CHAN YAT WAH v. MOONLAND ENTERPRISE LTD.

HCMP 3061/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 3061 OF 1998

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FIRST RULING

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1. In order to avoid unnecessary argument regarding issues that may become immaterial as a result of the Court's decision on other issues, Counsel have prepared an agreed flow chart of issues to be decided by the Court and have invited the Court to rule upon particular issues before considering the issues that arise from the Court's decision thereon.

2. The first issue to be decided is whether the Plaintiff can give good title today pursuant to the terms of the Sale and Purchase Agreement. Counsel accepted that if it cannot then the Court should not order specific performance. The reference to "today" is consequent upon the concession of Mr Lim for the Defendant that if the Plaintiff cannot convey good title today, the Defendant is restricted to a claim for damages.

3. The provisions of Clauses 4, 13 and 29 of the Sale and Purchase Agreement provided that the Plaintiff should convey the property to the Defendant free of encumbrances.

4. A good title was defined by Clough J in Kan Wing Yau v. Hong Kong Housing Society [1988] 2 HKLR 187 as:-

"One which can at all times and in all circumstances be forced on an unwilling purchaser in an action for specific performance."

5. The question therefore I have to consider is whether I can conclude beyond reasonable doubt that the Defendant (as purchaser) would not be at risk of his title being defeasible or of being defective by reason of the existence of an encumbrance in view of the writ in High Court Probate Action 12/1997 relating to the property.

6. Mr Lim has referred to the judgment of the Court of Appeal in Chun Hon Wai v. Junichi Takashima [2000] 2 HKC 777, and the principles stated therein that while a deceased's estate remains in the course of administration, no beneficiary has any interest in any specific asset and that a personal representative purporting to act for administrative purposes generally conferred good title on a person in whose favour he made a transfer or conveyance of the legal estate. In selling part of the deceased's estate, the personal representative would be presumed to be acting in discharge of his duties.

7. What the court was saying in that case was that the title of purchaser who takes assignment from an executor who is selling in the course of administration or who is presumed to be doing so, is protected unless the circumstances are such that the purchase is put on notice that the sale is a breach of trust.

8. In this particular case, the writ in High Court Probate Action 12 of 1997, gives clear notice that the plaintiff in that action is alleging that the defendant in that action (the Plaintiff in this action) was not selling in the course of administration but was selling in breach of trust. He expressly alleges in paragraphs 14 and 15 of the Statement of Claim that the Defendant (the Plaintiff in this action) had threatened to sell the property for his own benefit to the exclusion of the Plaintiff and keep the proceeds of sale. He therefore seeks, inter alia, an injunction restraining the disposal of the property as well as other relief which affects the property itself.

9. This Court cannot assess the rights and wrongs of those allegations save to say that if those allegations are made out, the title which the Defendant in these proceedings would receive would not be a good title in the sense of being safe from challenge or encumbrance. The Defendant had been put on notice by the writ that the sale may be in breach of trust and not in the course of administration.

10. It is not possible for this Court to say, as Woo J did in Lau Siu Ying and Anor v. Wong Cheung Tai [1993] HCMP 669, that any claim against the property by the Plaintiff in the Probate Action 12 of 1997 would be most unlikely to succeed.

11. I would observe that the Defendant's own solicitors appear to have taken the view that the existence of the Probate Action was inimical to the Plaintiff passing good title when in their letter of 2 December 1997 to the Plaintiff's solicitors, they stressed that completion of the Sale and Purchase could only take place after the probate writ had been discharged.

12. Mr Lim's other argument is that faced with equal equities, the Court will order the first in time to prevail. He suggests that because the Defendant's interest in the Sale and Purchase Agreement was registered before the writ in the Probate Action, the Court would be bound to favour the Defendant's interest in the Sale and Purchase Agreement. I share the view expressed by Mr Pow for the Plaintiff that the equities in this case would not be equal. The equity of the beneficiary Plaintiff in Probate Action 12 of 1997 is attacking the very basis of the transaction which gave rise to the equity of the Defendant acquired by reason of the Sale and Purchase Agreement.

13. Without considering Mr Pow's additional argument that the beneficiary's equity arose first in any event, I find that this is not a case of equal equities.

14. I, accordingly, rule that the Plaintiff cannot give good title today pursuant to the terms of the Sale and Purchase Agreement.