LIGHT OCEAN INVESTMENTS LTD. AND ANOTHER v. ENWAY DEVELOPMENT LTD.

HEADNOTE

Object and construction of s.15 of the New Territories Ordinance (Cap. 97) - effect of agreement to sell t'so land by managers prior to registration of their appointment and without consent of the Land Officer - whether agreement by putative purchasers binding upon sub-purchasers in particular regard to the nature of the title proffered.

IN THE COURT OF APPEAL

1993, No. 188
(Civil)

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J U D G M E N T

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Nazareth, J.A.:

1. On 17th October 1992, the respondent, Enway Development Limited ("the purchaser") entered into two separate agreements to purchase land at Yuen Long in the New Territories. One agreement was with Light Ocean Investments Limited, the 1st defendant, and the other with Silver Wall Investment Limited, the 2nd defendant. I shall refer to those agreements as "the principal agreements" and to the defendants as the "vendors" as they are in the judgment appealed against.

2. The transactions with which the principal agreements were concerned were substantial; the purchase price was $152,974,080 and the deposits paid totaled $38,243,520. In the same general context, the purchaser also wished to acquire other pieces of land which here and below were referred to as the "ancillary lots". In that connection each of the principal agreements contained a clause 32 in identical terms.

Its material terms were, as are agreed before us, accurately summarised by the judge in the following way:

"32. The Vendor hereby warrants that ... the Vendor ... shall be able to enter into a binding Agreement for Sub-Sale and Purchase with the Purchaser for the sale of the properties ... to the Purchaser and shall do so ... within a period of six (6) months from the 29th September 1992. The Purchaser agrees to enter into the Agreement(s) for Sub-Sale and Purchase ... with the Vendor upon receipt of fourteen (14) days' prior written notice from the Vendor. The Purchaser shall pay 25% of the purchase price ... to the Vendor as deposit upon the signing of the Agreement(s) for Sub-Sale and Purchase ... It is specifically provided that as the Vendor shall sell the said lots to the Purchaser as Confirmor, the completion for sale and purchase shall take place on the same day as specified in the principal agreement(s) between the Vendor and the registered owner(s). If the Vendor shall fail to produce sufficient documentary evidence showing that it is able to do so within the said period of 6 months .... this Agreement shall be absolutely terminated upon written notice served by the Purchaser on the Vendor ..."

Time was in every respect to be of the essence.

3. Of the ancillary lots two were of the properties of t'sos and accordingly subject to s.15 of the New Territories Ordinance (Cap 97), which applies to a t'so as well as to a t'ong, and reads as follows:

"15. Registration of manager of "t'ong", etc.

Whenever any land is held from the Crown under lease or other grant, agreement or licence in the name of a clan, family or t'ong, such clan, family or t'ong shall appoint a manager to represent it. Every such appointment shall be reported at the appropriate New Territories Land Office, and the Land Officer on receiving such proof as he may require of such appointment shall, if he approves thereof, register the name of the said manager who shall, after giving such notices as may be prescribed, have full power to dispose of or in any way deal with the said land as if he were sole owner thereof, subject to the consent of the Land Officer, and shall be personally liable for the payment of all rents and charges and for the observance of all covenants and conditions in respect of the said land. Every instrument relating to land held by a clan, family or t'ong, which is executed or signed by the registered manager thereof in the presence of the Land Officer and is attested by him, shall be as effectual for all purposes as if it had been executed or signed by all the members of the said clan, family or t'ong, The Land Officer may on good cause shown cancel the appointment of any manager and select and register a new manager in his place...."

4. In the present case, the manager of the land of one of the two t'sos mentioned died. The members of the t'so appointed three managers to replace him. The Land Officer was notified and approved the appointments on 22nd March 1993. However, the appointments were not registered until 1st April 1993. Before that, on 28th March 1993, the managers agreed to sell certain parcels of the ancillary lots to Important Plan Limited. The latter on the same day agreed to sell those parcels to Light Ocean Investments Limited. On 1st April 1993, the managers applied for the Land Officer's consent to sell those parcels. Consent was given on 19th July 1993.

5. On 28th March 1993 the vendors' solicitors had written to the purchaser's solicitors, calling on the purchaser to complete. The purchaser's solicitors replied on 29th March 1993 which was the date by which the sub-sale and purchase agreement had to be entered into (six months from 29th September 1992 provided in clause 32) rejecting the principal agreements as meeting clause 32 because, inter alia, the Land Officer had not consented to the sale. On 30th March 1993 they terminated the agreements and sought the return of the deposits, which was refused. So the matter came before Godfrey J (as he then was) upon an originating summons issued by the plaintiff seeking, inter alia, a declaration that it was not bound to complete the principal agreements, that it had lawfully terminated them, and seeking refund of the deposits with interest.

6. In his judgment, Godfrey J noted that the purchaser's contention was that "on 29th March 1993, the vendors were not able to enter into a binding agreement for sale and purchase with the purchaser for the 'sale of the relevant land'", adding that "if this is right, ... it follows that the vendors would have been unable on that day to produce sufficient documentary evidence that they were in fact able to do so". He went on to hold that the question which he had to decide on the facts was a question of construction "whether on 29th March 1993, the vendors were 'able to enter into a binding agreement for sale and purchase with the purchaser for the sale of the relevant land". He pointed to the vendors' reliance on the two agreements made on 28th March 1993 as agreements which on completion would have brought to them title to the relevant land. He continued at p.4 of his judgment:

"In my judgment on its true construction, clause 32 required the vendors to have been able to demonstrate to the purchaser by 29th March 1993 at the latest that the persons from whom they were themselves purchasing had at that date a good title to the relevant land. If the condition was not, on that date, satisfied, it would be too late for the vendors to show that they could have satisfied the condition immediately after that date: compare Aberfoyle Plantations v. Cheng [1960] AC 115.

The vendors contend that it was sufficient, for the purposes of clause 32, that they were able on 29th March 1993 to establish that they did have the benefit of a legally binding agreement with the vendors named in the agreements of 28th March 1993. The vendors were prepared to accept that, on 29th March 1993, they could not have obtained a decree of specific performance of their contracts to buy the relevant land; but say correctly that they could have issued proceedings for that relief (compare Marks v. Lilley [1959] 1 WLR 749; Hasham v. Zenab [1960] AC 316).

I reject the vendors' contention. It is clear on the face of the agreements (and I am not prepared to look further than this) that the purchaser was seeking to assemble a site for development, including the ancillary lots; and was anxious to ensure that the position would crystallize no later than 29th March 1993. On that day, however, no one could have been certain whether or when the registration of the managers of the t'so would be effected, and no one could be certain whether the Land Officer would, necessarily, consent to the sale by the managers (when registered) of the relevant land.

In my judgment, clause 32 contemplated that the vendors were to be able to show, on 29th March 1993, that they had a legal or equitable right to a good title to the relevant land, and to compel a conveyance or assignment of such a title to the purchaser. But in fact the ability of the vendors to show such a title was dependent (1) on the registration of the three approved persons as managers; and (2) on their having obtained the consent of the Land Officer to the relevant sale. In these circumstances, the title shown on 29th March 1993 was not on that date a good title, but one liable to be impeached if the registration or consent was not forthcoming.

It follows if that construction of clause 32 is correct that the purchaser was entitled to terminate the agreements, as it did; and is now entitled to the return of its deposits."

Godfrey J ordered accordingly. The vendors appealed.

7. Mr Charles Ching, Q.C. who, with Mr Thomas Lai, appears for the vendors, submits that Godfrey J erred in two primary respects:

(1) in holding that registration of the managers is a prerequisite to their exercising their powers under s.15; and

(2) in holding that prior consent of the Land Officer to the sale was required.

These errors, his submission ran, led to the judge's conclusion that the vendors were not able to show that they had a right to a good title.

8. Turning to the former, Mr Ching submits that s.15 does not predicate the managers' powers upon registration; registration may become relevant when the question of title comes to be dealt with, i.e. upon conveyance; the section simply provides that the Land Officer, if he approves of the appointment, shall register their names; it may well be that at the time of the conveyance the purchaser will require that the vendor has been registered so that it will be easier to prove title; but that the registration of itself confers no powers, equally the lack of registration does not detract from any powers. He submits that the registration is only an administrative act to assist in proving title and that what is important is the appointment of the manager and the approval of that appointment.

9. The fact that appointment and the approval of appointment as a manager is the more important part of the process does not mean that registration should therefore be disregarded. That cannot be so in the face of the plain meaning of s.15, and the important place registration has in the scheme of s.15 and in securing its object. That object must include the protection of the property rights of its members and the facility provided to all concerned to ascertain the relevant position by simple inspection of the land register.

10. The only authority on the point that Mr Ching referred to is Lai Chi Kok Amusement Park Company Limited (No.1) v Tsang Tin-sun and others [1965] HKLR 413 at 424 in which it seemed to Blair-Kerr J that "upon the Land Officer registering the appointment, the manager is in the position of a trustee for sale [and] he has 'full power to dispose of or in any way deal with' land". It is submitted by Mr Ching that this view which runs counter to his contention, is obiter; be that as it may, it seems to me that Blair-Kerr J was right in his view. It accords with the view of Rigby J in Lai Chi Kok Amusement Park (No.2) v Tsang Tin -sun [1966] HKLR 124 at 138 where he stated:

"...and the Land Officer ...shall register the name of the said manager; ... Thereafter, the registered manager shall, subject to the consent of the Land Officer, have full power to dispose or in any way deal with the land ...".

In my judgment Godfrey J was right in holding that the vendors' ability to show good title was dependent on the registration of the three approved persons as managers.

11. I turn then to Mr Ching's other ground relating to consent. He argued, and I think rightly in general, that some sort of agreement has to be made before consent is secured. Managers whose appointments have been approved, although not yet registered can, he contended, enter into binding agreements to sell t'so land without the prior consent of the Land Officer, notwithstanding that specific performance of such agreements could not be obtained.

12. The short answer to those submissions is that while a sale and purchase agreement entered into by a vendor who does not have title, and may even have uncertain prospects of obtaining title, is valid in the sense of making him liable to damages for breach, that is clearly not the sort of binding agreement or title contemplated in the principal agreements. For instance, it is clear from clause 32 that the completion of the agreement for sale and purchase by the vendors must take place on the same day as specified in the principal agreement between the vendors and the registered owners. It is therefore implicit from that and the agreement generally that the vendors had to show (by 29th March 1993) they had a legal or equitable right to good title to the relevant land and to compel the assignment of title to such land, as the judge held.

13. As to the nature of conditions generally, whether the condition was a condition subsequent or precedent, and conditional agreements in the context of registration and the consent of the Land Officer, and whether or not they were mere matters of title (to all of which the submissions flowed), I do not find myself assisted any more than Sachs LJ did in Property & Bloodstock Ltd v Emerton [1968] 1 Ch 94 at pp.120-122. The principles as to what period of time within such conditions are to be performed, propounded by Lord Jenkins in Aberfoyle Plantations v Cheng [1960] AC 115 at p. 124 (upon which Mr Ching also relied) were expressly stated by him to be subject to the overall consideration that the answer depended upon the true construction of the agreement, i.e. the intention of the parties as expressed in the language they used. That intention is here clearly stated, i.e. in effect as completion on 29th March 1994 if not earlier. I therefore do not find it necessary to rely upon the condition being a condition precedent in the Aberfoyle sense, notwithstanding the convincing submissions made in that regard by Mr Tang, Q.C. who, with Miss Maria Yuen, appeared for the purchaser. Nor is it necessary to address conditions and their effect in the first place.

14. I would add that, approaching the matter from the different direction of simple statutory construction, consent is on the plain meaning of s.15 necessary, and cannot be dismissed as surplusage or insignificant, given the object of the legislation as explained by Briggs J (as he then was) in Lai Chi Kok Amusement Park Company Limited (No.2) and Tsang Tin-sun [1966] HKLR 124 at 130.

15. Addressing the foregoing matters as at the 29th March 1993, clearly the managers were not registered. Equally, consent had not been obtained and the prospect of obtaining it was no better than uncertain. Plainly the vendors had not demonstrated on the 29th March 1993 that they had legal or equitable right to a good title and to compel a conveyance or assignment of title. Godfrey J was therefore right in his conclusions that the purchaser was entitled to terminate, and entitled also to return of its deposits.

16. In deference to Mr Ching's other submissions I would mention in addition that I do not accept that clause 32 is ambiguous, nor that a history of the New Territories Ordinance shows that registration is no longer a requirement additional to approval of appointment. Likewise as to his submission that it was inequitable that the purchaser should be able to retain land that the vendors had transferred and yet refuse to complete in relation to the t'so land, it appears that this was not a matter that was raised before Godfrey J. In addition it seems to me that what is complained of is the plain effect of the provisions of the principal agreements.

17. I would accordingly dismiss the vendors' appeal and make an order nisi that the purchaser is to have its costs of the appeal.

Litton, J.A.:

18. This case is concerned with the proper construction of a Sale and Purchase Agreement dated 17 October 1992 under which the appellants (vendors) agreed to sell various lots in Yuen Long to the respondent (purchaser). The provision in question is Clause 32 which deals with some ancillary lots which the purchaser also wished to buy. We are concerned with two of the ancillary lots: Lots No. 906 and 907. Those lots belonged to a T'so. Hence the difficulties which have arisen.

Section 15 New Territories Ordinance

19. Section 15 of the New Territories Ordinance governs the right of sale of T'so land. It is plain from the terms of section 15 that until a manager has been registered as such in the appropriate New Territories land office, the legal estate to T'so land cannot pass to the purchaser. This is underlined by the clause in section 15 which says:

"Every instrument relating to land held by a clan family or t'ong which is executed or signed by the registered manager thereof in the presence of the land officer and is attested by him shall be effectual for all purposes as if it had been executed or signed by all members of the said clan family or t'ong".

20. Every sale of T'so land effected by the manager is subject to the consent of the land officer. This does not mean that if a manager, duly appointed, enters into an agreement for sale of T'so land, before the appointment is actually registered, the transaction has no contractual content and effect as between him as vendor on behalf of the T'so and the other party as purchaser. If the manager is subsequently registered and the land officer consents to the sale, the manager can pass a good title to the purchaser. Subject to any question of time limits for completion etc. the parties can then obtain orders for the specific performance of the agreement against each other.

Conditional sale

21. What it boils down to in my judgment is this: where a manager of T'so land has been duly appointed, but before his appointment as such has been registered in the land office, and before the consent of the land officer has been given to the sale, any agreement for sale entered into by the manager can, at best, only be a conditional sale. Until he is registered as manager, and consent for the sale has been given, he cannot pass a good title to the purchaser.

22. Of course, a conditional agreement can become unconditional and if this happens then all the legal rights and liabilities embodied in the contract will follow, including the right to obtain specific performance. This proposition is illustrated by the cases to which Mr. Charles Ching QC, counsel for the vendor, has referred to in argument : for instance, Aberfoyle Plantations v. Cheng (1960) AC 115, Patel v. Permabhai (1954) AC 35, Denning v. Edwardes (1961) AC 245 and Property and Bloodstock Limited v. Emerton (1968)1 Ch. 94.

23. The question for our determination, ultimately, is not whether Mr. Ching is right in the submissions summarised above. Assuming that he is right, the question is simply this: upon the undisputed facts in this case, is the purchaser entitled pursuant to Clause 32 of the agreement to terminate the agreement and have its deposit refunded?

Clause 32 Sale and Purchase Agreement

24. Under the Sale and Purchase Agreement, the ancillary lots in question, Lots No. 906 and 907, come into the picture in this way. There is a reference in Clause 35 of the Agreement to those lots which, together with the principal lots, are said to be situated within a Comprehensive Development Area according to the Yuen Long Outline Zoning Plan No. S/YL/1. Then comes Clause 32 which contains, first of all, a warranty by the vendor that it shall be able to enter into a binding agreement for the sale of the T'so lots to the purchaser by not later than 29 March 1993. After dealing with the obligations of the purchaser to pay, Clause 32 goes on to provide for completion as follows:

"It is specifically provided that as the vendor shall sell the said lots to the purchaser as confirmor, the completion for sale and purchase shall take place on the same day as specified in the principal agreement between the vendor and the registered owner. If the vendor shall fail to produce sufficient documentary evidence showing that it is able to do so within the said period of six months ... this agreement shall be absolutely terminated upon written notice served by the purchaser on the vendor."

25. Plainly, the parties contemplated that by not later than 29 March 1993 there would be a binding agreement between the vendor and the registered manager of the T'so, without which the vendor in its turn would not be able to enter into a binding agreement with the purchaser, to sell the T'so land to the purchaser.

Position on 29 March 1993

26. What, then, was the factual position on 29 March 1993? On that day (i) the appointment of the manager of Lots 906 and 907, though approved by the land officer, had not been registered; and (ii) the land officer had not given his consent to the sale. The judge founded his judgment in favour of the purchaser on these two points.

27. In my judgment, these are not insignificant matters under section 15 of the New Territories Ordinance and. for the purposes of a binding agreement in respect of T'so land, cannot be disregarded.

28. As to the first point, the right of sale under section 15 of the New Territories Ordinance, it is conferred on the registered manager and on no-one else. As to the second point, that right is itself subject to the consent of the land officer. These fetters on the powers of sale of the manager of T'so land can be traced back to the beginning of this century. The first enactment, section 19 of the New Territories Land Ordinance, 1905, was in almost identical terms to the present section 15 and, in my judgment, this provision has not changed as a result of the "tidying-up" exercises which have been performed in the intervening years as to its language. As Briggs J said in Lai Chi Kok Amusement Park Company Limited (No. 2) v. Tsang Tin-sun [1966] HKLR 124 at 130:

"The mischief envisaged by the section is this: land held by a t'ong could in the usual way be conveyed only if the conveyance were executed by all the members of the t'ong. That would as time went on become increasingly difficult, if not practically impossible. The object of the Ordinance of 1905 was to facilitate transactions relating to land. It may well be in the interest of the t'ong that the land should be leased or sold and a convenient means of effecting the conveyance was sought. This was found in the appointment of managers, but at the same time it was necessary to protect members of the t'ong against malpractices on the part of managers. For this the personal supervision of any transaction entered into by the manager was desirable".

29. This statutory fetter on the powers of the manager has not changed, and I am not persuaded that the removal of the word "thereupon" before the phrase "shall... have full power to dispose of ... the land" in the course of law revision in the intervening years has altered the meaning of s15 in the least.

30. It is true that, as regards the appointment of the manager, once consent is given, it would be back-dated to the date of appointment by the members of the T'so. But this point, raised by Mr. Ching in argument, seems to me to be irrelevant to what we have to decide: namely, whether the statutory fetters on the acts of the manager were such that, as at 29 March 1993, there was no binding agreement to sell the T'so land.

Conclusion

31. Given the circumstances of this case, the vendor, as at 29 March 1993, had in my view no more than a hope or expectation that the land officer would give his consent to the sale after the period for objections by members of the T'so to the sale had expired. But the parties, in the Sale and Purchase Agreement, were not dealing in hopes and expectations. They were dealing with enforceable legal rights.

32. In my judgment, the judge was perfectly correct when he said:

"...Clause 32 contemplated that the vendors were to be able to show on 29 March 1993 that they had a legal or equitable right to a good title to the relevant land, and to compel a conveyance or assignment of such a title to the purchaser".

33. The vendor was unable to fulfill the terms of the warranty in Clause 32. and the purchaser had the clear contractual right to terminate the agreement, which it exercised.

34. Before concluding this judgment, I would deal with one further point raised by Mr. Ching in argument: namely, that as the vendor was required to convey the other ancillary lots to the purchaser, apart from Lots 906 and 907, it was inequitable that the purchaser should be relieved of his contractual obligations under the Sale and Purchase Agreement in respect of the principal lots. This point, as I understand it, was not in fact ventilated in the court below. It has, in my view, no merit. For all we know, the vendor considered it commercially advantageous to complete the sale of those ancillary lots and chose not to argue that, contractually, the lots had to stand or fall together. After all, the vendor was selling the ancillary lots to the purchaser at prices far higher than those in the agreements with the registered owners. In any case, equitable considerations are irrelevant here. What the purchaser is asserting is a contractual right. Clause 32 allows the purchaser to give notice to terminate the agreement in the event which has occurred. This is not a case where the purchaser comes before the court seeking the equitable relief of rescission. The purchaser had established a clear contractual right to terminate the agreement and demand the return of the deposit.

35. In my judgment, the appeal must be dismissed. As to costs. I would also make the order proposed.

Power, V.-P.:

36. I agree with what has fallen from my Brothers Nazareth and Litton and have nothing to add.