IP FOO KEUNG MICHAEL AND ANOTHER v. CHAN PAK KAI

1998, No. M.P.5179

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. Flat A on 6th floor of Fung Shing Building, No.168 Connaught Road West, Hong Kong, is built on the Remaining Portion of Praya Extension of Section A of the Eastern Moiety of Marine Lot No.198, the Remaining Portion of Praya Extension of Section B of the Eastern Moiety of Marine Lot No.198, the Remaining Portion of Praya Extension of Section C of the Eastern Moiety of Marine Lot No.198, the Remaining Portion of Section A of Praya Reclamation of Marine Lot No.198 Half Private Street and the Remaining Portion of the Praya Reclamation of Marine Lot No.198 Half Private Street.

2. This action involves the title to the Praya Extension of Marine Lot 198. There is no doubt about the title to the other Lots. The requisition was raised by the Plaintiff's solicitors in their letter of 25th June 1998 as follows:-

"1. Assignment Memorial No.930839

The Vendor was entitled to the grant of Crown Lease or Crown Leases of the subject lots under and by virtue of the following Agreements:-

......

(e) Agreement dated 5th October 1889 and made between Bruce Shepherd acting for the on behalf of the Governor of Hongkong of the one part and Lee Shee and Leung On of the other part being the Reclamation Agreement relating to the Reclamation to Marine Lot No.198 (Half Private Street):

... kindly let us have prior to completion certified copies of the same to enable us to approve your client's title"

3. The Agreement cannot be found. Neither the District Lands Office nor the Land Registry has any record of the Agreement.

4. The requisition was rightly raised because beginning with the judgment of Deputy Judge Findlay (as he then was) in Chan Kan Sing v Lam Ping Ping Grace [1990] 1 HKC373 the Courts have on a number of occasions held that under s.13(1) of the Conveyancing and Property Ordinance ("CPO"), secondary evidence of a Crown lease (apart from an attested or certified copy under s.13(2)) is not admissible as proof of title unless "the contrary intention is expressed" by the parties in their agreements.

5. However, there is another line of authorities beginning with the judgment of Woo J. in Yeung Dallah Rudin v Copiluck Limited [1992] 2 HKC575, which permits other secondary evidence to be used as proof of title under s.13(1).

6. In Wu Wing Kuen v Leung Kwai Li Cindy MP646 of 1999, the judgment of which will be handed down at the same time as this judgment, I have decided secondary evidence is admissible under s.13(1) in the absence of an expressed contrary intention. I adopt but will not repeat the reasons given in that decision.

7. There is no dispute that if secondary evidence is admissible, there is sufficient secondary evidence of the Agreement.

8. Its contents can be found in Praya Recolamation Ordinance of 1889 ("PRO"). In particular s.7(iii) and the Schedule to PRO. Moreover, the Agreements relating to other sections of the Praya Reclamation (namely, s.A, s.B and s.C are still available).

9. The parties to the Agreement can be found from the Recitals in the Assignment Memorial No.930839 dated 1st October 1972.

10. It follows that the Plaintiff's (the purchaser's) claim must fail.

11. In case I am wrong about s.13(1) it is necessary for me to deal with the other arguments of Counsel for the Defendant vendor (Mr. Horace Wong).

12. Mr. Wong accepts that the Agreement is an agreement for a Crown lease. However, he argues that an agreement for a Crown lease does not come within the definition of Government lease under s.13(1).

13. The definitions of Crown lease and Government lease can be found in the Interpretation and General Clauses Ordinance Cap.1.

"Crown lease means any lease granted by the Crown before 1 July 1997, any instrument whereby the term of a Crown lease may have been extended or the provisions thereof varied and any agreement for a Crown lease"

"Government lease means a lease of land granted by or on behalf of the Government, and includes -

(a) an instrument whereby -

(i) the term of the lease has been extended; or

(ii) the provisions of the lease have been varied;

(b) an agreement for such a lease; and

(c) a Crown lease;"

14. In my opinion, there is nothing in the context of s.13(1) which excludes an agreement for a Crown lease from the expression Government lease.

15. Mr. Wong's argument requires a finding that under no circumstances can a Crown lease under s.13(1) include an agreement for a Crown lease. With respect, that cannot be right. A person who holds land from the Government under an agreement for a Crown lease subject to conditions precedent surely derives title from such prior to the fulfillment of the conditions precedent. I can see no reason why in a sale by such an owner, the agreement for a Crown lease should not form his root of title and be regarded as being covered by the expression Government lease under s.13(1).

16. Mr. Horace Wong's second argument raises a more difficult issue. He agues that insofar as all the conditions stipulated in the Agreement, which are conditions to the grant of a Crown lease have been or are deemed to have been complied with (s.14(2) of CPO), a Crown lease is deemed to have been issued upon compliance with those conditions (s.14(1) CPO).

17. Since such a Crown lease is a statutory fiction and is not a tangible document, he argues it cannot, and need not be produced.

18. He argues further that with the deemed issuance of the Crown lease by s.14(1) of CPO, the lesser equitable estate created by the Agreement would have merged in the legal estate created by the deemed Crown lease. The Agreement itself would have lost all relevance.

19. Gatewood Limited v Silver Noble Investment Limited [1992] 2 HKC473 is authority that a tangible Crown lease must be produced, even if it has expired.

20. There, Barnett J. had to deal with a submission that as the relevant "Crown lease" had expired and a new Crown lease was deemed to have been granted by operation of the New Territories (Renewable Crown Leases) Ordinance, the vendor was not obliged to produce the expired Crown lease. At p.476, the learned Judge said

"Mr. Chow (Counsel for the vendor) asked me to consider the situation if Cap.152 had not been enacted, a right of renewal under an existing Crown lease had been exercised and a new Crown lease actually granted and issued. He asked whether the vendor would be obliged to produce the existing Crown lease as well as the new Crown lease. The answer, as Mr. Leong for the plaintiff agreed, must be no. There would be a Crown lease conferring title upon the vendor and containing in itself all the terms, covenants and conditions upon which the land was held.

Under s.13 of Cap.219, a purchaser is entitled to production of the Crown lease. It is implicit that he is entitled to a sight of a tangible document. A new Crown lease granted by operation of Cap.152 does not exist as a separate physical entity. There is no new Crown lease for a vendor to produce or a purchaser to sue. Cap.152 came into force in 1969 and Cap.219 in 1984. The legislature cannot be taken to have enacted the provisions of s.13 of the latter Ordinance in vain.

I am persuaded, therefore, that Mr. Leong is right when he contends that a purchaser is entitled to see the document which, subject to s.13, contains complete particulars of the terms upon which he will hold the land. That document is the existing Crown lease which effectively confers title to the land although by effluxion of time and operation of law is superseded by a new Crown lease"

21. Gatewood Limited v Silver Noble Investment Limited does not stand alone.Wong Wai Ming v Tang Tat Chi [1991] 1 HKC341 a decision of Patrick Chan J. (as he then was), and Lee Lai Sheung Karita and Wai In Fun Perseus v Wei Fei Trading M.P.1315/1998, 8/3/99, Yuen J. are to the same effect.

22. If I may summarise Mr. Wong's arguments, they are that:-

(1) the deemed Crown lease under s.14(1) is a statutory fiction and cannot be produced

(2) the Agreement has been superseded by the deemed Crown lease and is irrelevant

(3) furthermore, the land in the Praya Reclamation was granted to the original Crown lessees of M.L.198 with the intent that they should hold the additional land as part of M.L.198. There is no doubt about the title to M.L.198.

23. I see the force of Mr. Wong's argument. It may be that the requirement that the Agreement be produced, just as expired Crown leases are required to be produced, can be justified on the basis that they are the best evidence of the renewal extension or addition. But, of course, if they are required merely as best evidence, then secondary evidence may be admitted if the circumstances are right. Moreover, if they are required to be produced merely as best evidence of the renewal extension or addition, then it does not follow that they would fall within the definition of Government lease under s.13(1).

24. However, bearing in mind the weight of authorities in favour of the view that a tangible Crown lease, even if it has expired, has to be produced under s.13(1), I feel obliged to come to the conclusion that the Agreement, which falls within the definition of Government lease in s.13(1) has to be produced because it is the latest tangible Government lease.

25. It is basic to our law that like cases should be decided alike. This area of the law provides a good illustration of the importance of consistency in decisions. The rights and obligations of vendors and purchasers depend on it. If the law is uncertain, vendors and purchasers may take a contradictory view on a matter. In that case, litigation may result. The loser has to bear the costs of the proceedings. In the case of a purchaser, such as the Plaintiff here, he may also lose the deposit, which very often he can ill afford to lose. That being the case, I feel it is my duty to follow any long established and consistent first instance decisions.

26. Here, because I have come to the conclusion that secondary evidence is admissible under s.13(1) CPO, the Plaintiff's claim must be dismissed. I know it will be a great disappointment to him. If it is any consolation, I will add that the Plaintiff's legal advisers acted properly in raising and insisting on their requisition. It is the uncertainty in the law relating to the proper construction of s.13(1) CPO which has led to this unsatisfactory state of affairs. I can only hope that the uncertainty can be resolved by a higher court as soon as possible.

27. I also make an Order Nisi that the Defendant is to have the costs of the proceedings.