News & Knowledge

Winland Finance Limited v Gain Hero Finance Limited [FACV 5/2021]


Determining Priority Requires Comparison between Like with Like:

Priority Rules Do Not Apply to Unregistrable Assignment of Future Sale Proceeds

Our Firm’s Managing Partner Alexander Leung led our litigation team with Solicitor Winnie Yuen and Trainee Solicitor Heidi Pang in successfully resisting the final appeal in favor of our client, the Respondent, in Winland Finance Limited v Gain Hero Finance Limited [2022] HKCFA 3. This is the third time our Firm had represented the Respondent in the action, ending the present saga which started in 2017 with a finale in favor of our client. The Court affirmed the two lower courts’ decisions for our client’s charging order over the property to have priority over the unregistrable interests of an assignment of future sale proceeds of the same property.

What is the case about?

The Appellant and our client are creditors of one Mr. Tang, who purchased a property developed under a government housing scheme for civil servants (“the Property”) by virtue of a legal assignment which contained a non-alienation clause, prohibiting him from assigning or charging the Property without consent.

Mr. Tang entered into and subsequently defaulted in the repayment of 2 loan agreements, one with the Appellant, and the other with the Respondent. As these loans could not be secured by any mortgage or charge over the property due to the non-alienation clause, the form of security opted for by the Appellant and our client made a definitive difference in determining the security’s validity and priority. The Appellant had first obtained an assignment of the balance of all future proceeds of sale (“Proceeds”) of the Property; while the Respondent subsequently obtained a charging order over the Property.

What is the issue?

The question before the court was therefore: what is the priority to the sale proceeds of real property as between an earlier equitable assignment of Proceeds and a latter charging order?

What were the lower courts’ rulings?

The Court of First Instance held that as the assignment of Proceeds to the Appellant did not create any interest in or otherwise affect the Property, the Appellant’s loan agreement was not registrable and had to be vacated in the Land Registry. 

The Court of Appeal dismissed the Appellant’s appeal against the decision on the issue of priority as the Appellant’s interest was in a different class from that of the Respondent.


The Court of Final Appeal reiterated that by virtue of section 2(1) of the Land Registration Ordinance, instruments that do not affect land are simply not registrable. Consequentially for such instruments, the provisions in sections 3(1) and 3(2) which govern priority simply have no application. 

The assignment of future sale Proceeds did not give the Appellant any proprietary interest in the Property itself at all and did not affect the Property. It was thus not registrable in the first place. What the Appellant got by virtue of the security was merely an equitable chose in action. Therefore, as the “subject matter” of the earlier assignment of Proceeds and the subsequent charging order over the Property are different, “the equitable principle of ‘first-in-time prevails’ simply has no application.” The Appellant’s entitlement to the proceeds of sale hinged on the judgment debtor’s entitlement to the surplus proceeds, if any, “it must therefore rank last.”

What is the significance?

Where legal assignments of borrowers’ properties contain “non-alienation clauses”, subsequent lenders should be aware of the security it demands. An assignment of future proceeds should not be accepted as a valid form of security as it simply does not affect land and does not give the lender any proprietary interest in the Property itself. In contrast, a prompt registration of a charging order, which is a creature of statute and affects land, is a valid form of security as it gives lenders proprietary interests over the Property itself.

Alexander Leung (Managing Partner)
Winnie Yuen (Solicitor)
Heidi Pang (Trainee Solicitor)
H.Y. Leung & Co. LLP
Hong Kong