CHE YIN HAR MONLITA v. LIU KON KEUNG AND ANOTHER

1991, No.A4557

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. This is a purchaser's action for specific performance. The vendors' defence is that they have successfully exercised a power to rescind conferred on them by the contract of sale and purchase, which was made on 1st February 1991.

2. The property the subject of the contract is a property which may be shortly described as Flat 4, 18th Floor, Lee Ga Building, 121-135 Sai Wan Hoi Street, Shaukiwan. The price was HK$780,000. (A deposit of $90,000 had been paid by the purchaser.) The completion date was on or before 25th March 1991.

3. The contract provided that time should, in every respect, be of the essence of the agreement. It provided that the title should commence with the Crown Lease and continue with an assignment or a mortgage by assignment or a legal charge dealing with the whole estate and interest in the property extending not less than 15 years before the date of the contract. It provided that the vendors should prove a good title to the property, at their expense, and at the like expense should make and furnish to the purchaser such certified copies of any deeds or documents of title wills and matters of public record as might be necessary to prove such title, provided that the purchaser should accept a copy of a memorialised document as proof of title if the document or its copy itself could not be produced. It provided that such muniments of title as related exclusively to the property would be delivered to the purchaser.

4. Clause 12 of the contract, on which much of the argument in the present case has turned, provided as follows :

"12 (a) Any requisition or objection on title shall be delivered to the Vendor's solicitors within 7 days after the delivery of the title deeds to the Purchaser's solicitors.

(b) The Purchaser shall be deemed to have accepted the Vendor's title if requisition or objection on title is not delivered to the Vendor's solicitors within the times stipulated above (in this respect, time shall be of the essence of this Agreement).

(c) If the Purchaser shall have made requisition within the time stipulated above and shall insist on any objection or requisition either as, to title or any matter appearing on the title deeds or otherwise which the Vendor shallbe unable or (on the grounds of difficulty, delay or expenses or on any other reasonable ground) unwilling to remove or comply with, the Vendor shall notwithstanding any previous negotiation or litigation be at liberty to annul the sale in which case the Purchaser shall be entitled to the return of the deposit without costs or compensation and if that return is made within 7 days, without interest."

Clause 27 of the contract provided as follows :-"27. It is hereby agreed that all the covenants and conditions referred to in Part A of the Second Schedule to the Conveyancing and Property Ordinance Cap.219 shall be applied to and incorporated into this Agreement save and except those terms and conditions which have already been agreed between the parties hereto. In case of conflicts between the terms and conditions in this Agreement and the covenants and conditions in the said Ordinance, the terms and conditions in this Agreement shall prevail:"

5. Under s.36 of the Conveyancing and Property Ordinance, Cap.219, it is provided that the covenants and conditions mentioned in the Second Schedule to the Ordinance, or any of them, may be incorporated into any instrument by reference. Condition 7 in Part A of the Second Schedule reads as follows :

"7. Requisitions

(1)     Any requisition or objection in respect of the title shall be delivered in writing to the vendor's solicitors as soon as practicable after delivery of the title deeds and, in any event, not later than 14 days prior to the date of completion.

(2)     If the purchaser shall make and insist on any objection or requisition either as to title or any matter appearing on the title deeds or otherwise which the vendor shall be unable or (on the grounds of difficulty, delay or expense or on any other reasonable ground) unwilling to remove or comply with, or if the title of the vendor shall be defective, the vendor shall notwithstanding any previous negotiation or litigation be at liberty to annul the sale in which case the purchaser shall be entitled to the return of the deposit but without costs or compensation and, if that return is made within 7 days, without interest.

6. It is obvious that the provisions of the Condition 7 contained in Part A of the Second Schedule overlap the express provisions contained in Clause 12 of the contract. It seems to me that, except where there is repugnancy or inconsistency, each party is entitled to the benefit both of the express provisions of Clause 12 of the contract, and of Condition 7 contained in Part A of the Second Schedule. Of course, when there is repugnancy or inconsistency, the express terms of the contract will take precedence, but where there is not, I see no good reason for depriving either party of whatever benefit that party might also obtain from the provisions contained in Part A of the Second Schedule to the Ordinance.

7. The problem which arose in the present case appears to have arisen because, when the vendors purchased the property in 1989, they did so with the assistance of a mortgage so that the title deeds and documents went to the mortgagees, not the vendors.When the vendors came to sell the property, it was discovered that the mortgagees did not in fact hold all the documents of title and that certain of them were missing. It is not, I think, necessary to go into details about the missing documents of title. It is sufficient to say that, before the-contract between the vendors and the purchaser was made on 1st February 1991, the purchaser had been supplied with copies of all the documents of title but not with the originals (or certified copies) of the missing documents, the uncertified copies being of course insufficient evidence for the purposes of verifying the title.

8. The purchaser sub-sold the property to a sub-purchaser, who alerted the purchaser to this problem, and the purchaser took the matter up with the vendors on 15th March 1991, long after the 7 days mentioned in Clause 12(a) of the contract had passed.

9. On 19th March 1991, the vendors' solicitors told the purchaser's solicitors that they would send them, as soon as they received them from the Land Office, certified copies of the missing documents. The date for completion was postponed by agreement from 25th March 1991 to 28th March 1991.

10. On 27th March 1991, the vendors' solicitors stated to the purchaser's solicitors (among other things) as follows :-

"1.      We undertake to supply certified copies of the following documents as soon as we receive them from the Land Office.

(a) Agreement Memorial No.2104627;

(b) Supplemental Agreement Memorial No.2227578;

(c) Cancellation Agreement Memorial No.2227579;

(d) Assignment Memorial No.4204268;

(e) Mortgage Memorial No.3269977;

(f) Release Memorial No.4204267 and the relevant Power of Attorney (where necessary);

(g) Agreement Memorial No.4155831; and

(h) Mortgage Memorial No.4204269."

On 13th April 1991 the vendors' solicitors wrote again to the purchaser's solicitors saying this :-

"Further to our letter to you dated 3rd April 1991, we are instructed by our client to give you notice that the sale in respect of the above property will be absolutely annulled at the expiration of the period from the date hereof to 17th April 1991 unless the said requisitions in respect of the Statutory Declaration are withdrawn on or before 17th April 1991."

(This is a reference to a requirement which was made by the purchaser's solicitors, after prompting from the sub-purchaser's solicitors, whereby they required not only originals or certified copies of the missing title deeds, but also a statutory declaration in relation to the loss of any such deeds.)

11. On 17th April 1991, another firm of solicitors acting for the purchaser in place of her former solicitors wrote to the vendors' solicitors in the following terms

"We are instructed to act for the abovenamed Purchaser to complete the purchase in place of Messrs. Yung, Yu, Yuen & Co. [the purchaser's former solicitors].

We understand from our client that your clients agree to provide certified copies of those missing title deeds and documents to our client so as to complete the chain of title (save and except the Staturory Declaration of lossing of title deeds).

In accordance to the telephone conversation between our Miss Lam and Miss Vivian Yu of Messrs. Yung, Yu, Yuen & Co., we are informed that you undertake to let our client has the Statutory Declaration after completion.

In this connection, we shall be grateful if you will kindly let us know the present position and the actual date of completion."

(This letter was sent by fax, after 6:00 p.m. on 17th April 1991 to the vendors' solicitors.) It was suggested to me on behalf of the purchaser during her counsel's able argument that this letter falls to be construed as a withdrawal of the requisitions raised by the purchaser. But I do not so read it. The proper interpretation to put upon this letter, as it seems to me, is that the purchaser was prepared to agree to accept provision of certifiedcopies of the missing deeds and documents at completion but was insisting on the statutory declaration (even though that would not be tendered until after completion). In my judgment, this amounts to a persistence in the objections being raised by the purchaser to the title. The requirement for production at completion of the originals or certified copies of the missing title documents was clearly entirely justified. The insistence on an undertaking to provide a statutory declaration after completion was more problematic; it would not be possible to make any statutory declaration of any use until it was established that the missing title deeds and documents had indeed been lost. The vendors were understandably in fact prepared only to give an undertaking to produce (as soon as they could and not necessarily before completion) certified copies of the documents from the Land office, and there could be no certainty when or even if that would happen. (There does not appear to be any statutory requirement on the Land Registry to provide certified copies when asked to do so.)

12. On 23rd April 1991, the vendors' solicitors wrote to the purchaser's solicitors saying

"We refer to your letter dated 17th April 1991.

We would like to inform you that the sale in respect of the above property has been annulled. ....."

They enclosed for reference a copy of their letter dated 13th April 1991 to the purchaser's former solicitors.

13. In my judgment there is no question of this attitude on the part of the vendors being unreasonable or capricious or unfair in any way. They were placed in a difficult position. They had not been able to produce the necessary documents or certified copies of them, nor to undertake to do so before completion, and the purchaser, understandably, was pressing for better satisfaction before agreeing to complete. Solicitors acting for purchasers are often (and indeed usually) willing to accept undertakings from solicitors acting for vendors to supply originals or certified copies after completion; but they are not obliged to do so. The only question in the case is whether, in these circumstances, the powers conferred by Clause 12 of the contract (or, so far as applicable, Condition 7 in Part A of the Second Schedule to the Conveyancing and Property ordinance) entitled the vendors to rescind as they purported to do. In my judgment, the answer is yes.

14. It would be unreasonable to construe Clause 12 of the contract so as to shut out the vendors from the right to rescind conferred on the vendors in such circumstances as had arisen in the present case. I cannot allow the purchaser to shelter behind the fact that her requisitions were in fact made out of time. Both parties elected to ignore that fact. I am aware that the authorities say that powers conferred on vendors to rescind are powers which have to be construed strictly, but they do not in my judgment have to be construed unreasonably. In any event, if I am right in holding, as I have, that the provisions of Condition 7 were open to the vendors anyway, they have, as it seems to me, brought themselves within the terms of that condition.

15. That this dispute should have escalated so as to result in a two-day hearing over so small a matter is extremely unfortunate, but in my judgment I have no option but to uphold the rescission of the contract effected by the vendors and accordingly to dismiss this action for specific performance. I shall declare that the vendors validly rescinded the contract on 17th April 1991 and I shall order that the deposit of $90,000 be returned to the purchaser with interest thereon at 10 per cent per annum from 24th April 1991 until the date of payment. The purchaser must pay the vendors' costs of the action.