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Yu Fung Co Ltd v Olympic City Properties Ltd And Another

Judgment Cited authorities 20 Cited in Precedent Map Related
Vincent
Judgment Date30 July 2015
Subject MatterMiscellaneous Proceedings
Judgement NumberHCMP1084/2008
CourtHigh Court (Hong Kong)
HCMP1084/2008 YU FUNG CO LTD v. OLYMPIC CITY PROPERTIES LTD AND ANOTHER

HCMP 1084/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1084 OF 2008

________________________

IN THE MATTER OF a Property comprised in a First Legal Charge dated 18 September 1997 and registered in the Land Registry by Memorial No 7308915, namely, Flat D, 20th Floor, Profit Mansion, No 23 Fei Fung Street, Kowloon

and

IN THE MATTER OF Order 88 Rule 1 and Order 28 of the Rules of the High Court

________________________

BETWEEN
YU FUNG COMPANY LIMITED Plaintiff

and
OLYMPIC CITY PROPERTIES LIMITED 1st Defendant
LAI MING TAK TOMMY ALEXANDER 2nd Defendant

________________________

Before: Deputy High Court Judge Leung in court
Date of Hearing: 26, 28 November 2013
Date of Judgment: 30 July 2015

________________________

J U D G M E N T

________________________

1. This is another instance of litigation arising out of the scandalous redevelopment at Fei Fung Street, Kowloon (“the Street”), where Profit Mansion now stands. The property in question is Flat D on the 20th Floor (“the Property”). The plaintiff (“Yu Fung”), a licensed money lender, commenced this action to enforce a first legal charge in respect of the Property against the defendant (“Olympic”), the registered owner and borrower. The 2nd defendant (“Lai”) was joined, who resists the claim on the basis that he has a prior equitable interest in and has been in exclusive possession of the Property since 1996-1997.

BACKGROUND

2. On 18 September 1997, Olympic became the registered owner of the Property, and on the same day, executed the first legal charge over the Property to Yu Fung to secure the repayment of a loan (“the Charge”). Olympic defaulted in repayment. It was also discovered that Olympic had, in breach of the terms of the Charge, assigned the Property to Hebei Investment Limited (“Hebei”) in the absence of the prior knowledge and consent of Yu Fung.

3. Olympic, which had been struck off the register of the Company Registry since 2004, was reinstated for the purpose of this action. On 10 June 2008, Yu Fung commenced the originating proceedings herein pursuant to O.88 of the Rules of the High Court (“RHC”).

4. Soon Lai applied ex parte and was joined as a defendant on 10 July 2008.

5. On 29 November 2011, judgment was entered against Olympic for the amount of the outstanding loan with interest under the Charge. These proceedings for vacant possession of the Property between Yu Fung and Olympic as well as Lai were ordered to continue as if begun by writ. Consequential directions were given.

6. What happened was that Lai was the owner of a 700-square-feet flat in what used to be Wing Cheong Building, Nos 27-29 of the Street. Through a Mr Cheng, who held himself out to be representing Full Country Development Limited (“Full Country”), the developer responsible for redeveloping the lot, Lai received an offer of 2 new 400-square-feet flats in the new building to be erected on the redeveloped site in return for his assignment of his old unit. In addition, Lai was promised compensation for renting temporary accommodation pending the completion of the redevelopment, expenses for moving as well as for decoration of the new flat. Lai accepted the offer.

7. In September 1992, Lai and Full Country entered into a Chinese agreement (“the Redevelopment Agreement”). It provided that in exchange for his old flat, Lai would be given ownership of a flat in the new building to be erected and another flat there to be shared with Full Country (clause 1). It set out the terms in respect of the rental reimbursement, moving expenses and decoration expenses mentioned above (clause 2). However, the agreement would become void, if Full Country did not succeed in acquiring all the units at Nos 27, 29 and 27A of the Street, but Lai would be entitled to keep the payments (clause 3). A formal sale and purchase agreement in respect of Lai’s old flat would be entered. The consideration was HK$2,200,000, of which HK$10,000 would be paid to Lai as deposit and the balance would be settled by the transfer of the new flats. Upon that, the deposit would have to be returned (clause 4).

8. The parties also signed provisional sale and purchase agreements in respect of the 2 new flats, namely, Flat A on the 10th Floor and half of Flat A on the 11th Floor of the new building to be erected[1]. Typed-up provisional sale and purchase agreement were also signed.

9. Following formal sale and purchase agreement as well as assignment by October 1992, Lai transferred his old flat to Full Country. He moved out by the end of the year. The redevelopment proceeded.

10. In early August 1996, Full Country informed Lai that the Property[2], which is close to 700 square feet in size, would be assigned to him. By the end of the year, Lai was given the keys to the Property. After decoration and furnishing of the Property[3], Lai and his family physically moved in in about May or June 1997[4].

11. None of the Redevelopment Agreement and the provisional sale and purchase agreements mentioned above had been registered with the Land Registry. Nor has Lai ever received any actual assignment of the Property by Full Country.

12. Unbeknown to Lai, Full Country had assigned the Property away in June 1997, in other words, at about the time when Lai’s family moved in. The legal title in the Property had since changed hands and eventually to Olympic in September 1997, which also executed the Charge. As mentioned, unbeknown to Yu Fung, Olympic further assigned the Property in breach of the Charge to Hebei in January 1998. As the current registered owner, Hebei further mortgaged the Property.

13. In July 1998, the mortgagee bank of Hebei, through solicitors, issued letter of demand, demanding repayment of the loan or else the Property would be repossessed and sold. Lai came to realise the situation he is in.

14. It transpires that Lai is only one of some 60 occupiers of various units in the new building who came to be given possession of their respective units under similar swap agreements with Full Country without actual assignment of title to their units. The scam sparked off series of litigations involving these affected persons, Full Country and various other related parties[5].

15. In the present action, Yu Fung asserts its prior mortgagee’s interest in the Property. Hebei has not sought to assert otherwise.

16. Olympic remained absent from the trial.

17. The above background is essentially undisputed.

THE PLEADED CASES

18. Lai asserted an equitable interest in the Property to which Yu Fung’s interest as the mortgagee is subject. On this basis, he was joined as a defendant to defend the claim herein. By pleading, Lai adds the alternative limitation defence, claiming that he has nevertheless been in adverse possession of the Property, and Yu Fung’s right to recover possession of the Property has thus been extinguished by the time of the claim against him. He counterclaims for declaratory relief on these bases.

19. Yu Fung denies the alleged equitable interest of Lai in the Property, and avers that it took the Charge bona fide for valuable consideration without notice of any equitable interest or Lai’s occupation of the Property. It also contends that by his joinder as a party and assertion of a prior equitable interest in the Property, Lai has waived or is estopped from asserting adverse possession of the Property. In any event, the assertion is denied, and the claim against him, Yu Fung says, is within time.

WITNESSES

20. Yu Fung called its manager[6] to give evidence in respect of the dealings with Olympic at the relevant time. Lai gave evidence, and called 2 other witnesses[7] to testify in respect of his decoration and moving into the Property at the time. Their respective evidence is not seriously challenged.

PRIOR INTEREST IN THE PROPERTY

21. By pleading, Lai is asserting equitable interest in the Property, and it is such interest that he asserts to be ranking in priority to that of Yu Fung as the mortgagee. He is bound by his pleaded case. If he fails to establish precisely such interest, it matters not whether he has interest of other nature, form or extent which is not asserted by way of pleading. Nor will there be any basis for considering the issue of priority of interests of the parties if they are not both in the Property itself.

22. Ms Lam appearing for Lai refers to the principle that upon agreement for the sale of land, of which the purchaser is entitled to call for specific performance, the purchaser is said to have acquired a proprietary equitable interest in that land: see Halsbury’s Laws of Hong Kong (2010 Reissue) Vol.16 at §230.095; Gray & Gray on Land Law (5th ed) at §§8.1.54 – 8.1.55. Mr Vaughan appearing for Yu Fung has no argument about that as a matter of principle.

23. For the present purpose, I call this the purchaser’s equity. However the Redevelopment Agreement made no reference to any specific unit, let alone the Property, as the subject matter. Mr Vaughan submits that any equity arising in favour of Lai pursuant to the Redevelopment Agreement would at most be some form of interest in the land where the new development and building would stand. I agree. Ms Lam has to concede that whatever interest or claim her client may have against Full Country, it would not necessarily be to the Property itself.

24. In principle, interest of the kind other than specifically in the Property as mentioned above may still be binding on the subsequent purchasers or mortgagees of the Property to the extent of such interest on each and every part of the new development, of which the Property, as and when built, would form...

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