mortgagee to send within 12 days
o (i) The discharge
o (ii) Title deeds

3.1.3 The Law Society Qualifications

 All undertakings given should be expressly stated to be subject to the ‘Law Society Qualifications’
o Provide that if a party, whose execution of doc is required by any undertaking, is unable or unwilling to do so,
all monies sent must be immediately returned + undertaking would be discharged W/P to the rights of the parties
 Applies e.g. upon death / bankruptcy of the person required to execute the assignment / discharge the mortgage

3.1.4 Completion where sub-sale involved

 Where sub-sale is to be effected by confirmatory assignment
o SPA between V and head P will provide for completion in the normal manner
o Sub-sale agreement between head P and sub-P will provide that sub-sale be completed by undertaking before the
date and time agreed for completion
 Necessary since head P will use the money received from sub-P to pay the residue of purchase price

3.2 Completion in person (Formal completion)

 Rare, only when
o Very large sum of money involved
o Parties don’t trust each other
 Solicitors of all parties will attend at V’s solicitor’s office
o Purchase money will be handed over to V
o V’s mortgagee would discharge any outstanding mortgage
o V would execute the assignment
 Law Society circular (No 91/82) – requires three days’ working notice to be given “as a matter of professional courtesy”
before formal completion is insisted on
o Cheng Jui Lung Kris v Perfect Best Ltd:
 Parties agreed in SPA that completion “shall take at V’s solicitor’s office on 24 Jan 1998”
 P wrote to V 3 days before completion confirming formal completion required
 V unable to secure attendance of mortgagee on completion date to execute discharge  wrote to P
undertaking to have mortgage discharged after completion
 P refused to complete and rescinded  V forfeited deposit
 Held:
 (1) Parties obliged to carry out formal completion by the agreement
o No term could be implied into the agreement that completion could be carried out by
mutual undertaking
 (2) V committed breach of agreement by failure to secure mortgagee’s attendance
o P entitled to rescind + return of deposit
o Plus Lucky Ltd v Chin Yak Luen Francis:
 Formal completion must take place in 2 stages
 First stage: Both parties have the right to check the other side’s documentation
o P should check conveyancing documents
o V should cheque cashier order / cheque
 Second stage: P must hand over cashier order / cheque in return for executed assignment
o Here, P failed to hand over cashier order for checking
 Obiter: If V’s mortgagee not present and V must had over executed release before he is paid
 V may satisfy his mortgagee by making pledge of money outstanding to bank
o Yee Pui Pui Anna v Lam Mei Lin:
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  PSPA provided that completion on or before 20 April 2007
 Drafting FSPA: V proposed including a clause for completion by mutual undertakings  P said it was
unacceptable
  Parties unable to agree on terms of a formal completion
 Later, P solicitors insisted on formal completion, even V solicitors requested draft letters of undertaking
for use of completion
 V’s solicitor unable to secure attendance of mortgagee to execute discharge on completion
 Informed P that unable to complete on 20 April by formal completion, saying they required 3
working days’ notice if formal completion was to be insisted upon
 Completion did not take place in the end
 HH Judge Mimmie Chan:
 Chong Kai Tai Ringo v Lee Gee Kee; Edward Wong Finance Co Ltd v Johnson Stokes &
Master (a firm)
o A party to SPA was entitled to require formal completion, unless there was agreement
to the contrary
 On evidence, parites agreed upon formal completion
o Made clear by P by deleting the inserted clause of mutual undertaking
o Nothing in correspondence showing P agreed to completion by mutual undertakings
o No legal requirement of 3 days notice be given if formal completion is required
 Recorder Edward Chan SC:
 Cheng Jui Lung Kris v Perfect Best Ltd: rights of P under SPA to complete by way of formal
completion could not be varied by Law Society’s Circular
 No term will be implied in SPA that reasonable notice for formal completion had to be given
before a party could insist upon its right to complete by way of formal completion
 V had repudiated SPA

3.3 Relative advantages and disadvantages of formal completion and completion by undertaking

Formal completion Completion by undertaking

Advantage
(i) Absolutely safe for all parties (if payment by cashier (i) Convenient for solicitors and banks,
order) especially in case of multiple units in
(ii) Quick (one day) high rise buildings
(iii) Safe for P’s mortgagee and P
 The assignment and mortgage can be stamped
and registered almost immediately and certainly
in time  avoid any penalty for late stamping
and to comply with backdating provision in s 5
LRO
Disadvantage
(i) All parties (and/or their solicitors) must be present (i) Often a delay, especially on the part
(ii) Where multiple sales of high rise buildings – formal of V’s mortgagee, to execute doc
completion impracticable  Has adverse effect upon
stamping and registration (doc
should be stamped and
registered within 1 month of
execution to avoid any penalty
for late stamping + take
advantage of the backdating
provision in s 5 LRO)
[improper to date a doc
wrongly for the purpose of
gaining priority in registration]
(ii) Solicitor gives undertaking, whereas
docs executed by client 
unsatisfactory since solicitors cannot

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 compel client to honor the undertaking

3.4 Execution of assignment, mortgage and discharge of mortgage

 General rule = deed takes effect upon execution and delivery
o Two exceptions: deeds executed in escrow (i.e. conditionally in advance)
 Mortgage is usually executed in escrow by mortgagor / P conditional upon the loan being made
 Assignment executed in escrow by P conditional upon V executing the assignment
o  A deed in escrow only takes effect upon condition being fulfilled

3.5 Duty of P’s solicitor

 P’s solicitor who fails to arrange for delivery of completion cheque on time  liable for negligence to client
o Wu Wai San Janet v Chu Cheong Kit Raymond, t/a Raymond Chu & Co
 Completion cheque delivered 6 min late
 Held: Time is of essence + delivering cheque late  P’s solicitor failed to discharge duties owed to P
with the standard required of a reasonably competent solicitor

3.6 Death of V prior to completion; Duty of his personal representatives

 V dies before completion effected  Personal representatives have duty to comply with completion date
o Failure to do so  repudiation of SPA
o European Asia (Hong Kong) Ltd v Wong Shun On Anthony: delay in obtaining limited grant of letters of
administration by personal rep under s 36 Probate and Administration Ordinance in completing  repudiated
breach by V’s estate
o East Epoch International Ltd v Wong Poon Ting: V’s personal rep refused to accept P’s cheque on completion
and claimed repudiation of SPA
 Held:
 Personal rep had duty to take all necessary steps to complete the sale at agreed date of
completion
 If V dies intestate, before grant of letters of administration, the most appropriate method to
proceed is to obtain a limited grant for the purpose of completion under s 36 Probate and
Administrative Ordinance
o Not done on facts
 It is immaterial why V failed to complete
 Doctrine of temporary impossibility did not apply to a claim for damages for delay in
completion
o Even if it did, personal rep failed to apply for a limited grant for completion
 P entitled to claim damages for any loss sustained through delay in completion + entitled to
reject the offer to extend time for completion
o personal rep liable for any loss suffered by P for which V would have been liable in
the same circumstances

4. STAMPING

5. REGISTRATION OF DEEDS AND DOCS AFFECTING LAND

5.1 Documents that must be registered

S 2 LRO:

The Land Registry shall be a public office for the registration of deeds, conveyances, and
other instruments in writing; and all deeds etc ... by which any parcel of ground or premises
may be affected, may be entered and registered in the said office.

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  Registration is discretionary, not mandatory (Fast Forward v Magicsound Co Ltd)
o But failure to register will lead to adverse consequences

(i) Deeds, conveyances

 PSPA  Lites Pendentes

 FSPA  Charging orders
 Assignments  Covenants
 DMC  PoA
 Mortgages and charges  Long-term leases
 Discharges of mortgages  Easements
 Certificate of compliance  An option to purchase, even if it is contained in a
 OP short-term lease which need not be registered
(Markfaith Investment Ltd v Chiap Hua Flashlights
Ltd; Wellmake Investments Ltd v Chau Yiu Tong)

(ii) Other instruments in writing

 Whether notes / memorandum registrable
o Lau Kam Sing v Chung Cho Development Ltd
 Notice signed by lender after deposit of title deeds, which read “Notice is hereby given to all parties
intending to deal with the property that for the valuable consideration given by us [the defendant] to [the
plaintiff], the title deeds in respect of the property [the relevant plot of land] dated 8 October 1996 have been
deposited with us since 1996 and are now in our possession”
 Issue = whether such notice registrable
 Held:
 Financial and Investment Services for Asia Ltd v Baik Wah International Trading Co Ltd, per
Hunter J:
o An instrument in writing =
 (i) an instrument that created / affected legal or equitable rights or liabilities
+
 (ii) authenticated by signature of the author
o Not sure if it extends to documents that did not affect rights, but merely evidences
rights (e.g. note or memorandum of an agreement under s 3(1) CPO)
 Anstalt Nybro v Hong Kong Resort Co Ltd, per Lord Lane:
o Only where an agreement creates some interest, legal or equitable in the land, that the
instrument could be subject to registration under LRO
 Notice could not constitute a valid legal or equitable interest
 Only signed by D, not P  could not even constitute evidence of the equitable mortgage
  Not registrable
 Effect of non-registration of notes / memorandum:
o Zhang Xueshuai v Lai Chan Wing:
 De Monsa: Litton NPJ commented that a note or memorandum supporting an equitable mortgage was
void if unregistered
 Cheung CJHC commented:
 This would be correct where the written memorandum actually created the equitable mortgage
 Would not apply if written memorandum only evidenced the creation of the equitable
mortgage
 S 3(2) LRO only rendered a registrable but unregistered instrument null and void, but not the
underlying transaction as it could still survive without the instrument
o Therefore, whenever there is unregistered note / memorandum evidencing
 Oral SPA OR
 Equitable mortgage created by way of deposit of title deeds
o  only note will be void under s 3(2), not the underlying transaction

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 5.2 Exceptions to registration

(a) Short-term tenancies

 s 3(2) LRO – Short-term tenancies need not be registered  failure to register does not affect priority:
o (i) In writing
o (ii) For 3 years or less
o (iii) At rack rent
 Tse Siu Hoi v Lee Dick Gold and Jewellery Ltd:
 Rent of $57,000 per month  Expert evidence showed it was 15% below market rent
 Lands Tribunal concluded that the lease was below rack rent  fell outside the exception in s
3(2) LRO
o X Take effect in possession

(b) Floating charges

 S 2A LRO:
o Not registrable until crystallization
o Should be registered upon crystallization

(c) Licences
 Do not affect land  need not be registered (Ashburn Anstalt Ltd v Arnold)
 Land Registry Circular Memorandum 1/2013: confirms that licences cannot be registered, but states that certain licences
may be (e.g. licence that removes or varies the offensive trades clause in Government lease)

(d) Wills
 Cannot be registered since 1992

5.3 Procedure of registration

R 5 Land Registration Regulations:

 Registration is effected by delivery into Land Registry the instrument + memorial in the prescribed form
 Memorial:
o A summary of the contents of the instrument, verified by a solicitor)
 R 7 Land Registration Regulations – must be prepared and verified by a solicitor
 Form: First Schedule, Land Registration Regulations
o Past: memorial was registered instead of the document
o Now: memorial and photocopy of the instrument both presented for registration
 Plans mentioned in or attached to the instrument:
o Must be color-coded (i.e. the color can be identified on BW microfilm)

5.4 Registration fees

Land Registration Fees Regulations:

 SPA = $210
 Mortgage = $210
 Assignment:
o Consideration does not exceed $750,000 = $230
o Consideration exceeds $750,000 = $450
 Lease = $210
 Agreement for a lease = $210

5.5 Effect of registration

Registration does not confer ownership  merely affects priority

Rules of priority:

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(i) Registration of instruments
 s 3(1) LRO –
o All deeds etc. shall have priority according to the priority of their respective dates of registration
 S 5 LRO – backdating provision
o All deeds etc. registered within 1 month of date of execution shall have priority according to their dates of
execution
 S 4 LRO – doctrine of notice irrelevant

(ii) Registration of CO and lites pendentes

 S 5A LRO –
o CO and lites pendentes duly registered shall have priority from the commencement of the day following the
date of registration
 s 17 LRO – expiry and re-registration:
o Registration of CO or lis pendens shall cease to have effect after 5 years from date of registration
o Can be re-registered from time to time
 The relevant date = order nisi
o Wong Kam Wing v Cyril Murkin (HK) Ltd: where 2 Cos registered
 Two CO registered  priority will depend on the order of registration of the orders nisi
 The dates of orders absolute are irrelevant for priority purposes
 Prior mortgage vs. CO:
o Bank of China (Hong Kong) Ltd v Kanishi (Far East) Ltd:
 Nothing to prevent a CO absolute being made in respect of property over which a registered legal /
equitable mortgage already existed
 Interest of the CO holder will be subject to the prior registered mortgage  rank in effect as a second
mortgage
 Two CO:
o Incorporated Owners of Century Centre v Bank of China (Hong Kong) Ltd, applying Beaven v The Earl of
Oxford and Shaw v Neale
 (i) Where first CO is registered against title in favor of A
 (ii) Second CO registered later in favor of B
 (iii) First CO lapses after 5 years and is only later re-registered
 First CO, after re-registration, will continue to have priority over second CO
 Note: until A re-registers, the interest of A will be void against subsequent purchaser or mortgagor for
valuable consideration (s 3(2) LRO)

5.6 Illustrations of priority

Illustration 1:

Assignment executed: 1 July

 V dispossessed of legal and equitable interest
Charging order registered: 2 August  3 August
Assignment registered: 10 August (backdating provision inapplicable)

 P.f. CO takes priority over assignment

 Yet, note validity issue:
o Yau Siu Yeung v Wing Sum Lo; Ng Kam Ha v Vincent Sina Traders
 When assignment executed, V dispossessed himself of all his interest in the land
 Assignment predated CO  priority is not encumbered by CO
 On 2 August, V does not own any interest in the property
 CO could not attach to anything  invalid

Illustration 2:

SPA executed: 1 July (backdating provision)

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  V only has bare legal estate
CO nisi registered: 10 July  11 July
SPA registered: 20 July
Assignment executed: 1 August (backdating provision)
 V ceases to have any interests in land
Assignment registered: 10 August

 SPA takes priority over CO  CO does not bind property

o SPA: equitable interest passed to P
o At the time of CO’s registration, V only holds the bare legal estate
o Megalink Holdings Ltd v Whole Fortune Co Ltd
o Tse Fook Choy, Joey Callan v Kwong On Bank Ltd:
 No CO created after the date of the contract could gain priority to the interest of P / his successors in
title
 But P may have to pay any unpaid purchase money to the charge to the extent necessary to discharge CO
o Ho King Yim v Lau King Mo
o Fortis Bank Asia HK v Yu Kam Hoi: P who has actual / constructive notice of the prior registered interest has
duty to account to the person for the balance of any unpaid purchase price
  same conclusion even where SPA is not registered

Illustration 3:

SPA executed
CO registered
(No assignment)

 Shih Ching Yang v Tsoi On Pong:

o Property subject to a mortgage in favor of BOC
o Owner agreed to sell property to P, who paid deposit
o CO orders x2 by HSBC and DSB registered over property
o SPA cancelled by the consent of V and P
o Owned defaulted mortgage repayments  mortgagee sold property and surplus paid into court
o P claimed lien in respect of his deposit; CO holders claimed priority
 P: CO void since beneficial interest passed under SPA
o Held:
 P’s lien extinguished by the making of the cancellation agreement
 Whether the banks could enforce CO (i.e. whether CO valid and effective)
 Issue = whether the owner retained sufficient interest to the property which could be the
subject matter of the CO
 Distinguished Ho King Yim v Lau King Mo:
o An order charging land can only operate against such interest as the judgment debtor
has
o After SPA, V will only hold legal estate for P
o Yet, V also has a bundle of rights
 A right to protect his personal and substantive interest in the property and
an active right to assert that interest if anything is done n derogation of it
o Although such rights were very limited and incapable of precise definition, it is
sufficient interest for the charge to hang on  gives validity to the charge
 But the effect of encumbrance on land by the charge would be limited

  CO effective and entitled to be paid out of money paid into court according to their respective
priority

5.7 Subrogation

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Hong Kong Chinese Bank Ltd v Sky Phone Ltd:
 When first mortgage is discharged by TP loan (e.g. by way of fresh mortgage)
 TP is subrogated to the right of the discharged mortgagee  will take priority enjoyed by the first mortgagee

5.8 Unregistered registrable interests are void against bona fide purchaser or mortgagee for valuable consideration

s 3(2) LRO:
 All registrable deeds etc. which are not registered shall be absolutely void as against subsequent bona fide purchaser /
mortgagee for valuable consideration
o A lessee may be a ‘purchaser’ for some purposes
 Master Universe Development Ltd v Mass Ocean International Ltd: subsequent lessee took free of
prior unregistered tenancy agreement
 Does not apply to instruments exempted from registration, e.g. short-term written tenancies at rack rent
 Fast Forward v Magicsound Co Ltd:
o Right to exclusive use of roof not registered  void against bona fide purchaser
 Creator (HK) Ltd v Kwong Wing Food Industries Stainless Steel Engineering Ltd:
o (i) owner of land with 5-year tenant in occupation (tenancy not registered)  V sells to P subject to T
o Two long-term tenancy agreements with tenants, which expire in 2011 and 2010 respectively
 Both TA not registered
o 2006: sold building to P
 SPA and assignment expressly stated to be ‘subject to existing tenancies’
o After completion, P gave notice to T to quit  T refused to give up possession
o Held: following Markfaith Investment Ltd v Chip Hua Flashlights Ltd and Wellmake Investments Ltd v Chan
Yiu Tong
 Tenancies void against purchaser since they had not been registered
 P takes free of the unregistered tenancies  had a right to insist that T quit
 P’s knowledge of existence of tenancies irrelevant  did not have effect of imposing constructive trust
on P

S 4 LRO – notice irrelevant

 Meaning of ‘bona fide’ must be restricted to fraud or improper motive
o Does not extend to actual or constructive notice
o Mak Him v Chan Hung-pak
o Keep Point Development Ltd v Chan Chi Yim: Unless fraud involved, s 3(1) LRO confers complete and
unfettered title by an assignment to P, even if P had prior notice of the unregistered interest

Consequences of non-registration of registrable instrument:

 Void against bona fide purchaser, but also against everyone else?
o Siu Wing Yee Angeline v Earning Yield Ltd, per To J:
 V owned flat which she charged to secure a loan and a legal charge duly registered
 V applied to DC for declaration that the registration of legal charge be vacated  court ordered so
 V sold flat to P  P raise requisition contending the absence of discharge of the charge results in
encumbrance upon title
 (i) V responded that the effect of vacating charge is to render it void (i.e. vacation is as good
as a discharge)
 (ii) Alternatively, even if the vacation was not to render the charge void, the charge became an
unregistered registrable instrument, which is void as against a bona fide purchaser (i.e. the
present P) under s 3(2) LRO
 To J held:
 (i) Removing registration does not have the effect of extinguishing the interest in land created
by the charge
o The legal charge still existed and remained an encumbrance without a valid release
 (ii) Although P has priority over the charge under P’s proposition, registration only affects
priority and did not discharge the charge
o Defect in title remained  V’s title was still imperfect
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 o V failed to give satisfactory answer to the requisition and failed to show good title
o MW: wrong – s 3(2) renders the unregistered registrable instrument void as against
the whole world, not merely conferring priority upon the bona fide purchaser
 S 3(2) is deprived of much its value

Action for loss against V / assignor:

 Although a bona fide purchaser will receive title free of unregistered registrable instrument  dispossessed T or
beneficiary may still have an action against the assignor / V in contract, tort or breach of trust for selling the property to
P
o E.g. HKSAR v Lau Kam Ying: Where owner holds property on trust for B  trust not registered
 Owner sells property to bona fide purchaser
 B will lose his beneficial interest; but may still sue assignor / trustee for breach of trust
o Midland Bank Trust Co Ltd v Green:
 Father gave son option to buy his farm; option not registered
 Father sold farm to bona fide purchaser, who had notice of the option
 Held: although option void as against bona fide P, father liable in damages to son

Quaere: To take advantage of section 3(2), LRO, does the purchaser need to register his interest?
 V owns property with an unregistered 10-year lease  sells to P
 Does 3(2) only operate if P registers his interests? Or still operates when neither the registrable instrumnets are
registered?
o MW: don’t know
o See AL and Say Goo materials

5.9 Priority of unregistered interests

At common law:
 Priority of 2 unregistered interests (registrable or unregistrable)  depends upon their respective dates of execution
 Unregistered unregistrable interest vs. registered interest:
o Abbey National Building Society v Cann:
 Property purchased with the help of mortgage loan
 Claimant took occupation and claimed to have acquired equitable interest by RT through payment of
part of the deposit
 Claimed his equitable interest took priority over chargee bank’s interest
 HL: Where purchaser relied on a loan from bank / building society for completing his purchaser, the
transactions acquiring legal estate and granting charge are one indivisible transaction
 Since the acquisition of legal estate was entirely dependent upon provision of loan
 Loan was made prior to occupant entering into occupation
 Equitable interest of occupant will not take priority over interest of chargee
 Mortgage took priority over RT

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