The Judicial Committee of the Privy Council Decisions

Privy Council Appeal No. 3 of 1996

 

(1) Wu Koon Tai and

(2) Wu Koon Lun Appellants

v.

Wu Yau Loi Respondent

 

FROM

 

THE COURT OF APPEAL OF HONG KONG

 

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JUDGMENT OF THE LORDS OF THE JUDICIAL

COMMITTEE OF THE PRIVY COUNCIL,

Delivered the 10th October 1996

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Present at the hearing:-

Lord Goff of Chieveley

Lord Browne-Wilkinson

Lord Slynn of Hadley

Lord Cooke of Thorndon

Sir Ralph Gibson

  ·[Delivered by Lord Browne-Wilkinson]

 

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1. This appeal concerns the ownership of land and a small dwelling in the New Territories of Hong Kong, Lot 112b in Demarcation District No. 385.  It raises questions concerning the interaction between the system of land registration and conveyancing introduced when the New Territories were leased to Great Britain under the Peking Convention of 1898 and customary Chinese law affecting lands in the New Territories.

 

2. Before turning to the facts of this case, it is convenient to set out in outline the land law applicable in the New Territories.  When the New Territories were acquired, all laws and Ordinances in force in the Colony of Hong Kong were applied to the New Territories by proclamation.  Subject to one important exception, the land law in force in Hong Kong was broadly the same as English law. By section 7 of the Supreme Court Ordinance, 1873, the laws of England as at 5th April 1843 were applicable "except so far as the said laws are inapplicable to the local circumstances of  the Colony or of its inhabitants, and except so far as they have been modified by Laws passed by [the Colony's] legislature".

 

3. The basic English law affecting land had been varied in one important particular, namely by the introduction of a system of registration by the Land Registration Ordinance, 1844, which (as amended) is still in force.  The system is called land registration, but is in fact a system of deeds registration.  The Ordinance provides, by section 2, for the registration of deeds, conveyances and other documents affecting land.  Section 3 provides that all registrable deeds are to have priority according to their dates of registration.  Deeds which ought to be registered but have not been are not declared to be generally void.  However section 3(2) provides that they shall be absolutely null and void as against "any subsequent bona fide purchaser ... for valuable consideration" of the land. Section 4 provides that the priority of any registered instrument is not to be affected by notice, whether actual or constructive, of any prior unregistered deed or other instrument in writing.

 

4. Pausing at this point, subject to specific legislation to the contrary effect, English law both written and unwritten as at 1843 is applicable in Hong Kong (including the New Territories) so far as it is compatible with the circumstances in Hong Kong.  Thus the English law of contract and the rules of equity (including the right to specific performance) are applicable.  Any document affecting land is registrable and, if not registered, is void against the bona fide purchaser of the land for value.  However, there is nothing in the legislation so far addressed to render void any contract for the sale of land otherwise than as against a purchaser for value.

 

5. The basic land law of Hong Kong was modified in relation to the New Territories.  First, all land in the New Territories was declared to belong to the Crown for the duration of the 99 year lease granted by the Peking Convention of 1898.  In consequence, all land in the New Territories has thereafter been held under grant (usually by way of lease) from the Crown.  After the Peking Convention the land of the New Territories was surveyed. A land court was established to determine all claims to land.  The New Territories Land Ordinance 1905 made certain alterations to the system of land registration in broadly the same terms as those subsequently contained in the New Territories Ordinance, 1910, (Cap. 97) which is still in force.

 

6. Part II of the 1910 Ordinance (as amended) deals with land in the New Territories only. It makes certain modifications to the machinery of registration of documents and by section 12 confers jurisdiction   on  the  High Court  and  the District  Court  to

determine all disputes at law or in equity relating to the land in the New Territories. Section 13 then provides:-

"In any proceedings in the High Court or the District Court in relation to land in the New Territories, the court shall have power to recognize and enforce any Chinese custom or customary right affecting such land."

 

7. Section 17 deals with succession to land on death, providing a method of transfering the title to land on death without the necessity for the grant of probate or letters of administration.  It provides:-

"17. In the event of the death of any person in whose name any land is registered otherwise than as a manager, if no grant of probate or administration of the estate of the deceased is made by the High Court within 3 months after such death, the Land Officer, on ascertaining the name of the person who is entitled to such land in succession to the deceased person (hereinafter called the successor), and on being satisfied that any estate duty which may be due has been paid, shall register the name of the successor, and upon such registration being effected the said land shall vest in the successor for all the estate and interest of the deceased person therein, or for such estate and interest as shall be entered on the register by the Land Officer against the entry of the name of the successor.  On the registration of a successor, the fees fixed by regulations shall be paid to the Land Officer by the successor, but no probate fees shall be payable, anything in the Probate and Administration Ordinance (Cap. 10) to the contrary notwithstanding.  The registered successor shall be liable for the debts of the deceased in the same manner and to the same extent as if a grant of probate or administration had been made to him."

 

8. Against that background, their Lordships turn to the facts of this case.  In 1905 a lease of the land in question was granted to Wu Cheong U ("the Father").  The Lease was duly registered.  The Father died on 7th September 1921.  Under the customary Chinese law of succession his son Wu Hung Chi ("the Son") succeeded to the whole estate of the Father, including the land.  The Son was never registered as successor to the Father under section 17 of the 1910 Ordinance: it is that omission to register which raises the central problem in this case.

 

9. On 8th September 1934 the Son entered into a transaction to sell the land to Wu King Yip ("the Purchaser") for $200.  The transaction was carried through by a document in Chinese ("the 1934  document").   That  document is not signed by either the

10. Son or by the Purchaser but only by a middle man.  The 1934 document, in translation, reads as follows:-

"Conveyancing on Sale of Tiled House

  Maker of instrument for absolute sale of tiled house Hung Chi having in previous years succeeded to one tiled house [which is then described].  Now being short of money for use, (he) himself was willing to sell (the house) to people.  (He) called upon his brothers. None was prepared to take. Through the introduction of middleman, King Yip was first in agreeing to purchase.  This day (the parties) arrived at the house for a site inspection. After negotiation in person among the middleman three parties, it was determined that the current market price was Dollars Two Hundred Only.  This day the price and conveyance were delivered to each other clearly without any shortfall. Nor was there anything in the nature of a prior mortgage and subsequent sale.  Since completion of the sale, this house will be up to King Yip to repair and live in.  People such as uncles and nephews of Hung Chi cannot say otherwise or cause trouble and repudiate, trespass, resist etc.  Just like severed rattan, one stroke of the pen (is) forever and can never be recalled.  This is the will of both parties.  There is no compulsion or coersion.  For fear that words of mouth bear no evidence, (this) instrument of absolute sale of tiled house is made as proof.  (sd.) illegible/mark."

 

11. The expert evidence which was not challenged at the trial was that, in Chinese law, the document operated as a transfer of the land to the Purchaser.  The 1934 document was not registered but the evidence showed that the Purchaser was allowed into possession and for many years he and his successors occupied the land or were in receipt of rent for it.

 

12. The Son died at some time during the 1940's without, as has been said, ever having been registered under section 17 as successor to the Father.  On the death of the Son, Wu Shang ("the Grandson") succeeded to the estate of the Son and, through the Son, to the estate of the Father.  In 1951 the Grandson was registered under section 17 as successor to the Father. It is to be particularly noted that the Grandson was not registered as successor to the Son since the Son had himself never been registered.  The Grandson died in 1962 and Wu Yau Loi ("the defendant") succeeded to the Grandson's estate and was duly registered under section 17 as such successor to the land.

 

13. The Purchaser died in 1991 and the plaintiffs succeeded to his estate.  The plaintiffs' evidence, which the judge accepted, was that the  Purchaser (and  after  his death the plaintiffs) had been in

possession either of the land itself or of the rents relating to it since 1934. Notwithstanding this, the defendant started proceedings for possession under R.S.C. (Hong Kong) Order 113. That in turn led to the commencement of these proceedings in which the plaintiffs, as successors to the Purchaser, claim to be entitled to the land in consequence of the sale to the Purchaser in 1934.

 

14. Broadly, the plaintiffs put their claim in three alternative ways, viz.

 

1.That under section 13 of the 1910 Ordinance the court should give effect to the 1934 document as being, under Chinese law, a valid conveyance;

 

2.The 1934 transaction gave rise to a contract or trust enforceable, as a matter of ordinary Hong Kong law, against the defendant as successor to the vendor, the Son;

 

3.That the Purchaser acquired title by adverse possession.

 

15. The judge, H.H. Judge Wong, held that under Chinese customary law the land had been validly sold and conveyed to the Purchaser and that, under section 13 of the 1910 Ordinance, he should give effect to such customary law.  He achieved this result by holding that the Son and his successors held the land in trust for the Purchaser.  He did not expressly decide the other two points.

 

16. The Court of Appeal allowed the defendant's appeal by a majority.  Litton V.-P. and Mayo J.A. held that since the Son had never taken a grant to the Father's estate or been registered under section 17 as successor to the Father, the land had at no time been vested in him.  The land passed directly from the estate of the Father to the Grandson.  In consequence, the land could never have been held in trust either by the Son or by the Son's successors.  Under section 17 of the 1910 Ordinance what became vested in the Grandson was "all the estate and interest" of the Father.  Therefore any disposition of the land by the Son was ineffective.  Chinese customary law could not override these requirements of the general law. The majority did not in terms consider a claim based on the 1934 document being a contract but indicated that in any event section 3 of the Conveyancing and Property Ordinance (Cap. 219) was fatal to such a claim.  Section 3 reproduces the old requirement of the Statute of Frauds 1677 that no action shall be brought on a contract for the sale of land unless it be in writing or evidenced by a memorandum signed by the party to be charged.  Section 3(2) preserves the doctrine of part performance. As to the claim based on adverse

possession, the majority held that the trial judge had not made sufficient findings of fact to determine the issue and referred the matter back to another district judge for determination.  Liu J.A., whilst agreeing that section 13 of the 1910 Ordinance could not operate so as to allow Chinese customary law to override the statutory formalities applicable to land, held that there was a specifically enforceable contract by the Son to sell the land to the Purchaser.  There was sufficient part performance of this contract to make it enforceable and the right to specific performance of that contract was enforceable against the Grandson and his successors.

 

17. The plaintiffs appeal to their Lordships' Board against the decision of the majority.

 

The 1934 document as a Conveyance.

Mr. Goudie Q.C., for the plaintiffs, sought to uphold the decision of the trial judge by an argument along the following lines.  It was uncontraverted that, under Chinese customary law, the 1934 document operated to convey (i.e. to transfer the title) to the Purchaser. Notwithstanding the failure of the Purchaser to register the 1934 document or to comply with other statutory provisions affecting the transfer of land in the New Territories, the court can and should give effect to the applicable Chinese customary law since section 13 of the 1910 Ordinance either authorises or requires the court so to do. Accordingly, the 1934 document transferred the title to the land to the Purchaser in 1934, whereupon it ceased to form part of the estate of the Father or to belong to the Son.  Therefore it could not have vested in the Grandson when he was registered as successor to the Father.

 

18. Their Lordships reject those submissions.  It is plain that, after the Peking Convention, the whole system of land tenure in the New Territories was fundamentally altered.  Leases from the Crown were substituted for old titles under the pre-existing law.  A system for deducing title to such leases was imposed, dependent upon the registration of deeds.  To allow the old customary land law to cut across and to trump the new system would be to defeat its whole purpose.

 

19. This view is supported by the provisions of sections 15, 16 and 17 of the 1910 Ordinance which expressly modified the general system of registered conveyancing to take account of special Chinese institutions.  Section 15 deals with the case where lands belong, under Chinese law, to a clan or family; it provides for a manager of such lands to be registered, he having full power of disposition of all the family lands. Section 16 also deals with family lands.  Section 17 is directed to dealing with the problem of  succession on  death.  It recognises that under Chinese law,

which is to continue to regulate rights of succession, it is improbable that the full procedure of taking a grant of probate or letters of administration will be followed.  It provides for the registration of the successor to the land and the vesting of the land in the registered successor.

 

20. In their Lordships' view, the devolution of title to land in the New Territories, whether by inter vivos transaction or on death, is regulated by the registration system and the general law of Hong Kong.  It follows that in the present case title to the land was never vested in the Son since, although entitled to be registered as successor to the Father, the Son was never in fact so registered.  It follows that the Son cannot have transferred title to the Purchaser by the 1934 document.  The title to the land was vested by virtue of section 17 directly in the Grandson when, in 1951, he was registered as successor to the Father.  The title to the land is now vested in the defendant.

 

The case based on contract.

Although the 1934 document cannot operate so as to transfer title to the land, it is quite clear that in 1934 the Son did enter into a contract to sell the land to the Purchaser for $200.  The 1934 document itself records that agreement between the parties.  The question is whether that contract is now enforceable against the defendant, as owner of the title to the land.

 

21. The first point to note is that Mr. Oliver Q.C., for the defendant, does not rely on the Limitation Ordinance (Cap. 347) as a defence, presumably because the claim is one to enforce a contract for the purchase of land brought by a purchaser who has been in possession.

 

22. Mr. Oliver does, however, contend that the contract is not enforceable on a number of other grounds.  First, he relies on section 3 of the Conveyancing and Property Ordinance since there is no written contract or memorandum in writing signed by the Son. (The plaintiffs do not contend that the only signatory of the 1934 document, the middle man, was a duly authorised agent of the Son for that purpose).  However, section 3(2) preserves the doctrine of part performance. Their Lordships consider that there are the clearest possible acts of part performance by the Son in this case.  He received the purchase price (as the 1934 document records) and gave possession of the land to the Purchaser who thereafter retained it.

 

23. Next Mr. Oliver relied on the principle of English law that, whilst the estate of a deceased person is in course of administration, no beneficiary under the will or intestacy has any

beneficial interest in any specific asset of that estate: he has only

a right to have the estate duly administered: Lord Sudeley v. Attorney-General [1897] AC 11.  Therefore, Mr. Oliver submits, since in 1934 the land was part of the estate of the Father, the Son could not validly contract to sell the land as a specific item of property.  Even assuming (without deciding) that the principle in Sudeley has any application to a case such as the present where, as is common ground, succession on death is regulated by Chinese law, the argument is unsound both factually and legally.  The Son did not purport to sell the land until 13 years after the death of the Father.  In the absence of any evidence to the contrary, the correct factual inference must be that after that lapse of time the estate of the Father had been fully administered and the Son was entitled to land in specie by implied assent. Even if, contrary to this view, the estate of the Father had not been administered by 1934, there can be no doubt that it has at some time been administered.  In principle, there is no reason why a devisee of land comprised in an unadministered estate cannot enter into a binding contract to sell that land. True, until completion of the administration and the vesting of the property in the devisee, the devisee cannot convey the land in specie.  But their Lordships were referred to no authority to suggest that such devisee cannot validly contract to sell the land at a time when his interest is a mere chose in action or expectancy.  Their Lordships can see no distinction in principle between such a contract and a contract for value to assign a future chose in action.  As and from the date when the chose in action comes into existence, the contract becomes specifically enforceable.

 

24. The position therefore was that, at the date of the death of the Son, the land was subject to a specifically enforceable contract of sale i.e. to an equitable right. If, contrary to the facts, on the death of the Son his estate had been dealt with in the traditional way, the Grandson would have had to take a grant to the Son's estate and the title to the land would have vested in the Grandson on such grant.  The equitable right of the Purchaser in the land under the contract of sale would have been specifically enforceable against the land vested in the Grandson as the personal representative of the Son and against all those taking the land as successors to the Son: all would be volunteers.  Therefore if a grant had been taken to the Son's estate, the 1934 contract would have been enforceable against the defendant as successor, via the Grandson, to the estate of the Son.

 

25. But the Grandson did not take a grant of representation to the Son's estate, relying instead on the alternative procedure provided by section 17 of the 1910 Ordinance.  The only real question in this case is whether section 17, on its true construction, operates to defeat a claim to specific performance against the land which would, under ordinary procedures, be an enforceable claim.

 

26. The basic structure of section 17 is clear.  When no grant of representation to the estate of the deceased is taken out within three months of the death, the person proved to be the successor of the deceased can obtain registration.  Upon registration the "land shall vest in the successor for all the estate and interest of the deceased person therein".  The registered successor is made liable for the "debts of the deceased in the same manner and to the same extent as if a grant" had been made to him.  In the ordinary case of direct succession, the section 17 procedure for vesting land on death would make no difference: the registered successor is made liable for the debts of the deceased which, in this context, must include liabilities of the deceased's estate.  But in this case the Grandson, although only entitled to the land by virtue of being successor to the Son and the Son being the successor to the Father, obtained registration as direct successor to the Father, i.e. all reference to the interposition of succession to the Son slips out.  Therefore, it is argued, in a case like this where there is an unregistered successor (the Son), section 17 operates so as to make the ultimate registered successor (the Grandson) liable only for the obligations of the deceased (the Father) and vests in the ultimate registered successor the estate owned by the deceased, all transactions entered into in the meantime by the unregistered intermediate successor (the Son) being overridden.

 

27. Their Lordships find it difficult to accept that section 17 can operate so as to defeat the claims of third parties against the estate of a person who dies without having been registered under section 17.  But it is unnecessary to decide that point in the present case.  Let it be assumed that, on registration as successor to the Father, there vested in the Grandson title to the land "for all the estate and interest of" the Father.  Even so, there is nothing in the section which provides that such estate is to be taken free of all rights which are specifically enforceable in equity against that land.  The right of the Purchaser and his successor (the plaintiffs) to enforce their equitable interest in the land depends upon the right to specific performance against the Son being enforceable against any subsequent holder of the land other than a bona fide purchaser for value.  If the Grandson had sold the land to a bona fide third party, the equitable right of the Purchaser would have been defeated.  But since the land has not been sold to a third party but is held by someone taking as a volunteer through the Son, the Purchaser's equitable right in the land is enforceable against the present owner of the title, i.e., the defendant.  The fact that the land never vested in the Son during his lifetime does not mean that the equitable right in the land created by the Son's contract is not enforceable against the person in whom the legal title is vested as successor to the Son.

 

28. Their Lordships will therefore humbly advise Her Majesty that the appeal should be allowed, that it should be ordered that the defendant do forthwith vest the title to the land in the plaintiffs and that the defendant do pay the plaintiffs' costs both here and in the courts below.  The plaintiffs should have liberty to apply to the District Court, if necessary, for the further enforcement of their rights.

 

© CROWN COPYRIGHT as at the date of judgment.