THE NATURE OF THE TITLE AND VENDOR’S DUTY TO GIVE GOOD TITLE

1. V’S DUTIES OF GIVING & SHOWING GOOD TITLE

Two entirely distinct duties  breach of either of them entitles P to rescind

An exam question can involve BOTH duties
- e.g. P raised requisition and V replies saying…
- (i) whether V’s title is good due to UBW  give title
- (ii) whether V provided an adequate answer to the requisition  show good title

1.1 The duty is 2-fold:

1. Show good title
a. producing to P the required documents of title, and
b. answering any requisitions reasonably raised
2. Give / make good title
a. Remove defects
b. Provide conveyancing evidence that his title is not defective [encumbered / defeasible])
 Such duty can be excluded / modified in the S&P agreement

Failure to give good title by V  P will be able to rescind the agreement to purchaser property

2. WHAT CONSTITUTES GOOD TITLE?

Good title = one that will enable P to hold property against any challenger
 Need not be perfect title
o Test (the no real risk test) = Is there a real risk that V’s title is defective by reason of being encumbered or
feasible OR is merely illusory
 MEPC Ltd v Christian Edwards
o “if facts and circumstances of a case are so compelling to the mind of the court that the court concludes beyond
reasonable doubt that the P will not be at risk of a successful assertion against him of the incumbrance [& of
the risk of defeasibility], the court should declare in favour of a good title.”
 Kan Wing Yau v Hong Kong Housing Society
o “If BRD the risk is illusory, court should dismiss any objections to title founded upon it

3. V’S DUTY TO GIVE GOOD TITLE

3.1 The duty may be expressed or implied:

No rule of law that sets out this duty to give good title  depends on the terms of S&P
Extent of V’s obligation depends on S&P terms:

(a) S&P expressly requires V to give good title

 Such term may also be incorporated by condition 9 of Part A, Second Schedule, CPO
o “V shall give title to the property in accordance with s.13A CPO”

(b) S&P silent as to title (as in an open contract)

 Implied term that V must give good title (De Monsa Investments Ltd v Whole Win Management Fund Ltd, CFA)

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3.2 Exclusion / limiting clauses – S&P might expressly exclude / limit V’s duty
 Examples:
o (i)`The purchaser will accept the title of the vendor and agrees to raise no requisitions thereon'
o (ii) `The vendor agrees to sell only such title as he holds'.
o (iii) `The purchaser is deemed to purchase with full knowledge of all defects in title and shall assume [that the power of attorney under
which assignment memorial number 12345 was executed was valid and had not been revoked] and the purchaser agrees to raise no
requisition thereon'
 (i) Construction of excluding or limiting provisions – Whether such clause is effective depends on:
o (1) The clause must cover the actual defect with sufficient ambit and precision
 i.e. sufficient ambit and precision to cover the defect in title
 Contra proferentem rule applies (e.g. an exclusion clause embracing defects in the ‘condition’
of the property will not be construed to extend to defects in title)
o (2) As a matter of construction, has the purchaser been misled
 (a) Does V have actual / constructive / imputed knowledge of the breach?
 Jumbo King Ltd v Faithful Properties Ltd, CFA
o V has actual / constructive / imputed knowledge of the defect in title, but does not
share it with P = MISLEADING P
 Constructive knowledge = knowledge a reasonable person would have after
making reasonable enquiry
 (b) Does P have actual / constructive / imputed knowledge of the breach?
 Taking into account sophistication of parties (Ip Kam Wah v Fair City Group Ltd: purchaser was
professional speculator)
 E.g. special knowledge or experience in property dealings / professional dealers in real estate
 likely to have constructive knowledge in UBW
 Therefore, where V has knowledge of a defect in title, he should ensure the defect of title is brought to
P’s attention
 Join Union Investment Ltd v China Tree Investment Ltd
o V failed to disclose unauthorized partitioning of shop into 4 separate shops +
construction of unauthorized cockloft
o P’s case was V has implied contractual obligation to make full and frank disclosure
of any defects in title which he was aware
o Held:
 The proper inquiry is whether the limiting provision was intended to apply
to the relevant defect in title upon true construction of it, notwithstanding
V’s knowledge of it at the time of making the contract
  i.e. only ask about knowledge after (1) is passed
 (a) no implied term in S&P that, where V expressly or impliedly agreed to
give good title, he had to make full and frank disclosure of all latent defects
in title
 (b) where V agreed to give title, not a defence for V to say he did not have
knowledge of any defects in title at the time of making the contract
 (c) where V wished to rely on the exclusion or limiting provision in S&P, his
knowledge of defects of title might affect whether he could rely on it
 The issue of V’s knowledge only became relevant when V sought
to rely on a contractual provision limiting the title to be proved or
given
 Ip Kam Wah v Fair City Group Ltd
 Exclusion clause that V gives no warranty as to UBWs  P also raised requisitions on
discovering the illegal structures
 Held: limiting clause effective
o As a matter of law, nothing to prevent parties from agreeing sale of property with
defective title, provided P was not misled (Jumbo King)
 Good practice for V to make a list of all possible illegal structures in order
to rely on a limiting clause
 Only rule of construction that courts would avoid construing a contract in
such a way as to enable P to be misled
o Limiting clause was clear
o P was an experienced dealer in real estate
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  Followed by
 Rignall Developments Ltd v Halil (V’s solicitors knew of defect but P untold  such
knowledge imputed to V  P not bound by limiting clause);
 Wah Ying Properties Ltd v Sound Cash (remedial ordered issued by BA  V knew but P did
not  limiting clause ineffective)
 Billion Profit Enterprises Ltd v Global Fly Development Ltd (permitted user = office use; use
as karaoke bar  held limiting clause effective despite V not telling P, since use as karaoke
bar was patent)
 Chi Kit Co Ltd v Lucky Health Enterprise Ltd
 Cf. Kamos Ltd v Chan Chun Chung Howard
 V agreed to sell flat  S&P contained term that ‘P accepts such title as V has’
 Held: limiting clause effective
o Parties were capable adults who should be able to look after their own interests
 (ii) Exclusion clauses in respect of misrepresentation or misstatement
 (iii) Exclusion / limiting clause may not be added to formal S&P agreement where parties have already
entered into a binding preliminary agreement whereby V expressly or impliedly give good title
o If V has already expressly or impliedly agreed to give good title in the previous binding preliminary agreement
(i.e. situations (a) and (b)), the exclusion / limiting clause may not be added in the formal S&P agreement,
unless P agrees to the modification of the earlier terms (Chu Wing Ning v Ngan Hing Cheung; DH Shuttlecocks
Ltd v Keung Shiu Tang)
 For 2 binding contracts on the same matter, parties cannot insert a clause in the second agreement
which is inconsistent with the first agreement
o Note: when V limits the title to be given, he must also amend the covenants for title (Butler v Mountview Estates
Ltd)
 (iv) “As is” clause is not a limiting clause
o “V shall sell the property as is”
o Simply means that V is not required to improve the property prior to sale (Leung Wing Fai v Onlink Investment
Ltd)
 Does not have effect of an exclusion clause regarding UBWs (All Ports Holdings Ltd v Grandfix Ltd)
 Cannot be relied on to prevent V from demolishing UBWs prior to completion (Summit Link Ltd v
Sunlink Group (Hong Kong) Co Ltd)

4. WAIVER BY P OF HIS RIGHT TO OBJECT TO DEFECTIVE TITLE & RESCIND

(a) What constitutes a waiver?

 P expressly / impliedly agree to accept the title notwithstanding the defect
o A question of fact in each case (Chan Kin Leung v Lok Kar Cheong: waiver by clear words in correspondence
between the parties)
 Three ingredients (Regent Summit (Hong Kong) Ltd v Smart Business (Asia) Ltd)
o (i) P has knowledge of the defect in title
o (ii) P understands the legal consequences of the defect in title
o (iii) P, by words or conduct, made it unequivocally clear that he is waiving his right to rescind
 Motor Oil Hellas (Corinth) Refineries SA v Shipping Corpn of India (‘The Kanchenjunga’) (HL, per Lord Goff), tests of waiver laid down and
approved by Yuen JA in Large Land Investments Ltd v Cheung Siu Kwai Pansy
o (i) Waiver by election occurrs when state of affairs come into existence in which one party became entitled to exercise a right that he had to
decide whether to do so, either under terms of contract or law
o (ii) a prerequisite of election that the party making the election be aware of the facts which gave rise to the existence or right
o (iii) must also be aware of his legal right of affirming or rescinding the contract when there had been repudiation by the other party
o (iv) since a party who elected not to exercise a right which had become available to him was abandoning that right, he would only be held to
have done so if he had communicated his election to the other party in clear and unequivocal terms
 Poon Mee Kuen v Luk Yuk Chun: unauthorised partitioning of flats in Chung King Mansions  P inspected flat before
S&P and raised requisition  V argued P waived his right; Held: P must also be aware of the legal consequences of those
facts before they can prejudice his legal position)

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(b) P’s failure to raise a requisition will not constitute a waiver
 No duty on P to raise requisition  Failure to do so will not constitute waiver of P’s right to object to V’s title at
completion and rescind
 Flywin Co Ltd v Strong & Associates Ltd (CFA): failure to raise requisition does not inevitably imply P has waived right
to object to the existence of UBW
 Profit World Trading Ltd v Ho So Yung (CA, per Le Pichon JA): no obligation that P raise any requisition and failure to
do so would not constitute acceptance of V’s title
o If otherwise, would have the effect of
 imposing P a positive obligation to raise requisition timeously where the defect was patent and
discoverable by the exercise of due diligence +
 V would be relieved from performing what had been his obligation
 = reversing the legal burden of giving good title (since V’s obligation to give good title could not
depend on whether P made requisition as to defects within a reasonable time)

5. WHAT CONSTITUTES GOOD TITLE

Defective titles – encumbered and defeasible titles

Both renders the title defective; whether the defect constitutes a repudiatory breach depends on the
significance of the breach

Defective title Good title

Encumbered title Defeasible title

The encumbrance leads

to the title being worth A title that can be taken
less, but cannot be away from the owner
taken away

How to distinguish:
 (i) ask whether it is a defeasible title
 (ii) if not  encumbered

Encumbered titles
 Examples:
o TP has an equitable interest in the property by express trust, RT or CT
o Uncompleted S&P
o Right of way registered against ht e title
o Restrictive covenant
o Lease affecting the title
 The encumbrances must not lead to any real risk of the title being taken away
 An encumbered title constitutes a repudiatory breach if the encumbrance is significant

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Defeasible titles
 Where the title can be taken away from the owner by some other person
 Examples:
o Re-entry by Government for breach of covenant in Government lease or conditions in Conditions of Grant
o Sale by BA to recover expenses incurred in remedying a UBW
o Right of enforcement action by manager or IO regarding significant breach of DMC (e.g. failure to pay management fees leading to manager
imposing a charge on the property)
o Right of sale by mortgagee
o Title set aside because of conveyance to defraud creditors

6. DEFECTIVE TITLES

6.1 Title must be in V

 Title must be in V or some other persons whom V can compel to assign by his instructions
 Cf. Enway Development Ltd v Light Ocean Investments Ltd: other land which the vendor had agreed to assign was still in
ownership of t'so and no consent of the Land Officer for sale had been obtained as required by s 15, New Territories
Ordinance
 Harold Elliott v Pierson: property owned by company not vendor but, since vendor had sole and absolute control of
company, title good

6.2 No necessary consent of TP must be required before the assignment can be executed
 V must be entitled to assign the property without the consent of TP
 E.g. Sale where property is subject to Consent Scheme
 Tang Yau Yi Tong v Tang Mou Shau Tso (CA): consent of t’so required before manager could sell
 Enway Development Ltd v Light Ocean Investments Ltd

6.3 V must be able to assign the whole interest unencumbered by TP interests

General principle that “V agrees to give good title” = “V must be able to assign the property free from any
encumbrances”
 But subject to three exceptions below:

o Exception1: Prior encumbrance is one that that is registrable but unregistered

o Registrable encumbrances which are not registered  void against BFP / mortgagee for valuable consideration
(s.3(2) LRO)  do not constitute encumbrances
 Exception to the exception: unregistered short-term tenancies  present title still encumbered
 Short-term tenancies (3 years or less) which are granted at rack rent (s.3(2) LRO) or ‘the best
rent reasonably obtainable” (s.6(2) CPO), which are exempted from registration and excluded
from the effect of s.3(2) LRO
 Tse Siu Hoi v Lee Dick Gold and Jewellery Ltd: 2-year tenancy was granted
at rent 15% below market rent  hence fell outside s.6(2) and 3(2) 
required to be created in writing or by deed
 Oral short term tenancies – must take effect in possession + at rack rent (s.6(2) CPO)
 Written short term tenancies – at rack rent (s.3(2) LRO)

S 3(2) LRO:
All such deeds, conveyances, and other instruments in writing, and 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

S 6(2) CPO:

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 Nothing in section 3 or 5 or in subsection (1) shall affect the creation by parol of leases
taking effect in possession for a term not exceeding 3 years (whether or not the lessee is
given power to extend the term) at the best rent which can be reasonably obtained without a
premium.

o See priority cases:

 Kwok Siu Lau v Kang Yang Chee: 5 year unregistered lease void as against bona fide purchaser
 Chu Yam On v Li Tam Toi Hing: declaration of trust in writing not registered
 Fast Forward Ltd v Magicsound Co Ltd: right to exclusive use and occupation of roof omitted from
memorial on registration; when property sold to another with exclusive right to roof first purchaser lost
right
 Wellmake Investments Ltd v Chan Yiu Tong: option to renew in tenancy agreement not registered;
purchaser of reversion from landlord took free from option even though assignment of reversion stated
to be subject to option to renew
 Markfaith Investment Ltd v Chiap Hua Flashlights Ltd: option to renew void when unregistered
o Knowledge irrelevant
 V’s knowledge of the existence of the unregistered interest is irrelevant, unless fraud is involved
 Keep Point Development Ltd v Chan Chi Yim: P conferred a complete and unfettered title by an
assignment even if P had notice of prior unregistered interest, unless fraud involved
 Creator (HK) Ltd v Kwong Wing Food Industries Stainless Steel Engineering Ltd: Tenancies void
against P even though P was aware of their existence and property was expressly assigned to him
subject to the tenancies
 Exception 2: Encumbrances to which sale made expressly subject
o V can sell expressly subject to identified encumbrances, properly identified in the Schedule to the formal S&P
and the assignment
 Clearly every sale of a unit in a multi-storey building is made expressly subject to DMC covenants
 Exception 3: Patent encumbrances
o Patent = ‘patent to the eye’ (Yandle & Sons v Sutton)
 E.g. rights of way, UBWs
 Kensel Ltd v Charmfast Investment Ltd: UBWs involving conversion of the light well into actual
structure IS patent defect  no obligation on V to bring it to P’s attention in order to rely on exclusion
clause
 Goldenwick Ltd v Standard Chartered Bank (Hong Kong) Ltd: right of passage over staircase and
hallway within building NOT patent

6.4 Title must not be encumbered

Examples of encumbered titles

(a) Mortgages and charges

 Mortgage / charge contains a power of sale in favor of mortgagee / chargee  title potentially defeasible
o Even if the mortgage is only registered in the deeds pending registration section of the land register
(Goldenwick Ltd v Standard Chartered bank (Hong Kong) Ltd)
 (i) Discharge or release of mortgages / charges
o Legal mortgages / charges
 3 ways to discharge / release a legal mortgage / charge
 (i) by deed (s.4 CPO)
 (ii) By receipt written on the charge (s.56 CPO)
o Contents of receipt: Cheung Fuk Yu Danny v Vu Poi Van
 An instrument appearing to be duly executed shall be presumed, unless the
contrary is proved, to have been duly executed
 Nothing to show that the signatory (agent of mortgagee bank) had not been
authorized to execute the receipt / receipt had not been validly executed
without mortgagee bank’s company chop
 No action taken by the bank for many years to challenge its validity
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  Held: V had adequately answered P’s requisition
 (iii) By receipt annexed to the charge (s.56 CPO)
o Equitable mortgage / charges
 In writing (s.5 CPO)
o  Effect of discharge of mortgage / charge
 Mere vacation of charge from the land register =/= discharge of the charge (Siu Wing Yee Angeline v
Earning Yield Ltd)
 Court ordered mortgage be vacated from the registry  V later sold to P
 Issue = effects of vacation from register
 Held:
o  (1) Vacation =/= discharge of mortgage  defect in title remains
 Vacation only had the effect of removing its registration from the Land
Register  did not have the effect of extinguishing the interest in land
created by the charge
 Since registration simply affects priority and does not affect
validity  Vacating does not affecting property itself, but simply
means mortgagee loses priority
o  (2) Mortgage is void against P but only P
 i.e. vacation renders the charge void against bona fide purchaser under
s.3(2) LRO (i.e. present purchaser only)  s.3(2) LRO operates in
personam rather than in rem
 MW: wrong – s.3(2) renders the charge void against the whole
world, not only P
 (ii) Discharge of wrong mortgage
o Where the wrong mortgage is discharged, the title will remain encumbered
 Unless the error was simply a typing error
 Chan Shun v Ng Yiu Leung Danny: wrong memorial number given upon discharge  held: release
ineffective and new release required
o Note system of undertaking in HK – V’s solicitors only undertakes to discharge any outstanding mortgage within 7/14/21 days on the day of
completion
 Once discharged, the doctrine of feeding estoppel operates retrospectively to give purchaser good title
 Cumberland Court (Brighton) v Taylor; Cali Enterprises Ltd v Chongmark
 (iii) Getting rid of ‘old’ mortgages
o 2 ways to get rid of an ‘old’ mortgage registered against the title:
 (1) Common law remedy: declaration that the mortgage is no longer enforceable
 Procedure:
o Mortgage no longer enforceable snice the limitation period of 12 years has long
expired
o Court may then grant a declaration that the mortgage is no longer enforceable  then
mortgage will not constitute a blot on the title
 Fung Kam Cheung v Kwok Yiu Wing: 12-year limitation period long expired  declaration
granted that mortgage no longer capable of taking effect
 Defects:
o (i) Without anyone seeking to enforce the mortgage / contesting V’s title  court will
unlikely grant declaration on the grounds that the matter is merely academic or
hypothetical (Ip Jennifer Jiang Gee v Cheung Ting Iu)
o (ii) cannot apply to DC (no jurisdiction)  must go to CFI
o (iii) applications cannot be made ex parte
o (iv) declaration given by court is in personam, not in rem
 (2) Statutory remedy: a declaration that the land is free from the mortgage (s.12A, CPO) (MW: more
preferable)

s.12A, CPO:
 Where land is subject to an encumbrance, and the encumbrancer is
 out of jurisdiction, OR
 cannot be found OR

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  is unknown, OR
 if it is uncertain who the encumbrancer is,
 On application of the party for the time being entitled to redeem the encumbrance
 The court may direct or allow payment into court a sum of money sufficient to
redeem the encumbrance and any interest thereon

 2-stage process – approved in Re Light Time Investments Ltd

o First stage: Once court satisfied as to applicability of s.12A, make payment into court
the outstanding mortgage + interest
  Court advertise for the mortgagee to come forward
o Second stage: comes to effect when no one responds
  at a subsequent hearing, court may declare
 (i) the land to be free of the encumbrance
 (ii) make an order for conveyance
 (iii) give directions for the retention and investment of the money
paid into court
 Method of application:
o Notice given to the public that a payment into court had been made
o Then the process could be by way of a paper application (Re Light Time Investments
Ltd)
o Ex parte and evidence adduced to show that the conditions as to the encumbrancer
being out of jurisdiction (Re Cheung Chi Wang)
o DC has jurisdiction to grant statutory remedy where applicant submits to court’s
jurisdiction (Harvest Development Ltd v The Personal Representatives of the Estate
of Liu Wa Fuk, deceased)
 Note: on subsequent application of the encumbrancer / any person entitled to the money, the
court may order payment out

(b) Rights of occupiers and others by way of RT and CT

o (i) Does an occupier / non-occupier have a beneficial interest in the property?
o General rule = deserted wife has no right to the matrimonial home in the absence of the four situations above
(National Provincial Bank Ltd v Ainsworth, HL; aapplied in HKCB Finance Ltd v Yuen Yi Wan Sandy
o However, occupiers’ rights (domestic) and non-occupiers’ rights (commercial) may acquire beneficial interest by
RT or CT through:
 (a) contributed to the purchase price
 (b) made some mortgage repayments
 (c) carried out significant repairs, or
 (d) under a common intention CT
o (a) Contribution to purchase price
 A person in occupation / non-occupier may acquire an interest in the property if he/she has contributed
to the purchase price (Pettitt v Pettitt; Tinsley v Milligan (principle applied to same sex relationships))
 Beneficial interest vs. mortgagee (Abbey National Building Society v Cann)
 W claimed to have acquired equitable interest by way of RT by providing part of the deposit
 W claimed to have priority over chargee bank’s interest
 HL: mortgagee bank takes priority over RT
o (i) where P relied on a loan from a bank / building society for completing his / her
purchase (i.e. the acquisition of legal estate was entirely dependent upon provision of
the loan)  The transaction of acquiring the legal estate and granting the charge
were one indivisible transaction (simultaneous)
o (ii) If loan is made prior to occupant entering into occupation
o  Beneficial interest must subject to mortgagee’s interest
 Mortgagee’s interest takes place at the same time of transfer of property
 The occupier’s equitable interest does not take priority over the mortgagee’s
interest
o (b) Making mortgage repayments

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  A person may acquire an equitable interest in a flat by making mortgage repayments (Cooke v Head)
 Note: Simply making mortgage repayments will not give rise to RT automatically
o Tong Kwai Ying v Poon Kwok Sin: RT will only be inferred from mortgage
repayments if there are strong grounds to infer a common intention that the person
paying the instalments will acquire a beneficial interest in the property
o (c) Common intention CT
 Lloyds Bank v Rosset (HL): A spouse or other occupier may acquire an equitable interest in the
property where there is found to be
 (i) common intention to give that person an equitable interest in the property
 (ii) supported by detriment
 Lightfoot v Lightfoot-Brown (CA):
 The question is whether there has been either by expressed OR inferred intention below:
o Expressed intention: any express agreement, arrangement or understanding between
the parties (which need not be precise in its terms) that the property is to be shared
beneficially, or
o Inferred intention: where there is no evidence of express discussions, whether an
intention to share the beneficial interest can be inferred from the parties’ conduct
 Expenditure will only lead to such inference if it is referable to the
acquisition of property
 The relevant intention of each party = the intention which is reasonably understood by the
other party to be manifested by the party’s words or conduct
 Held: although plaintiff has made significant mortgage repayments, there had been no
discussion concerning repayments + D not aware that such repayments had been made  no
common intention
 Liu Wai Keung v Liu Wai Man:
 Brother and sister purchased a family home – put in sister’s name
o Brother (plaintiff): down payments, all outgoings, mortgage repayments
o Sister (defendant): mortgage put in her name since she could obtain a mortgage on
preferential terms
 Held:
o There had been common intention that the property is intended for P’s use and had
only been put under D’s name to secure a mortgage on preferential terms
o Later, P, by paying all outgoings including mortgage repayments, had altered his
position in reliance on this common intention
o Unconscionable to allow D to assert her title to the property against him
 Mo Ying v Brillex Development Ltd (CA):
 New approach = consider the whole course of conduct of the parties and take a holistic
approach
 Also applied in commercial relationships (Chan Sang v Chan Kwok)
o Note: New approach in UK
 Stack v Dowden (HL): favoured consolidation of the 4 categories under the common test: whether the
parties intended the property to be the subject of common ownership
 per Baroness Hale: ‘the search is to ascertain the parties’ shared intentions, actual, inferred
or implied, with respect to the property in light of their whole course of conduct in relation to
it’
 (ii) RT of CT?
o Whether the interest is quantifiable / contribution is clear?
o RT  quantifiable (e.g. paid 50% of the purchase price)
 Note: Quantum of beneficial ownership may change subsequently
 A and B purchased property jointly, but A subsequently makes most of the mortgage
repayments  A’s interest will increase from the original 50%
 Note: effect of charging order on A and B’s shares
 A and B purchased property jointly  a charging order is later registered against the property
to secure a judgment debt against B
  the charging order will only attach to the diminished quantum of interest of B (Chan Chui
Mee v Mak Chi Choi Nelson; Tong Ka Nin v Tam Chun Wah)
o CT  not quantifiable
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  Drake v Whipp; Oxley v Hiscock: amount calculated on the basis of what was fair, having regard to the
whole course of dealings between the parties (including respective contribution to purchase price and
the outgoings)
 Contratual licences: An occupier may also have a right of occupation by contractual licence  gives
rise to CT (Chen Tek Yee v Chan Moon Shing)
 (iii) Counter Presumption of Advancement
o Lavelle v Lavelle, per Lord Phillips MR:
 Where A transfers property to B without any consideration + evidence of intention to transfer beneficial
interest is unclear
 PoA applies if A and B has a close relationship
  Presume A intends to transfer property as gift  give beneficial interest to B
o Note: Evidential value of PoA may now be very weak (Lily Cheung v Commissioner of Estate Duty)  whether
PoA will override presumption of RT or CT is a matter for the court to determine on the evidence
o (a) Relationships where PoA applies:
 (i) Husband to wife
 (ii) Father to children
 (iii) Male fiancé to female financee
 (iv) Man to his de facto wife (Cheung Pui Yuen v Worldcup Investments Inc)
 (v) Person to those whom eh stands in local parentis
 Wong San Mui, the Personal Representative of Hall Kimson Decd v Ha Pa Yang Patrick:
grandfather to grandson
 Sze Ka Shuen v Silkease Investments Ltd: stepfather to stepson
 (vi) [probably] Mother to child
 Watson v Smith: no PoA
 Lee Tso Fong v Kwok Wai Sun: PoA applies not only between father and child, but also
between mother and child
o But declined to extend to mother to daughter-in-law
 Suen Shu Tai v Tam Fung Tai (CA): PoA should apply between mother and infant child
o Unclear whether it should apply between mother and adult child
 X Wife to husband (Mercier v Mercier)
 X Female financee to male fiancé / between siblings (Yue Shiu Ngam v Zen She Lin)
o (b) Admissibility of evidence – generally:
 What evidence can be taken into account for courts to consider PoA?
 Parties’ conduct and statements subsequent to the assignment are admissible
 Only a matter of weight, not admissibility:
o Court is free to assess the probative value of the conduct and statements, taking into
account all relevant circumstances (Tribe v Tribe; applied in Law Pak Fun v
Tai Lee Fat International)
 Old law: Shephard v Cartwright
o Acts and declarations of parties before or at the time of assignment OR so immediately
afterwards as to constitute part of the transaction = admissible evidence for PoRT and PoA
o Subsequent acts and declarations only admissible against the party who did the act / made the
declaration
o (c) Admissibility of evidence – doctrine of locus poenitentiae (“place of repentance 悔悟”)
 Where P purchases property for illegal purposes  assigned property in the name of another person
(assignor) whom PoA applies
  P unable to raise evidence to rebut PoA and claim interest by RT
 Since P would have to raise the issue of illegality
o Gascoigne v Gascoigne; Re Emery’s Investment Trust; Tinker v Tinker; Wong Sing v
Wong Chun Wai
  But P may be able to adduce evidence of his illegality if he has repented the illegal purpose before it
was implemented
 Cheerbond Development Ltd v Tung Kwok Yu: since H had not carried out his illegal intention
(property named under wife to keep it out of reach from creditors)  allowed to adduce
evidence to rebut PoA
 (G) RT and illegal, immoral or improper purposes
o Whether purchaser can claim RT or CY even if property is transferred by the purchaser into the

10
 name of another in furtherance of an illegal, immoral or improper purpose on the part of transferor
(e.g. to keep property away from potential creditors / to purchase a flat under the Home Ownership
Scheme)  it would appear that the transferor will not be prevented from claiming an equitable
interest, unless, to do so, he must rely on that illegal, immoral or improper purpose
 (iv) PRIORITY: Is the interest of the occupier overridden by the purchaser?
o RT or CT will be overridden if P is ED = bona fide purchaser without notice, actual or constructive
 Constructive notice: should have discovered had he carried out such inquiries as a reasonable purchaser
would make (Kong Lin Yeung v Lai In Peng)
 William & Glyn's Bank v Boland: held Bank had constructive notice of wife’s interest
(purchasing property jointly)  could not take possession
 Wong Chim Ying v Cheng Kam Wing (CA): held purchaser had constructive notice of H’s
interest by way of RT
 China & South Seas Bank Ltd v Ma Koon Ah: held bank mortgagee had constructive notice of
occupant’s interest (who had paid 90% of purchase price)
 Flying Mortgage Ltd v Chan Kuen Kwong: held bank bound by mother’s interest by way of
RT since it had constructive notice
 The ‘value’ paid by the purchaser / mortgagee need not necessarily connote the full value of the
property (Ng Luk Mui v Shiu Tsun Wai Vincent)
 (v) Waiver and delay in claiming beneficial interest
o Express waiver: a person having beneficial interest in the property by RT or CT may expressly waive the right
(Sum Fan Hung v Chum Mei Diu)
o Implied waiver:
 Delay in asserting beneficial ownership  may be held to have impliedly waived his interest
 Mo Ying v Brillex Development Ltd (CA):
 Wife only claimed equitable interest when P sought possession, not when property was sold
 Held: Despite purchaser fixed with constructive notice (failure to inspect property) of wife’s
equitable interest, wife had waived such interest by failing to assert her interest when the
property had been sold
o Wife had a duty to speak up once she realized husband agreed to sell the property 
Purchaser prejudiced by her silence and could have rescinded the sale
o MW: wrong – shouldn’t be able to ‘waive’ a right (the doctrine of laches may cause
someone to lose a right, but the court did not state this)
 Solicitor acting for P / mortgagee should:
o (i) Visit property to check for occupants
o (ii) Raise requisitions asking if anyone has an equitable interest
 If no interest  get him to sign a confirmation that he/she has no interest
 If occupant has an interest  join in the assignment as confirmor / provide written renunciation of his
equitable interest
 Tenants: Purchaser will have constructive notice of the leasehold interest of a tenant in occupation (Hunt v Luck)
 What if spouse is not in occupation?  no constructive knowledge

(c) Nominations (usually for hiding property)

 P (nominator) provides the purchase money, but instructs (nominates) that the assignment be made into the name of
another (nominee)  nominee will be presumed to hold the property by RT for P
o P (nominator) [equitable interest from RT]  Nominee [bare legal estate]
 Where the nominee intends to sell property
o = Encumbrance on title (Formking Development Ltd v Lee Kwok Hung Robert)
o Fulltrend Co Ltd v Longer Year Development Ltd: no RT since purchaser had himself affixed seal of company
assignee
o Lion Will Investment Ltd v Triple Will Ltd: H nominated W to be assignee  PoRT rebutted by PoA
 Nominator’s interest vs. TP:
o If nominator’s interest is unregistrable  may be overridden by ED (ED will take free of the nominator’s
equitable interest)
o If nominator’s interest is registered  new purchaser will have constructive notice of the interest
 Nominator’s interest (RT) can be avoided by the inclusion of a term that the nominator renounces any interest he may
retain in the property

11
(d) Liability / potential liability of property under a notice / order from Government or other competent authority
(BA)
 (i) UBW discovered
o (a) Resumption orders and remedial, demolition and repairing orders
 Property subject to the following notices may be encumbered:
 Resumption notice (Lands Resumption Ordinance)
 Remedial, closure or demolition order (Buildings Ordinance)
 Repairing order (Building Ordinance)
 Test = is the cost of compliance outside the contemplation of a reasonable purchaser?
 MEPC test not applicable since enforcement action already taken
 Lam Mee Hing v Chiang Shu Yin (remedial order against dangerous slopes);
 Wah Ying Properties v Sound Cash Ltd (remedial notice against retaining wall);
 All Ports Holdings Ltd v Grandfix Ltd (repairing order would only encumber V’s title if it is of
such a wholly exceptional nature and called for wholly exceptional measures outside the
ordinary ‘wear and tear’ remedies that common owners of HK buildings had to meet from
time to time)
 So long as the test is satisfied, title may even become defeasible:
 Notice will be registered at the Land Registry by BA
 Notice not complied with + bill not paid after BA carried out repairs
  BA obtain order of sale from court
o (b) Warning Notices (more lenient)
 s.24C, Buildings Ordinance – BA may issue a notice in writing warning owners of property that UBW
have been carried out and requiring them to be demolished by a certain date
 But no authority on the effects of warning letters
 Title may be defeasible:
 Only if demolition notice not carried out will the warning notice be registered at the Land
Registry  if not complied with + bill not paid after BA carried out repairs, BA may get an
order of sale from court = property may be sold  so long as test is satisfied, title becomes
potentially defeasible = NOT good title
 Chi Kit Co Ltd v Lucky Health International Enterprise Ltd
o (c) Non-mandatory notices
 Will NOT render title defective –
 A notice merely suggesting (vs. mandating) that measures be taken to rectify UBWs (Polyset
Ltd v Panhandat Ltd)

(e) Liability / potential liability of owner or IO in an action unrelated to land

 (i) Personal action unrelated to land against the owner of land
o Title will NOT be defective
 Personal action unrelated to land against V, which might in future lead to imposition of a charging
order upon the property (execution against the property)
 (ii) Action unrelated to land against Owner’s Corporation
o s.17(1)(b) Building Management Ordinance: judgment creditor entitled to apply to Lands Tribunal for leave to
enforce judgment against any co-owner in the building
o Test = is the cost of compliance outside the contemplation of a reasonable purchaser?
o Lucky Health International Enterprise Ltd v Chi Kit Co Ltd (CFA): (the `scaffolding case’)
 Personal injuries action commenced against IO for more than $20million
 P claimed V’s title defective under s.17(1)(b)
 Held: V’s title defective due to the liability to contribute to an expense of such magnitude that is not
within reasonable contemplation of P
o Kan Yui Man Allen v Ng Hiu Nam (CFA):
 Action commenced against IO
 P raised requisition  V replied that P had agreed to purchase the flat subject to the pending action
 Held: V had not answered P’s requisition by failing to provide information on (i) particulars of the
action (ii) stage of proceedings (iii) amount of claim  did not enable P to assess magnitude of the risk
of any judgment against IO

12
  i.e. V not answering requisitions and identifying the particulars of the action against IO =
failure to show good title
o Gigabillion Asia Pacific Ltd v Sino Dynamic International Ltd:
 Observed 3 ways in which the eventual costs orders against IO could affect V’s title:
 (i) IO failed to discharge its liability  judgment creditor could commence execution
proceedings against owner if IO failed to discharge its liability
 (ii) Owner failed to contribute to funds  IO registering a charge against owner’s property
under DMC
 (iii) IO becomes insolvent, owner liable to contribute to funds to discharge IO’s debts and
liabilities
 3 sets of litigation against IO  viewed as a whole, could not be regarded as an ordinary incident of
building management such that a reasonable purchaser might be expected to have in contemplation
 V failed to give any indication as to the magnitude of the actual and potential exposure to the costs 
impossible for P to evaluate whether potential liability was real or fanciful  requisition also not
satisfactorily answered
o Lo Yee Man v Si Chuan Property Development Consultants Ltd:
 Tortious claim against IO
 P raised requisition  V first maintained that it was irrelevant, but offered to pay $50,000 on the day of
completion as stakeholders to defray any such claim
 P then refused to complete  V forfeited P’s deposit
 Held:
 V failed to provide information as to the magnitude of claim
 V failed to show good title
o Solicitor acting for P should:
 Check to ensure there is no pending litigation affecting IO of the building P is intending to purchase a
unit
 If there is
 (i) must raise a requisition to identify the extent of claim
 (ii) decide whether claim is of such magnitude as to render V’s title defective
o Solicitor acting for V, who is aware of such litigation, should:
 (i) insert an exclusion clause in S&P
 (ii) to fulfill its duty to show good title and avoid P being entitled to rescind, answer any requisitions
raised by P with full candour

(f) Liability of owner to pay / contribute towards building repairs or management fees in multi-storey buildings
 Liability under DMC to contribute to unpaid bills for the following imposed by IO / manager of multi-storey buildings:
o Building repairs
o Management fees
 Test = is the cost of compliance outside the contemplation of a reasonable purchaser?
 Repair costs – Luk Ho Chang v Fook Man Finance Co Ltd:
o V warranted that if IO passed any resolutions for repairs prior to the date of agreement, V would pay the costs of
repairs
o IO resolved to replace lifts and carry out major repairs to the building
o V refused to pay repair costs
o Held: repair costs were an outstanding liability to pay for repairs at completion  IO would be able to recover
costs from owner of the flat  provided the costs are outside the contemplation of a reasonable P, it constitutes
an encumbrance on V’s title
 Unpaid management fees – AIE Co Ltd v Kay Kam Yu:
o Held: Memorandum of outstanding management fees constituted an encumbrance upon property, provided that
the sum unpaid is outside the contemplation of a reasonable P

6.5 Title must not be defeasible

Examples of defeasible titles

13
(a) Breach of Government lease / Conditions of Grant giving rise to right of re-entry by Government
 Title defeasible if Government has the right of re-entry as a result of the breach
o Note: not all breaches will lead to government re-entry:
 New Jade Enterprises Ltd v Jing Ying She Ltd: failure to pay a small sum of Government rent would
not give rise to a real risk of re-entry by Government
o Regent Summit (Hong Kong) Ltd v Smart Business (Asia) Ltd: failure to comply with plot ratio  defeasible
title
o Century Legend Ltd v Chu Chung Shing Investment Co Ltd: no building works to be carried without consent of
District Office  canopy erected without consent  defeasible title
o Lee To Ming v Tam Kim Sum William: no building exceeds 4 storeys  OP issued for 5-storey building  but
OP issued by BA, government could still re-enter  defeasible title

(b) Breach of Buildings Ordinance / Linkeage clauses in Gov Leases or Conditions (double defeasibility)
 Linkeage clause = a term in Government leases / Conditions of Grant: developer / owner must comply with all building
regulations in the Buildings Ordinance
o i.e. UBWs, which are in breach of Buildings Ordinance = breach of Government lease / Conditions of Grant 
defeasible title
o Giant River Ltd v Asie Marketing Ltd: extra subterranean floors constituted breach of Buildings Ordinance 
defeasible title
o Cf. Woomera Co Ltd v Provident Centre Ltd: trivial breaches of Buildings Ordinance  no real risk of re-entry
 Title defeasible if there is real risk of substantial enforcement action by BA for breach of Buildings Ordinance or
regulations
 (i) Whether V’s title defeasible?
o (A) Building initially constructed
 Where a building has been constructed in a manner which fails to comply with the Buildings
Ordinance or the Building Regulations
 Luk Kwan Hung v Victory Mark Investment Ltd: roof constructed too low in breach of Building
Regulations  title potentially defeasible
o (B) UBW not yet discovered – ‘ticking bomb’ Subsequent UBWs
 Where unauthorised building works have been carried out without prior approval from the BA
subsequently
 s 14, Buildings Ordinance: no person shall commence building works without first having obtained
approval from the Building Authority (s.14AA: save for minor building works)
 Issue = Does the existence of the UBW (ticking bomb) render V’s title defeasible?
 Consider the following in the appropriate order:
 (i) Are the UBW ‘in’ the building?
 Mariner International Hotels Ltd v Atlas Ltd (CFA): UBWs on the roof =/= in the building
 Ronald Wilson v Appeal Tribunal (Building: bay windows =/= in the building
 Exam: extended / enclosed balconies =/= in the building
 If yes  go to (ii)
 If no  exempted under s.41(3) Buildings Ordinance  go straight to (iii)
 (ii) If in the building, are the UBWs exempted building works under s.41(3) Buildings Ordinance?
 Building works that are not ‘structural’ are exempted under s 41(3)
 Two alternative tests for ‘structural’:
 1. Does the alleged UBW significantly affect the load-bearing propensities of the building?
o Note: both cases would be decided differently after Mariner v Atlas (since they
would not be considered as ‘in’ the building  go straight to (iii))
 MTR Corpn Ltd v Hwang Xiao Yun Sherry: heavy concrete room on roof is
UBW
 Yili Concepts (HKG) Ltd v Lee Wai Chuen: extended balcony is UBW
o Note: the load-bearing propensity test is only appropriate in certain contexts / certain
UBWs  for some others, the alternative integrity test may be better (see below)
 2. Are the building works integral to the building / affects the integrity of the building?
o e.g. internal partitioning may or may not affect load-bearing propensities
 Structural if it involves changes to drainage system / creation of new
entrances (Lucky Success (HK) Ltd v Ko Ni Kwong; Asia Way International

14
 Investments Ltd v Hung Kin Ping)
 (iii) Is there a real risk of enforcement action by BA?
 Any real risks of BA imposing a charge on the property after BA carried out the necessary
works of removal since removal / remedial order issued but required work ignored? (Kok
Chong Ho v Double Value Developments Ltd)
o Once charge imposed, BA has power to sell property to recoup its charges and costs
 Test = could a prudent and experienced solicitor advise his client that he could safely ignore
the risk of enforcement action? (Spark Rich (China) Ltd v Valrose Ltd) – stricter
reformulation of MEPC in the context of UBWs
o Godfrey JA commented that cases in which P might safely be advised that he could
be sure he could safely disregard UBWs are likely to be rare
o Link Harvest Ltd v Wayhang Development Ltd: very old mountain lodge built in 1972
without OP  real risk of enforcement  defeasible title
o Chinawell Management Ltd v Strong Huge Corporation Ltd: add-on squatter
extension to house  real risk of enforcement  defeasible title
 Guidance Notices from BA
o Guidance notices on BA’s priority of taking enforcement action
o These guidance notices will NOT give rise to a legitimate expectation (as to give rise
to a right to JR) that no enforcement action will be taken regarding a UBW classified
as low risk (Tsui Koon Tin v Building Authority)
o (C) UBWs in relation to one flat in a multi-storey building will NOT affect the titles of co-owners?
 If notice of UBW relates to that flat alone  Only the title of that particular flat will be affected
 Active Keen Industries Ltd v Fok Chi Keong; Hong Kong Central Hospital Ltd v Progressive
Group Ltd
 If the notice relates to UBW in the common parts of the building  title of all flats in the block will be
affected  V’s tilte is defective if the repairing obligation is beyond the reasonable expectation of a P
 Lam Mee Hing v Chiang Shu Yin; Wah Ying Properties Ltd v Sound Cash Ltd
 (ii) UBW = Criminal Offences
o s.40(1AA) Buildings Ordinance: any person who knowingly to commence or carry out building works without
the approval of the Building Authority = committing a criminal offence
o s.40(1BA): criminal offence to fail to comply with an order (such as a demolition or removal order) given by the
Building Authority.
 (iii) Whether V’s defective title made good by removal of UBWs prior to completion
o Issue: whether removal of UBW prior to completion means V has good title and will be sufficient answer to a
requisition?
 In theory: Since V only has duty to give good title at completion  sufficient for V to demolish UBW
prior to completion to give good title
o Test = whether, if UBW are removed prior to completion, P will be able receiving substantially what he
contracted to purchase (i.e. the doctrine of substantial performance)
 If after UBW is removed, P will not be receiving substantially what he contracted to purchase  V
cannot compel P to accept the title by way of SP
 Cases of major UBWs  hence no substantial performance after removal
 Cashew Holdings Ltd v Pacific Success Enterprise Ltd: enclosure of pump room to make extra
bedroom  Court looked at:
 Size of affected area
 Difference in value to P
 Effect of removal of UBW on sale prospects
o Held: no substantial performance
 Max Smart Ltd v First Super Investment Ltd: unauthorized cockloft of substantial dimensions
erected  P raised requisition and B agreed to demolish  Held: since V agreed to sell
premises on ‘as is’ basis, V could not compel P to accept the premises after demolition of the
unauthorized cockloft
 Sun Great International Ltd v Hui Lai Ying Polly: an addition to an upper balcony, a skylight
and courtyard  V offered to demolish them prior to completion, but P rescinded and
demanded return of deposit  Held: defects in title not capable of being successfully removed
prior to completion; Even if removed, P would no longer be receiving substantially what he
contracted to purchase
15
  Grandco (Holdings) Ltd v Harbour Wealth Co Ltd: sloping garden rebuilt without permission
to render it flat  V reinstated before completion  Held: substantial difference between
sloping and flat garden
 Minor UBWs  Substantial performance of agreement
 Homyip Investment Ltd v Chu Kang Ming Trade Development Co Ltd: removal of
unauthorized staircase did not have the effect of substantially depriving P of the benefit under
the S&P agreement
 Goldful Way Development Ltd v Wellstable Development Ltd: enclosed yard  V agreed to
demolish prior to completion  Held: although the unauthorized enclosure would reduce the
internal floor area slightly, it was of immaterial significance for the enjoyment of the rest of
the property
o Where P did not respond to V’s offer to demolish UBWs
 Where V offers to demolish the UBW and P fails to respond  V proceeds to demolish
 Victory Star Ltd v Ng Fung Ying: arguable that P under duty to respond  P estopped from relying on
V’s failure to give substantial performance
 MW: wrong – silence cannot constitute estoppel (must be something unequivocal)
o UBWs reported to BA by intending P after it is demolished
 Chan Choi Fung v Huge Base Investment Ltd: P cannot subsequently complain if V demolishes UBW
prior to completion
o Note: Approval may be required for demolition of UBW
 Approval of demolition / repairing plans to the UBW required from BA
 Re Profit Success Development Ltd:
 If the demolition work is within the scope of s.14 Buildings Ordinance  the building order
itself would normally constitute the necessary consent by BA to commence work done under
the demolition order
 If demolition work did fall within s.14 and was not covered by any plans already approved
under that section, plans had to be submitted under s.14 for approval
 (iv) Sale ‘as is’
o S&P on ‘as is’ basis – only refers to the physical condition of the property; does not serve as exclusion clause
covering illegal structures (All Ports Holdings Ltd v Grandfix Ltd)
o Cashew Holdings Ltd v Pacific Success Enterprise Ltd: ‘as is’ clause only to protect V; does not give any right
that could be asserted against V to restrain him from demolishing UBWs
o But may be a reason for court to find no substantial performance after removal of UBW – Max Smart Ltd v First
Super Investment Ltd

(c) Material change in user

(d) Extent of the property is unclear / boundaries do not correspond with plan / encroachment
 Unclear / wrong boundaries
o The extent of the property is unclear / boundaries do not correspond with the plan  title defeasible (Tam Mo
Yin v Attorney-General; Fan Tony v Incorporated Owners of Kung Lok Building: car park space did not
correspond with plan)
 Encroachment 侵犯 over Government land
o Chan Hong Chung v Mak Kiu: balcony protruding over public street  title defeasible
 Cf. Gold Glory International (Hong Kong) Ltd v KW Wong Investment Co Ltd: Government granted
permission over overhanging balcony  title not affected
o Profit World Trading Ltd v Ho So Yung: conversion of part of car port into sitting room  title defeasible
o Widely Success (HK) Ltd v Hollywood Land Ltd: main doors to property altered and extended into common
areas of the building  title defeasible

(e) Title defeasible on other grounds

 1. Fraudulent conveyance (ss 60 and 61, CPO)
o “With intent to defraud creditors”
 Tradepower (Holdings) Ltd (in liquidation) v Tradepower (Hong Kong) Ltd:
 where objectively shown that disposition of property (i) unsupported by consideration was
made by a disponor when insolvent, (ii) the result being his creditors subjected to significant
16
 risk of being unable to recover their debts in full
 2. Transaction at undervalue (e.g. gift) by person subsequently adjudged to be bankrupt within 5 years of the assignment
(s 49(1) and 51, Bankruptcy Ordinance)
 3. Unfair preference by person subsequently adjudged to be bankrupt (s 50 Bankruptcy Ordinance; s 255 CO)
 4. Assignment by way of security for loan that is illegal under the Money Lenders Ordinance
 5. Breach of FD owed by P to V (Chiu Che Kuen v Or Yue Ling)
 6. Breach of DMC
o Where there is a breach of DMC in V’s property
o Not all breaches of DMC has the effect of rendering V’s title defeasible
o Test = is there a real risk of significant enforcement action being taken by IO / manage (e.g. by imposing a
charge on the property to enforce compliance [equitable charge with a right of sale])
 Examples of breaches:
 Failure to pay management fees
o Wise Wave Investments Ltd v TKF Services Ltd: failure to pay management fees 
title defeasible
 Failure to contribute to sinking funds / fighting funds
 UBWs
o Modern Sino Ltd v Art Fair Co Ltd
 Failure to maintain unit property
 Despite prohibited in DMC, agreed to sell carpark space separately from unit
 Interference with common parts  renders title of BOTH flat and carpark defeasible
o Lo Chi Wai Arthur v Liu Wing Cheung Wilfred: car park sold separately from flat in
breach of DMC  held title defeasible due to significant risk of action
o Dragon Top Investments Ltd v Able HK Holdings Ltd: car park sold separately from
unit in breach of DMC  held: V failed to answer requisition adequately  failed to
show good title
 Prohibition of subdividing flats (not physically)
o Note: no authority on this – in exam, say “I don’t know, but I suggest…”
 7. Sale of property by mortgagee to himself (Tang Ying Ki v Maxtime Transportation Ltd)
 8. Gift / Sale by attorney to himself or others
o Lo Hung Biu v Lo Shea Chung: gift
o Yook Lu Fong v Lau Po Ching: sale by attorney to himself to hold as T for another who himself was aware of the
duty of the attorney
 9. Personal representative selling estate property to himself
o Feerni Development Ltd v Daniel Wong & Partners (a firm): sale voidable at instance of any person interested
in the property sold
 10. Duress / Undue influence (Barclays Bank plc v O’Brien; Royal Bank of Scotland v Etridge (No 2); Bank of China
(Hong Kong) Ltd v Wong King Sing; Hong Kong Chinese Bank Ltd v Santa Fur Co Ltd)
 11. Breach of building licence
o Euro King Development Ltd v Ho Yu Kuen: following concessionary grant of land by building licence under
Small House Policy, owner constructed Small House  licence prohibited alienation of house within 5 years,
irrevocable power of attorney granted by owner within 5-year period  house later agreed to be sold to P 
held: title defeasible and V could not give good title

7. DUTY TO PROVIDE DOCUMENTARY EVIDENCE TO PROVE GOOD TITLE

Duty of V, by way of giving good title, to provide originals of all title deeds which relate exclusively to the property agreed
to be assigned

 Statutory duty (s.13A, CPO)

o Applies to S&Ps signed after 11 July 2008, unless excluded or modified
 Common law duty applies only in 2 circumstances:
o (i) where S&P pre-dated the CPO amendment (11 July 2008)
o (ii) where V agrees by S&P to give good title in accordance with common law, excluding the effect of s.13A,
CPO
17
(i) Common law duty
 Old position: Yiu Ping Fong v Lam Lai Hing Lana
o V, who agreed to give good title, has an obligation to deliver the originals of all title deeds that relate exclusively
to the property to be assigned right back to the ultimate root of title
 If any such documents are missing, V had to provide a statutory declaration as to how they had come to
be missing in accordance with the rule in Re Halifax Commercial Banking Co Ltd and Wood
o A massively onerous duty as many original title deeds had been lost or destroyed
o Unclear what is under the duty to give good title
 Conveyancers construed it widely  ALL originals that affect the property, regardless of the period of proving
title
 If cannot produce, apply rule in Re Halifax
 New position: De Monsa Investments Ltd v Whole Win Management Fund Ltd (CFA)
o Clarified duty and scope of V’s obligation to produce original title deeds under common law rule by
way of GIVING title:
 Yiu Ping Fong misconstrued
 Reduced to V only need to produce originals of title deeds that affect the title of property
o The common law position before s 13A – MW’s view that the common law position also applies
under s 13A(2)
o (a) P is entitled to receive the originals of title documents relating exclusively to the property at completion by
virtue of his proprietary right to such original title documents
 Rationale: P had a proprietary right to such documents (Re Williams and Newcastle’s Contract)
o (b) V need normally only supply the originals in his possession or power
o (c) For missing original title documents in the pre- and post-intermediate root period, V has a duty to explain the
reason why they are missing ONLY where their absence would indicate the realistic possibility of some
transaction affecting the land, which could affect P if he took title
 The only real possibility of defect affecting land = equitable mortgage created by way of deposit of title
deeds
 Litton NPJ observed that an equitable mortgage could be created in 2 different ways:
o (1) by way of deposit of original title deeds + memorandum of deposit
 the memorandum would be a registrable instrument
 If registered: give P notice of the equitable mortgage
 If not registered: void against subsequent bona fide P (s.3(2) LRO)
 no real risk to P’s title
o (2) by deposit of original title deeds unaccompanied by memorandum
 But difficult to imagine a situation where a person would lend a substantial
sum of money with nothing more than an oral commitment and a deposit of
title deeds
  therefore, no need to worry about missing title deeds

(ii) Statutory duty – s.13A, CPO (effective as of 11 July 2008)

 s.13A does not have retrospective effect  only applies to S&P agreements signed after 11 July 2008 (Donpower
Trading Ltd v Apexcom)
 Failure to provide the original title deeds under s.13A will constitute repudiatory breach of S&P agreement (Big Most Ltd
v Chau Wa Hung)

(1) Unless the contrary intention is expressed, P shall be entitled to require V to deliver to him, for the
purpose of giving title to that land, the original of both of the following only:
(a) if there is a Government lease that relates exclusively to the land, the lease; and
(b) any document that relates exclusively to the land and is required to be produced by the
vendor as proof of title to that land under s 13(1)(a) and (c).
Test = does the document relate exclusively to the property

(2) Subsection (1) does not affect any rule of common law under which the vendor may discharge his

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 obligation to give title to that land otherwise than by delivering the Government lease or document to the
purchaser.

(3) If the vendor is not required to deliver to the purchaser a document in giving title to that land, the
purchaser has no proprietary right or ownership in the document.

(4) The fact that

(a) the vendor is not required to deliver to the purchaser a document in giving title to that land; and
(b) the purchaser has no proprietary right or ownership in the document
does not affect the right or interest of any other person in that land.

 s.13A(1)(a) and (b): V under duty to produce the original of the Government lease / Conditions of Grant, together with
those title deeds and documents which relate exclusively to the property between the intermediate root of title to the
present S&P (i.e. within the chain of title period which is usually more than 15 years)
o Original title deeds in the pre-intermediate root period do not need to be produced
o No duty to produce originals of title deeds that do not relate exclusively to the property sold (Goldmex Ltd v
Edward Wong Finance Co Ltd)
 Documents that do NOT relate exclusively to property
 Government lease / Conditions of Grant
 DMC
 OP
 Certificate of compliance
 Documents that normally relate exclusively to the property:
 Assignments
 Mortgages
 Discharges
 Note: Power of attorney may fall into either category, depending on its nature
 General power of attorney: do not relate exclusively to the property
 Special power of attorney: may relate exclusively to the property
o Zhang Xueshuai v Lai Chan Wing:
 V unable to locate any of the original title deeds  could only supply certified copies
 provided a statutory declaration stating that after extensive searches he was unable to explain
how the documents came to be missing
 P contended the possibility of 2 S&Ps being deposited by way of securing an equitable
mortgage (since the purchasers were financial lending institutions)
o Raised requisition of whether the 2 S&Ps were disguised lending transactions
 Held:
 (1) Requisition properly raised:
o The possibility of the then owner had made use of the original title documents for
borrowing purposes could not be excluded
 Therefore, the statutory declaration could not properly speak as to the reason
for loss of the original title documents
 (2) Requisition not satisfactorily answered:
o On Litton NPJ in De Monsa, equitable mortgage over the property would invariably
be accompanied by a written note or memorandum of deposit  if unregistered, void
against bona fide purchaser for valuable consideration
o Observed that it only affects priority, not validity of the underlying equitable
mortgage
 The note / memorandum is only EVIDENCE of the underlying equitable
mortgage  failure to register it will only render the evidence void, but not
the underlying equitable mortgage
 s.13A(2): preserves the common law rule in Re Halifax that V may discharge his obligation to give title (e.g. by
providing secondary copies where the original title deeds are missing)
o Q: whether s.13A(2) also preserves the less onerous common law rule under De Monsa and be applied even
where the parties have contracted, expressly or by implication, to give title in accordance with the statutory

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 provision?
 De Monsa, per Ribeiro PJ and Gleeson NPH: `We note for future reference that section 13A(2) allows
recourse to the common law if the specified originals cannot be delivered’
 MW: wrong; if this is right, De Monsa applies to every case  s.13A(1) will be totally
redundant and never applied
 Chu Yin Fan v Inter Rivers Ltd (per Dty Judge Samson Hung): s.13A(2) preserved common law rule as
enunciated in De Monsa, which should be applied even where the parties had agreed to give title in
accordance with s.13A
o Exam:
 If parties agree to give title in accordance with common law – no problem
 If parties did not say anything – Q: whether s.13A or De Monsa applies?
 Apply s.13A first  reach conclusion under s.13A
 However, it is arguable that after Chu Yin Fan that common law can be applied under
s.13A(2), in which case De Monsa will apply  reach conclusion under common law
 s.13A(3) removes P’s common law right of ownership in respect of title deeds, save those that must be produced in
compliance with V’s duty to give title under s.13A
o An owner of land has a common law right to the ownership of the title deeds and documents relating to that land
as an incidence of his ownership of the land (Re Duthy and Jesson’s Contract)
 s.13A(4) preserves the right of TPs, such as any right of an equitable mortgagee who holds the original title deeds

8. MATTERS OF MERE CONVEYANCE

Matters of mere conveyance = defects which V can remove independently of the concurrence of any other person  will not
render a title defective
 Example: discharge of a mortgage prior to completion (Re Jackson & Oakshot)
 Sharneyford Supplies Ltd v Edge, applied in Ip Fai Man v Lui Kit Man
o Duty on V to give vacant possession, but there were presence on land to be sold of trespassers or licensees
o Held: since within V’s power to remove them, this was a matter of mere conveyance
 Result would be different if the occupants were tenants
 City Chain Properties Ltd v Speedy Port Ltd
o Presence of trespassers occupying wall stalls outside shop in Chung King Mansions = matter of mere
conveyance  did not adversely affect V’s title

9. POSSESSORY TITLE (BY ADVERSE POSSESSION)

(a) Good holding or possessory title

 A good holding / possessory title is based upon AP for the period specified in the Limitations Ordinance
o Against Government: 60 years
o Against a private person where the right of action accrued to the dispossessed person before 1 July 1991: 20
years
o Against a private person where the right of action accrued to the dispossessed person after 1 July 1991: 12 years
 Challenge to AP on grounds that this breached the constitutional guarantees laid down in Art. 6 (right to protection of
private ownership of property) and Art 105 (right to compensation for lawful deprivation of property) BL rejected:
o Harvest Good Development Ltd v Secretary for Justice
o Hong Kong Kam Lam Koon Ltd v Realray Investment Ltd (No 5)
 DC has jurisdiction to hear and determine AP cases under s.36 DCO (Lam Man Lau v Secretary for Justice)

(b) Elements of a possessory title

(1) Physical control of the land by squatter (factual possession) for the relevant limitation period
 Paper owner may cease to be in possession by
o (i) Dispossession: when a person (trespasser) comes in and puts the owner out of possession
o (ii) Discontinuance of possession: where the person in possession goes out of possession voluntarily and a
person (squatter) takes possession
 Acts must have been done by the squatter which are inconsistent with the enjoyment of the land by the
person entitled (Leigh v Jack)
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 Fencing off = best evidence of possession of surface land
o Kam To Pui v Incorporated Owners of Lux Theatre Building
o Wealth Hill International Investment Ltd v Wong Kwan Siu: building of a fence and keeping a dog to discourage
strangers showed that the squatter was exercising a high degree of control over the land to the exclusion of
others  constitute sufficient evidence of factual possession
 Cultivation of surface land without fencing off also held sufficient to prove factual possession
o Seddon v Smith
o Tsoi Ping Hung v Cheung Chow Lan (CA): squatter constructed a house on P’s land 
removed wild vegetation, levelled it by laying soil and planted grass + built small golf
course + erected a fence along 3 sides of the land, the 4ths ide bordered by a ditch
 Held: levelling and planting grass on land + erection of fence indicated factual possession
 Dispossession of paper owner:
o Acts of dispossessing an owner must be unequivocal (Powell v McFarlane)
o Paper owner will not be dispossessed of his land if he continues to enjoy some use of that land
 Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd: paper owner holds keys to access the
property and often used the property for his family’s enjoyment  no exclusive factual possession
o Repossession by paper owner (Zarb v Parry)
 Requires paper owner taking back exclusive possession
 Paper owner doing something less than excluding the adverse possessor (e.g. plant a flag, put up notice,
make an oral declaration of ownership)  squatter would continue to have factual possession and AP
will not be affected
 Adverse possession of wall and surface of wall
o AP cannot be taken of the surface of an external wall of a building (Sunbroad Holdings Ltd v Occupiers)
o AP may be taken of the wall itself and the ground under the wall
 Leung Kwok Kau v Tam So Wah
 Bridam Ltd v SASA Cosmetic Co Ltd: AP can be taken of a wall if nuts and bolts had been driven into
the wall to affix a sign
 Kayway Investment Ltd v Focus: AP may be taken of the wall
 Taking possession by interception of rent
o S.12(3) Limitation Ordinance: AP may be taken by a person who wrongfully receives or intercepts rent from a
tenant of the paper title owner (Fang Moon Wan v Yu Chi Foon) – only applies to tenants of
paper owner
 But do not apply to situation where the lease has been granted by the squatter himself (Tang Kwan
Tai v Tang Koon Lam, alias Tang Kun Lam; Cheung Yat Fuk v Tang Tak Hong) –
does not apply to tenants of squatter
 Taking possession by illegal means or using the land for unauthorized purpose
o May prevent squatter from acquiring title by AP
o Choy Kuen Chi v Tat Fung Enterprises Co Ltd: erecting UBWs on land did NOT prevent
squatter from acquiring title by AP)
 Joint possession by squatters
o If squatters take possession jointly (e.g. as JTs), they may joint together to acquire title by AP
o If squatters take possession severally and independently (e.g. as TCs), no possessory title may be acquired by
any of them (U Po Chu v Tsang Pui Ling)

(2) Intention to possess land by squatter

 An intention to exclude the world, including the paper owner (Powell v McFarlane)
o Only an intention to possess, not to own (Ocean Estates Ltd v Pinder; JA Pye (Oxford) Ltd v Graham)
o A person who believes that he is the rightful owner can acquire title by AP (Wong Luen Chun v Secretary for
Justice)
 A squatter who mistakenly believes he is the lawful tenant of the true owner can also acquire title by
AP (Cheung Kwong Yuen v Sun Hui Fang)
o A person who claims title by AP under a non-completed S&P agreement may also have the required intention
(Yu Fung Co Ltd v Olympic City Properties Ltd)
 A matter of inference – depends on assessment of all circumstances

(3) Possession is adverse to the owner – in the sense that squatter has no permission from the owner / TP to occupy the land
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  If rightful owner gives permission, expressly or impliedly, to squatter to use land  possession will never be adverse
(Hughes v Griffin)
o Applied in Ho Hang Wan v Ma Ting Cheung, confirmed in English CA in BP Properties Ltd v Buckler
o Similarly, entering land consequent to a grant of licence by TP is not adverse (Tsang Foo Keung v Chu Jim
Mi Jimmy; Pang Yiu Chor v Wong Wai Leung)
 The fact that paper owner has taken no enforcement action will not constitute permission or licence (Zarb v Parry)
 Willingness to pay rent to paper tilte owner if such were demanded will prevent squatter from securing title by AP (Wong
Tak Yue v Kung Kwok Wai (No 2))
o Cf. UK courts reached a different conclusion (Ocean Estates Ltd v Pinder; JA Pye (Oxford) Ltd v Graham)

(c) AP of common parts and units in multi-storey buildings

 (i) TP can obtain possessory title over common parts or unit in multi-storey building against co-owners of the building
o Third party squatters obtaining possessory titles:
 Kam To Pui v The Incorporated Owners of Lux Theatre Building: P occupied a section of a lane behind
Lux Theatre Building (common part) and fenced off part of it to run various business venture  held: P
had acquired possessory title to that portion of the lane that had been fenced off
 Wong King Lim v Incorporated Owners of Peony House: TP held to have secured title by AP over lane
at the rear of Peony House
 Yeung Mau Cheung v Ka Ming Court, Castle Peak Road (IO): P acquired possessory title to 2 portions
of the common parts on the ground floor of a multi-storey building
o IO obtaining possessory title against co-owners:
 Shine Empire Ltd v Incorporated Owners of San Po Kong Mansion; Loyal Sail
International Ltd v Incorporated Owners of Wai Lun Building
 (ii) One co-owner of shares in a multi-storey building CANNOT obtain a possessory
title against the other co-owners over common parts of the building
o Since all co-owners of shares in the building are TCs with a joint right of possession to the entire building,
including the common parts (Incorporated Owners of Man Hong Apartments v Kwong Yuk Ching)
 The squatter’s possession must be adverse (i.e. without the consent of the rightful owners)
 A co-owner’s use is as of right, and cannot be adverse to the rights of other co-owners
o Incorporated Owners of Po Hang Building v Sam Woo Marine Works Ltd
 (iii) One co-owner of shares in a multi-storey building CANNOT obtain possessory title
in respect of a unit which another co-owner has the right to exclusive occupation and
enjoyment
o Same reasoning as (ii)

(d) Continuous period of AP by different persons in succession

 Periods of AP by different persons can be aggregated
o Sze To Chun Keung v Kung Kwok Wai David:
 D entered into AP in 1955  1961 granted permit by Crown (another trespasser since land does not
belong to Government)  permit revoked in 1988  Owner sued for possession in 1990
 Held: there had been continuous possession by D squatter
o Ng Lai Sim v Lam Yip Shing:
 Father having adverse possession died  daughter took over
 Held: the perios could be aggregated

(e) Squatter continues in AP where he has leased property to another

 Cheung Yat Fuk v Tang Tak Hong (CFA): a squatter continues in AP where he has leased the property to another
 Tang Kwan Tai v Tang Koon Lam (CA)

(f) Possessory title is destroyed by a surrender to and regrant from the Government
 Where adverse possession is against a Government lease  the possessory title can only be secured against that lessee
and not against the Government as landlord
o Therefore, if title reverts to / is surrendered to the Government, the squatter can be evicted by the Government
(Fairweather v St Marylebone Property Co Ltd)
 This principle was adopted as correct in Fu Mei Ling Mary, Administratrix of the Estate of Fu Tong (deceased) v Yeung
Kong (CA)

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(g) Effect of the reversion of HK Island and Kowloon to the Government of PRC in 1997 on squatter being in the course of
establishing 60 years of AP against the Government prior to 1997
 Lee Bing Cheung v Secretary for Justice (CA):
o The reversion of sovereignty over HK Island and Kowloon to PRC in 1997 had the effect of destroying the
inchoate rights of a squatter who was in the course of establishing the 60-years adverse possession against the
Government prior to 1 July 1997
 The same conclusion should apply to a squatter who had acquired a possessory title prior to the Handover in 1997

(h) Effect of New Territories (Renewable Government Lease) Ordinance upon AP

 Some leases in NT (i.e. those granted before 1959) were due to expire on 1 July 1973, but contained an option to renew
for 24 years less 3 days
o New Territories (Renewable Government Lease) Ordinance provides that on 1 July 1973, a new Government
lease is deemed issued for all such leases in NT
 Rejected argument: the new deemed issued Government lease terminated the adverse possession  adverse possession
had to begin again
 (i) Position where squatters had been in possession for more than 20 years prior to 1 July 1973
o Squatters who had secured a possessory title before 1 July 1973 by adverse possession for the required number
of years were unaffected by the legislation (Fu Mei Ling, Mary v Yeung Kong)
 Their rights protected by s.4(4)(c) New Territories (Renewable Government Leases) Ordinance – the
new Government lease was deemed issued subject to all encumbrances and interests to which that land
was subject before 1 July 1973
 A possessory title held to be such an interest
 (ii) Position where squatters were in the course of acquiring a possessory title as at 1 July 1973
o Old position:
 Squatters’ interest ceased on 1 July 1973 by virtue of the deemed grant of new Govenrment lease
 Squatters who were in the process of acquiring a possessory title as at 1 July 1973 are not
entitled to the protection of s.4(4)(c)
 Therefore, have to commence a period of adverse possession afresh from the date of 1 July 1973
o New position: Chung Ping Kwan v Lam Island Development Co Ltd (Privy Council):
 (1) As a matter of general principle, the lease contained an option to renew  means title never
reverted to Government and Government had no right to re-enter to eject the squatter
 (2) The ordinance merely provided administrative machinery to avoid inconvenience  intended to
achieve the same result as if a new lease is granted pursuant to the right of renewal
  Adverse possession of squatters continued uninterrupted

(i) Effect of the extension of NT leases from 1 July 1997 under New Territories Leases (Extension) Ordinance on squatters
who have obtained / are in the course of obtaining possessory titles against Government lesees
 The New Territories Leases (Extension) Ordinance: extended NT leases for 50 years from 1 July 1997
 Chan Tin Shi v Li Tin Sung (CFA):
o Extended = continuation of the old lease
o Preserved rights of squatters who have acquired a good holding title by the date of the Ordinance came into
effect (25 April 1988) or [perhaps] by the date of expiry of the old lease on June 27 1997
o But court also admitted the unsatisfactory result that the owner would remain liable on the covenants in the
Crown lease (e.g. to pay Government rent), despite no longer having any right to the enjoyment of the property

(j) Effect of reversion of NT to the Government of PRC in 1997 on titles of squatters having established, or being in the
course of establishing, 60 years of AP against the British HK Government and/or the HKSAR Government
 Reversion of NT to PRC on 1 July 1997 has NO effect on title of squatters who had obtained possessory title by that
date / were in the course of obtaining such titles
o Li Kwok Ching v Secretary for Justice (CA):
 The Peking Convention operated on an international level and did not create any
leasehold estate in favour of the British Crown or any reversionary estate in
favour of the Chinese state
 British Crown took NT and then imposed the common law land tenure
system in NT, but did not take possession of the New Territories from
Chinese state under a lease under the common law land tenure system 
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 transfer of NT was a cession, not a demise
 HKSAR was to be regarded as simply having stepped into the shoes of the British
Hong Kong Government as owner of the land, rather than as a reversioner
 S.30(1) Hong Kong Reunification Ordinance; Art 120, BL
  60-year period under s 7(1) of the Limitation Ordinance did not start to run
afresh on 1 July 1997 for land in the New Territories
 If the court had come to the conclusion that there had been encroachment of the
disputed land for 60 years by 30 June 1997 or even after that date, it would have
held in favour of the plaintiff on the claim for encroachment
o Followed in Lam Man Lau v Secretary for Justice (DC)

(k) The doctrine of encroachment

 Where a squatter is a tenant of a landlord, any possessory title acquired by the squatter during the period of tenancy will
accrue for the benefit of the landlord
 The doctrine of encroachment applies in HK (Lau Wing Hong v Wong Wor Hung)
o But the doctrine was excluded in that case since on the facts, L had disclaimed any right to the land in AP 
doctrine had been excluded

(l) The nature of a possessory title

 A possessory title is NOT a good title
o A squatter did not succeed to or take over the title of the paper owner whom he had
dispossessed (eung Pak Ki v The Estate of Pang Kau, deceased)
o The Limitation Ordinance did not operate as a statutory conveyance of that title to the
squatter (Wong King Lim v Incorporated Owners of Peony House)
o Rather, , a squatter would only be entitled to a declaration that he had acquired `a
possessory title’ to the property (Lai Wai Kuen v Wong Shau Kwong)
 Therefore, a squatter who wish to sell his possessory title should insert a special term in the S&P
o (i) identifying the nature of his title
o (ii) providing that P agrees to raise no objection thereto
 Subject to 2 exceptions:
o Chan Chu Hang Arden v Man Yun Sau, per Le Pichon J:
 (i) where there has been such long uninterrupted possession as to afford a reasonable presumption that
there is an absolute title in fee simple (Cottrell v Watkins)
 (ii) where good title can be traced from the ultimate root down to the date of the defect, uninterrupted
possession as from that date would cure the defect (Re Atkinson and Horsell's Contract)

(m) Rejection of constitutional challenge to possessory titles

 2 significant UNSUCCESSFUL challenges to the constitutionality of the limitation provisions, on the grounds that they
breached Art 6 (right to private ownership) and 105 (no deprivation of property without compensation) of the BL
o Harvest Good Development Ltd v Secretary for Justice;
o Hong Kong Kam Lan Koon Ltd v Realray Investment Ltd (no 5), per Lam J:
 (i) On Art 105: thee right to compensation provided by article 105 was restricted to cases of deprivation
of property by the state  did not extend to cases where paper title owners lost their right to assert
their title against squatters
 (ii) On Art 6: decision of European Court of Justice in JA Pye (Oxford) Ltd v United Kingdom applied
to land which was subject to a system of registered title
 HK: no system of registered title but merely a deeds registration system  depended
ultimately upon possession
  the limitation provisions did not offend the constitutional guarantees laid down in the BL
 Lam J’s judgment further fortified by the European Court of Human Rights in JA Pye holding that the English law on
adverse possession did not violate landowners’ constitutional rights.

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