FULLTREND CO LTD v. LONGER YEAR DEVELOPMENT LTD AND ANOTHER

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

-------------------

-----------------

JUDGMENT

------------------

1. This is an action between vendor and purchaser.  The purchaser is the plaintiff in the action. The vendor is the 1st defendant. The 2nd defendant is a firm of solicitors, which acted, pursuant to the provisions of the contract dated 3rd May 1989 between the vendor and the purchaser, as stakeholders in respect of certain sums of money paid in respect of the purchase by the purchaser. They have now released the money to the vendor and against them the purchaser complains that the money should not have been so released.

2. The problem with which the court is concerned arises out of an earlier transaction whereby the property was conveyed, not to the party who had agreed to buy it, but to another person nominated by that party. It is the purchaser's contention now that the nominee may have taken the property upon trust for the person making the nomination and there may be an equitable interest outstanding in that person which has to be got in or which will otherwise remain as a blot on the title. Before dealing with the merits of this contention, I must relate the facts of the case, which are as follows.

3. The properties the subject of the present agreement for sale and purchase are Nos. 819 and 820 Nam Fung Centre, Tsuen Wan, New Territories. These properties are, as I understand it, commercial or industrial units. By an agreement of 15th July 1982, Kin Fung Garments and Investments Ltd., as vendor, agreed to sell to one Ha Kin Hung ("Ha"), as purchaser, the property 819. By another agreement of the same date, the same vendor agreed to sell to one So Lai Hing ("So"), the property 820. On 19th October 1982, there was incorporated a company called Darlaston Limited ("Darlaston"). Its two directors were Ha and So. On 11th August 1983 Ha and So executed nominations of Darlaston to take up the properties. The nomination in each case nominated Darlaston to take an assignment of the property without, in any way, condescending to elaborate or explain the nature of the transaction. In the result, the properties were duly conveyed to Darlaston on the same date, 11th August 1983.

4. On 16th March 1985, Darlaston conveyed the properties to one Renato Djaja Moelyono. In the conveyance, Darlaston was expressed to assign the property to the purchaser as beneficial owner. The assignment was duly executed by Darlaston; the common seal of Darlaston was affixed to the assignment and the assignment was signed by Ha and So.

5. On 27th July 1985, Ha died. On 19th August 1987, So died. On 17th March 1989, after several further transactions, the properties were the subject of an agreement for sale by Jointa International Ltd. to the 1st defendant. On 3rd May 1989, the 1st defendant entered into a sub-sale agreement with the plaintiff, the present purchaser.

6. On 11th May 1989, the solicitors acting for the the purchaser raised requisitions in relation to the nominations to which I have referred. The solicitors pointed out that the nominators had nominated Darlaston to take up the assignment of the units 819 and 820. They pointed out that the nominations had not spelt out who had provided the deposit and part payment of the purchase price stated in the relevant agreement, and they suggested that the question of resulting trust arose as to whether the nominees were holding the properties as trustee for the nominator. The purchaser got no satisfactory answer, and on 22nd June 1989 it rescinded, or purported to rescind, the agreement it had with the vendor. When the date for completion, 17th July 1989, came round, the purchaser refused to complete. (A day later, certain documents were tendered to the purchaser which it was contended would cure the supposed difficulty, but these documents were too late and were in any case quite useless for the purpose.)

7. The issue in the case, then, is whether the purchaser's objection to the title was well-founded. In my judgment, it was not well-founded and was indeed misconceived. The properties were conveyed to Darlaston at the direction of Ha and So. That Ha and So gave such a direction to their vendors is for conveyancing purpose sufficiently evidenced by their execution of the forms of nomination in favour of Darlaston. I accept that at this stage the equitable interest in the property may well have remained outstanding in Ha and So.  It is quite a common thing for a purchaser to direct that a conveyance or assignment of the property which he has agreed to purchase be taken in the name of his nominee. Where that happens, it is often the purchaser who provides the purchase money. The person to whom the property is assigned as his nominee then holds the property upon a bare trust for the purchaser as the person who provided the purchase money: see Bridges v. Mess [1957] Ch. 475. (I should add that not every case in which a nomination is made has this result; e.g.  the nomination may be made to assist in the effectuation of a sub-purchase, or it may be made because the person who has entered into the contract to purchase the property wishes to make a gift of it to the nominated person.) Where the purchaser simply wants the property to be held not in his own name, but in the name of a nominee for him, the entire beneficial interest, then, remains in the purchaser. So I must proceed here, in the absence of any evidence whatever about the true facts, on the footing that there is at the very least a real possibility that, as between Ha and So on the one hand and Darlaston on the other hand, Ha and So retained the beneficial interests in these properties for themselves.  As against Darlaston, therefore, they would have been entitled, at any time while Darlaston remained the owner of the premises in name only, to call on Darlaston to convey the property to them or as they should direct. However, what in fact happened was this. Ha and So having clothed Darlaston with the mantle of authority to deal with the property, Darlaston then sold it. Ha and So affixed the common seal of Darlaston to the necessary assignment and signed the assignment to evidence that they had done so. Accordingly, Ha and So concurred in the assignment, which expressly provided that Darlaston was conveying the property as beneficial owner. Thereafter, could Ha and So, in the circumstances which I have described, possibly assert a title to the equitable interest against the purchaser from Darlaston or any successor in title of that purchaser? The suggestion seems to me, with great respect, to be quite untenable. The relevant principle is clear and I propose to take it from the old case of Savage v. Foster (1723)9 Mod. Rep. 35. There the principle is stated (at page 37) as follows : -

"When anything in order to a purchase is publicly transacted, and a third person, knowing thereof, and of his own right to the lands intended to be purchased, does not give purchaser notice of that right, he should never afterwards be admitted to set up such right to avoid the purchase."

Here, Ha and So not only remained silent when Darlaston sold and conveyed the property; they positively co-operated in the transaction. There is nothing to suggest that Darlaston's purchaser was apprised of Ha and So's interest. Certainly, the present purchaser had no actual notice of any such interest (the existence of which has anyway not been demonstrated) and equally certainly the present purchaser had no constructive notice of any such interest because there was nothing to put a prudent purchaser upon enquiry. It follows that the refusal of the purchaser to complete was unjustified. There was no blot on the title occasioned by the possible existence of an equitable interest outstanding in Ha and So which could have survived the sale and conveyance by Darlaston in the circumstances which I have mentioned.

8. In the result, I must dismiss the action both as against the 1st defendant and the 2nd defendant. Their costs of the action must be taxed (if not agreed) and paid by the plaintiff.