In Chun Tat Paper Co Ltd v Wong Ip Cheng ([2013] 1 HKLRD 571, CA) W’s predecessor had created an equitable charge ranking behind a legal charge. The predecessor later paid off the legal charge and replaced it with a new legal charge. The predecessor sold the property to W and the replacement legal charge was released. W then granted a legal charge in favour of his bank. W had entered into an agreement to sell the property to C. C’s solicitors raised a requisition seeking evidence that the equitable charge had been released. There was no record of any release of the equitable charge.
The Court of Appeal held that in light of the objective facts known to the parties there was no substance to the requisition and title had been shown to the requisite standard. Kwan JA commented that discharge may be inferred if there is strong evidence pointing to it ([17]). The later legal chargees would not have taken their charges had there been any doubt that the equitable charge had been discharged. Otherwise, there may have been no value left in the property to satisfy the advances made by them. Further, the equitable charge required the chargee’s consent to the creation of any later charges. Common sense and commercial reality pointed to the conclusion that the equitable charge had been released ([23]).
