This Legal Update outlines a recent Hong Kong Court of First Instance (HKCFI) decision regarding powers of the Land Registrar to withhold registration of instruments.
This decision is particularly relevant to real estate developers, investors, banks and other persons and institutions dealing with landed property seeking to protect their priority in interest in land by registrable instruments – as well as legal practitioners handling those instruments.
The HKCFI granted leave for judicial review and found the Registrar's decision not to register instruments – due to alleged legal issues arising from the instrument – to be ultra vires and thus invalid.
Background
Edmund W.H. Chow & Co., A Firm and Chiu Ching Ki v. The Land Registrar [2023] HKCFI 1269 concerned a transaction whereby a vendor sold and assigned certain land interest to a purchaser.
The sale and purchase agreement was successfully registered in the Land Registry. However, when the purchaser lodged the assignment and mortgage documents for registration after completion (the "2022 Assignment"), registration was withheld by the Registrar.
In correspondence with the purchaser's solicitors, the Registrar explained the reasons for withholding registration as follows:
- The Registrar has doubt as to the vendor's "authority and capacity" to assign the whole of the undivided shares of the property to the purchaser by the 2022 Assignment, due to allegedly "contradictory" drafting of an earlier registered assignment in 1996 (the "1996 Assignment").
- Pursuant to section 23(1)(b) of the Land Registration Ordinance (Cap. 128) (LRO), the Registrar may refrain from registering an instrument that fails to satisfy provisions of the LRO or any regulations made thereunder.
- The Registrar is empowered by regulation 13 of the Land Registration Regulations (Cap 128A) (LRR) to scrutinise every instrument delivered for registration and ensure particulars required by regulation 6 are accurately contained in the memorial thereof. The Registrar's doubt of the vendor's "authority and capacity" gave rise to issues of inaccuracy under regulation 6 of the LRR.
The purchaser and the purchaser's solicitors (the "Applicants") applied for leave to challenge the decision of the Registrar by way of judicial review.
Decision
Judge Russell Coleman held that the purchaser's solicitors did not have sufficient standing to lodge the judicial review, but he found in favour of the purchaser when determining the following issues:
(a) Purpose of LRO and Obligation of Registrar?
Both the Applicants and Registrar did not dispute (and the HKCFI concurred) that (i) the purpose of the LRO was to provide a framework for registration of instruments to prevent secret and fraudulent conveyances; and (ii) the registration system under the LRO was a system for registration of instruments affecting land – but not a system of land or title registration.
The Registrar is obliged to register instruments if:
- they are "registrable", i.e., if the instrument may affect land (section 23(1)(a) LRO);
- comply with all statutory requirements relating to registration (section 23(1)(b) LRO); and
- prescribed fees have been paid (section 23(1)(c) LRO).
The HKCFI held that title issues are not matters touched upon by the purpose of the LRO or powers it conferred to the Registrar. In fact, title issues should be raised by parties interested in the transaction and, if necessary, determined by the Court.
Registration of an instrument cannot perfect or confer title and does not constitute any indication, endorsement or approval as to validity of the legal effect of any such instrument on the part of the Registrar.
Based on correspondence between the parties, the Registrar's unwillingness to register the 2022 Assignment hinges on whether the vendor had good title to convey the whole of the property's undivided shares to the purchaser.
The HKCFI held that it was not the Registrar's function to investigate whether the vendor had good title, as it does not relate to the purpose of the LRO. Such question cannot be determined by the Registrar, and the question would not be affected by registration of the 2022 Assignment.
(b) What Constitutes an "Accurate" Memorial under Section 23(1)(b) LRO and Regulation 13 of LRR?
The HKCFI also clarified the interpretation of the regulations reviewed under section 23(1)(b) of the LRO – specifically what constitutes "accuracy" under regulation 13 of the LRR.
"Accuracy" of particulars in the memorial is not tied to the actual legal effect of the instrument, or the title in land. Instead, a memorial serves as the secondary evidence of the instrument it describes – it should correspond with what is provided in the instrument. Therefore, the HKCFI held that a memorial is "accurate" if it acts as a faithful summary of what's stated in the instrument.
For this reason, the Land Registry Scrutineer suggesting the Applicants amend the 2022 Assignment memorial to reflect the number of undivided shares in the 1996 Assignment would be counter to the role of a memorial as a secondary evidence of the instrument, and provide a misleading record as to what was stated in the 2022 Assignment.
(c) Can Registrar Look beyond Delivered Registration Instrument to Determine Registrability?
While discussing the above issue on "accuracy", the HKCFI elucidated whether the Registrar may investigate instruments beyond the one delivered for registration when deciding whether to register the instrument.
The HKCFI held that whether the specific instance of investigating other instruments falls within the Registrar's powers would depend on the purpose for such an investigation:
- Where the purpose for such investigation is to identify the specific property mentioned in the instrument, it would be permissible as it meets the requirement of determining whether the instrument truly "relates to land" (section 23(1)(a) LRO) and sufficiently describes the land and premises (section 23(1)(b) LRO and regulation 6(1)(c) and (d) LRR). Examples include ascertaining registrability of death certificate, i.e., determining whether a deceased was a joint tenant immediately prior to death, and checking if properties listed in the particulars of probate or letters of administration are in fact land held by the deceased.
- But where the purpose for such investigation is to determine the legal effect of the instrument or title, it would not be permissible to consider other instruments.
As such, the HKCFI held that the Registrar's consideration of the 1996 Assignment to determine the legal effect in the 2022 Assignment did not fall within the Registrar's function and powers.
(d) How Can Registrar Protect against Section 23A LRO Liability?
The Registrar's counsel referred to section 23A of the LRO, which provides that the Registrar shall be liable in damages if she negligently or wilfully fails to comply with section 23 LRO.
On this point, the HKCFI considers that the Registrar would be exempted from liability if the Registrar registers the instrument in good faith, and noted the Applicants' suggestion that when registering instruments the Registrar may register the instrument with a remark to alert the public. Anyone interested in the relevant property can then make their own determination after reviewing the remark and take legal action if necessary.
Implications
Given the increase in comments from the Registrar on instruments delivered for registration in recent years, this decision should be welcomed by legal practitioners – as it provides greater clarity on Hong Kong's Land Registration System, as well as the Registrar's functions and duties.
This decision clarifies the distinct roles of the Registrar and the Court in the system, with the determination of legal effect and title remaining exclusively in the hands of the latter.
Those seeking to register instruments in the Land Registry will be comforted to know that title issues in previously registered instruments would not come to haunt the registration of new instruments.
Additionally, should the Registrar adopt the suggestion of the HKCFI, parties should experience fewer delays in the registration process and be able to better protect their priority by land registration. The decision also confirms that the Land Registration System in Hong Kong remains a deed registration system, which is yet to be changed by the Land Title Ordinance.
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This Mayer Brown article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.
