Priority & Registration

(A) Competing interests

Competing Interest Applied Rule

Equity vs Equity The first in time prevails provided that the equities are
equal. (manner of acquisition, fraudulent or negligent
(Rice v Rice (1884) 2 Drew 73 VC))

Legal vs Legal In general, the first in time prevails provided that the
interest was registered in time (except for short leases)

Equity vs Legal The bona fide purchaser for value of a legal interest in
property who has no notice of a prior equitable interest
takes free from that interest (Pilcher v Rawlins (1872)
Ch App 259).

(B) Bona fide purchaser for value of a legal interest in property who has no notice
a. Bona fide: honest behavior
b. Purchaser: anyone who acquire an interest in land other than by operation
of law such as inheriting or by adverse possession.
c. For value: consideration of $ or by $’s worth
d. Without notice: actual notice, constructive notice or imputed notice

(C) Constructive Notice

a. Constructive notice is notice of everything that the purchaser would have
discovered if he had made proper enquiries.

b. Wong Chim Ying v Cheng Kam Wing ((1990) 2 HKLR 111 CA)
Fact: W is a mini-bus driver. He bought a flat. The flat was under his
wife’s name. His wife sold the flat to C and disappeared. C has inspected
the flat and noticed about W’s occupation but he did not ask W whether he
had an interest in the flat.
Held: C had constructive notice of W’s equitable interest. W’s interest
prevailed.

c. How to discharge the constructive notice:

i. The purchaser must inspect the title deeds.
ii. Proper enquiry where there is special circumstances of the
transaction.
Kingsnorth Finance Co Ltd v Tizard ((1986) 1 WLR 783)
Fact: T applied for a mortgage from K stating that he was single. K
inspect T’s property and aware that T had children. K made no
enquiry about it.
 Held: K should have been put enquiry  Constructive notice

iii. The purchaser must inspect the property. If anyone, other than the
owner is in ACTUAL occupation, the purchaser must make
enquiries to the occupier whether he has an interest in the property.
(Hunt v Luck (1902) 1 Ch 428 CA)

(D) Registration
a. The priority of the registrable interest is governed by the date of creation
provided that they are registered within the period prescribed by the LRO.
(LRO s5)
b. An registrable instrument shall be registered within 1 month after its date
of execution. (LRO s5)
c. Unwritten interest cannot be registered. (LRO s2)
d. If the first interest to be created never registered, it is void against the later
interest of bona fide purchaser or mortgagee for value (LRO s3(2).
i. It applies even if the owner of a later duly registered interest knew
of the earlier interest.(LRO s4)
ii. It applies even if the buyer expressly agreed to buy his interest
“subject to” the interest of A.
Chan Yiu Tong v Wellmake Investments Ltd ((1996) 1 HKC 528)
Fact: Option to renew was not duly registered. The agreement for
sale of the subsequent purchaser states that the sale was “subject to
the option”.
Held: the option to renew the lease was void against the
subsequent bona fide purchaser for value.

e. Note that registration preserves priority; it does not confer title.

f. Option to renew is registrable and is void if unregistered (Markfaith case)

i. Even if the agreement of sale contains a provision of “subject to
existing tenancy”, the unregistered option for renewal is still “null
and void” against the subsequent bone fide purchaser for value
(Chan Yiu Tong v Wellmake Investment Ltd ((1966) 1 HKC 528))