MORAL KIND LTD v. ROSE PALACE LTD

HCMP 742/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 742 OF 2008

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J U D G M E N T

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1.  This is a vendor and purchaser summons. 

2.  The plaintiff is the purchaser under a Sale and Purchase Agreement dated 30 January 2008 and the defendant was the vendor. 

3.  The suit premises is Flat A on the 3^rd Floor of Yu Fung Building, Wong Nai Chung Road, Hong Kong. 

4.  It is the plaintiff’s case that the defendant failed to satisfactorily answer requisitions on title raised by the plaintiff’s solicitors and thus did not prove a good title to the property. 

5.  The requisitions were first raised in a letter dated 11 February 2008 :

“Howell & Co.

…

Messrs. S.H. Chan & Co.,

Solicitors,

…

Re: Flat A on 3/F. of Yu Fung Building, 27, Wong Nai Chung Road, Hong Kong.

We refer to your letter dated 31^st January, 2008.

Upon perusing the title deeds and documents, we have the following requisitions on title to make :-

1.    Please provide us with documentary evidence to show that the Government Rates, Rent and Management Fee in respect of the above property have been paid up to date.

2.    By an Agreement dated 12/9/1988 registered in the Land Registry by Memorial No. UB3969069, Chui Kai Chuen and Wu Lap Kung contracted to purchase the above property as Tenants in Common in equal shares from the then owner.  It then followed by a Memorandum of Direction dated 12/10/1988 registered in the Land Registry by Memorial No. UB3969070 (copy enclosed) given by Chui Kai Chuen and Wu Lap Kung to the said Chui Kai Chuen in which Chui Kai Chuen and Wu Lap Kung directed the vendor to assign the above property to Chui Kai Chuen solely.  Chui Kai Chuen subsequently entered into a sub-sale and purchase agreement with Senior Field Limited in which he agreed to sub-sell the above property to Senior Limited.  Finally, the above property was assigned to Senior Field Limited under and by virtue of an Assignment dated 30/12/1988 and registered in the Land Registry by Memorial No. UB3969073.

       It was noted from the said Memorandum of Directions Memorial No. UB3969070 that Chui Kai Chuen and Wu Lap Kung merely gave directions to direct the vendor to assign the above property to Chui Kai Chuen.  Wu Lap Kung had not relinquished his interest in the above property nor had the Memorandum of Directions conferred any power on Chui Kai Chuen to sub-sell the above property.  We take the view that the above scenario constitutes a typical type of resulting trust situation in favour of Wu Lap Kung,  Please therefore provide us with documentary evidence to show that Wu Lap Kung has waived and/or relinquished his beneficial interest in the above property.

3.    Occupation Permit No. 108 dated 7/6/1972 (copy enclosed) relates to a development erected on the then Section C of Inland Lot No. 2165 and not the then Remaining Portion of Section C of Inland Lot No. 2169 on which the building in respect of which the above property forms part was built.  Please provide us with certified copy of a property Occupation Permit of the above property.

4.    Please provide us with the original of the Legal Charge dated 15/8/1996 Memorial No. UB6748643 and its Receipt on Discharge dated 31/3/2001 Memorial No. UB8359464 for proof of title prior to completion as well as to complete the chain of title.

5.    We noted that the lot number of the building in respect of which the above property forms part was changed from the Remaining Portion of Section C of Inland Lot No. 2165 to Inland Lot No. 8703 on 1/12/1988.  Accordingly, the description of property as set out in Party V of the Schedule to the present Agreement for sale and Purchase dated 30/1/2008 was ambiguous and requires rectification in the manner as per the revised schedule attached hereto.  Please confirm that you have no objection to amend the description of property in the said Agreement for Sale and Purchase in the manner as proposed.

Yours faithfully

(Signed)

Howell & Co.

encl.

c.c. client”

6.  Requisition No. 2 is the relevant one in this case.  

7.  The Memorandum of Direction referred to in the requisition was in this form :

“MEMORANDUM OF DIRECTION

WE, CHUI KAI CHUEN(徐繼存)of Flat B on 18th Floor of Chang Pao Ching Building, Hong Kong and WU LAP KUNG (鄔立功)of Room C on 13th Floor, Kar On House, 12 Cheung Hong Street, North Point, Hong Kong ‘as Tenants in Common in equal shares’ DO hereby direct that the property, being ALL THAT one equal undivided 23rd part or share of and in ALL THAT piece or parcel of ground registered in the Land Office as THE REMAINING PORTION OF SECTION C OF INLAND LOT NO. 2165. And of and in the messuages erections and buildings thereon now known as YU FUNG BUILDING TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT FLAT A on the THIRD FLOOR of the said Yu Fung Building agreed to be purchased by us under an Agreement for Sale and Purchase dated 12th day of September 1988 in respect of the above property be assigned to the said CHUI KAI CHUEN solely.

Dated the 12^th day of October 1988.

WITNESS to the signatures of the                 ) Signed

                                                                     )

said Chui Kai Chuen and Wu Lap Kung:-       ) Signed

(Signed)
ONG TONG SING LAWRENCE
Solicitor, Hong Kong.

INTERPRETED by:-

(Signed)
Lau Kwok Kwong
Clerk to Messrs. Lawrence Ong & Chung,
Solicitors, Hong Kong.”

8.  The root of title was an agreement for sale and purchase dated 12 September 1988 under which Wu Lap Kung (“Wu”) and Chui Kai Chuen (“Chui”) agreed to purchase the property as tenants in common in equal shares and their vendor received a deposit and part payment in respect of the purchase. 

9.  The next document adduced as evidence was the said Memorandum of Direction. 

10.  Following this was a Sub-Sale and Purchase Agreement dated 18 October 1988.  

11.  Under this agreement Chui agreed to sell the property in his own name to Senior Field Limited (“Senior Field”). 

12.  This was followed by an assignment to Senior Field which Chui executed as a confirmor in his own name. 

13.  It was this which was the subject of the requisition in question. 

14.  It will be noted that the concern which is being expressed by the plaintiff’s solicitors is that there is no proof that Wu as a tenant in common in equal shares under the Sale and Purchase Agreement had relinquished his interest in the property. 

15.  The defendant’s solicitors reply to the requisition was as follows :

“S.H. Chan & Co.

…

Messrs. Howell & Co.,

Solicitors,

…

Re:  Flat A on the 3^rd Floor of Yu Fung Building, No. 27 Wong Nai Chung Road, Hong Kong (“the Property”)

We refer to your letter dated 30^th January 2008 and hereby reply to your requisitions in the same order adopted by you :-

1.  We would drawn your attention the decision in Jasmin Enterprise Ltd, v. Chan Yuk Hon, MP No. 4070 of 1997 that unless there were some reasons to suspect that the government rent had not been paid, the requested documentary evidence to prove due payment thereof is not a proper requisition.  The rates and management fees are matters of outgoings which do not qualify themselves as requisitions on title.  We shall deal with the same by way of apportionment account on or before completion. 

2.  We would like to draw your attention to Section 13(4A) of the Conveyancing and Property Ordinance Cap. 219 which stated that where any document is or has been produced by a vendor as proof of title to any land and that document purports to have been executed, not less than 15 years before the contract of sale of that land, under a power of attorney, it shall for the purposes of any question as to the title to that land be conclusively presumed.  Your request will not be entertained. 

3.  We opine that the lot which appear in the Occupation Permit No. H108/72 and dated 7^th June 1972 is discernable.  However, on an entire without prejudice basis, we now send you herewith another certified copy of the said Occupation Permit together with a copy letter dated 17^th March 2008 issued by Buildings Department showing that No. 27 Wong Nai Chung Road was erected on The Remaining Portion of Section C of Inland Lot No. 2165 and covered by the said occupation permit.  Your requisition will not be entertained any further. 

4.  As the documents as requested are not registered against the Property we fail to see any reason for its production. 

5.  We have no objection to amend the description of the Property in the Agreement for Sale and Purchase dated 30^th January 2008 in manner as proposed. 

We trust that we have satisfactorily answered all your requisitions and look forward to receiving your draft Assignment and Undertaking Letter for our approval as soon as possible.

Yours faithfully,

(Signed)

S.H. CHAN & CO.”

16.  I find myself to be in agreement with Mr Kenny Lin who was representing the plaintiff that for all practical purposes all that the reply to the 2^nd requisition amounted to was a bald assertion that Wu had ceased to be the legal or beneficial owner of the property.  

17.  Before me Mr Denis Yu for the defendant attempted to elaborate on the reply to the requisition by adding that when considering presumptions under resulting trusts the important rule to consider was the most likely inference of fact to be drawn from the surrounding circumstances was the one which should be drawn in the absence of any evidence to the contrary. 

18.  His authority for this proposition was Halsbury’s Laws of Hong Kong, Vol. 26(2), page 28, paragraph 400.026. 

19.  I fear that this is an unduly simple approach to this problem.  

20.  What is clear from the documents of title is that Chui and Wu were described as tenants in common in equal shares. 

21.  Under the Memorandum of Direction it was stated that the property should be assigned to Chui solely.  It was not.  It was assigned to Senior Field under the said Sub-Sale Agreement by Chui alone. 

22.  There is no reference in any of the documents as to how Wu’s interest was relinquished. 

23.  There are a number of cases where the courts have considered the position where one party has nominated another to take an interest in property, see Fulltrend Co. Ltd v. Longer Year Development Ltd [1990] 1 HKC 452, Formking Development Ltd v. Lee Kwok Hung Robert [1993] 1 HKC 412 and Lion Will Investment v. Triple Will [1992] 2 HKC 430.  

24.  Lion Will Investment was upheld by the Court of Appeal. 

25.  A common feature of these cases is the necessity for the nominator to prove that the nominee has indeed relinquished their interests for the title to the land to be made good. 

26.  Mr Yu submitted that the present case could be distinguished from these cases as it did not involve a nomination.  

27.  I disagree.  This is simply a matter of what label is attached to the document.  

28.  If the document is considered as a whole its purport is indistinguishable from the so-called nomination cases. 

29.  I have no doubt that the law propounded in these cases is correctly stated and that it was incumbent upon the defendant to prove at the requisite level that Wu had divested himself of any interest he may have had in the property. 

30.  Mr Yu did raise some other issues including consequences which might flow from the operation of the Limitation Ordinance, Cap. 347.  

31.  I do not think that any of these matters can assist the defendant.  

32.  The reason for this is that they were not raised in the correspondence when the plaintiff’s requisitions were being considered. 

33.  The authority for this proposition can be found in the judgment of the Court of Appeal in Kok Chong Ho & Another v. Double Value Developments Ltd [1993] 2 HKLR 423. 

34.  For all these reasons I am satisfied that the defendant did not prove an acceptable title to the property to the plaintiff and that accordingly its claim must succeed. 

35.  The relief it seeks in its summons is :

“(1)  A Declaration that since

(a)  under the Agreement for Sale and Purchase date 12 September 1988 and registered in the Land Registry by Memorial No. UB3969069, Wu Lap Kung (‘Wu’) and Chui Kai Chuen (‘Chui’) agreed to purchase the Property as tenants in common in equal shares;

(b)  by a Memorandum of Direction dated 12 October 1988 and registered in the Land Registry by Memorial No. UB3969070, they as tenants in common in equal shares directed that the Property be assigned to Chui solely;

(c)  by an Agreement for Sub-Sale and Purchase dated 18 October 1988 and registered in the Land Registry by Memorial No. UB3969071, Chui agreed to sell the Property in his own name to Senior Field Limited (‘Senior Field’); and

(d)  by an Assignment dated 30 December 1988 and registered in the Land Registry by Memorial No. UB3969073 which was executed by Chui as confirmor in his own name, the Property was assigned to Senior Field,

the Plaintiff was entitled as against the Defendant to sufficient and satisfactory conveyancing proof that Wu retained no beneficial interest in the Property.

(2)  A Declaration that the Defendant has failed to provide any sufficient and satisfactory conveyancing proof that Wu retained no beneficial interest in the Property.

(3)  A Declaration that in all the circumstances of the case, the Defendant, as the vendor of the Property under the Agreement has, in breach of the Agreement :-

(a)  failed to answer satisfactorily and sufficiently the requisitions and objections numbered 2 (as set out in letters dated 11 February, 29 March, 9, 10, 12 and 14 April, 2008 and issued by the Plaintiff through its Solicitors) raised by the Plaintiff in respect of the title to the Property comprised in the Agreement; and/or

(b)  failed to show and prove a good title to the Property in accordance with the Agreement.

(4)  A Declaration that the Plaintiff was entitled to rescind the Agreement and has effectively rescinded the Agreement.

(5)  A Declaration that the Defendant shall return to the Plaintiff the sum of $710,000.00 being the amount of deposits and part payment paid by the Plaintiff to the Defendant pursuant to the Agreement and is liable to compensate the Plaintiff a sum of money equivalent to any estate agency fee and/or stamp duty (if any) paid or liable to be paid by the Plaintiff in respect of the Agreement and its conveyancing costs incurred (including the costs of investigation of title) together with interest thereon at such rate and for such period as this Honourable Court shall think fit.

(6)  Further or alternatively, an Order that the Defendant do pay to the Plaintiff the said sum of $710,000.00 and do pay to the Plaintiff such sum of money equivalent to any estate agency fee and/or stamp duty (if any) paid or liable to be paid by the Plaintiff in respect of the Agreement and its conveyancing costs incurred (including the costs of investigation of title) together with interest at such rate and for such period as this Honourable Court shall think fit.

(7)  Damages for breach of the Agreement to be assessed.

(8)  A Declaration that the Plaintiff is entitled to a lien on the Property for the said deposits in the sum of $710,000.00 and interest thereon, the costs and expenses (including but not limited to all the conveyancing costs, stamp duty, and/or estate agent commission, if any) incurred by the Plaintiff in or about the said purchase of the Property and costs to be recovered by the Plaintiff in this action;

(9)  Interest on the amounts found to be due to the Plaintiff at such rate and for such period as this Honourable Court shall think fit;”

36.  I make an order nisi that the plaintiff will have its costs.