XCHRX LAI CHI ON v. STRONG SING DEVELOPMENT LIMITED

1994, No. MP 695

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

____________

____________

____________

_______________

J U D G M E N T

_______________

1. On the 8th June, 1994, I dismissed the Originating Summons issued on behalf of the Plaintiff ("the Purchaser") against the Defendant ("the Vendor"), with costs of the proceedings, save and except the costs of the Exhibits to the Affirmation filed on behalf of the Vendor which were disallowed by me. I did not think I needed to trouble Counsel for the Vendor and I did not call on him. I said that reasons for my judgment would be handed down. The hearing was listed and heard by me in Chambers. It was a vendor and purchaser summons taken out under section 12 of the Conveyancing and Property Ordinance, Cap. 219. As indicated by Godfrey J. (as he then was) in Re Kwun Tong Inland Lot No. 386, H.C. M.P. No. 1996 of 1988, 12th October, 1988, unreported, at p. 4, the proceedings should have been set down to be heard by the Judge in court, not in chambers, and as I can see no reason why reasons for my judgment should be handed down in chambers, I have decided to hand down this Judgment in court and release it for publication.

2. By an Agreement dated the 6th August, 1993 ("the Agreement"), the Vendor agreed to sell and the Purchaser agreed to purchase all that 1 equal undivided 3rd part or share of and in Sai Shan Wai House Lot No. 6 registered in the District Land Registry Yuen Long and of and in the 3 storeyed building constructed thereon together with the sole and exclusive right to the use occupation and enjoyment of all that the ground floor thereof. The purchase price was $680,000. By Clause 3 of and Part II of the First Schedule to the Agreement, completion should take place within 45 days from the date of the Vendor's Solicitors notifying the Purchasser's Solicitors in writing that the No Objection Letter had been granted by the District Lands Office Yuen Long. By Clause 24 of the Agreement, the Purchaser should either enter into a Deed of Mutual Covenant or at the Vendor's option, accept an assignment subject to and with the benefit of a Deed of Mutual Covenant. Clause 19 of the Agreement provided that time should in every respect be of the essence of the Agreement. There was no provision in the Agreement restricting the time within which the Purchaser should make objections or requisitions with reference to the date of delivery of title deeds and documents, but Clause 11 provided that should the Purchaser make and insist on any objection or requisition which the Vendor should be unable or unwilling on certain specified grounds to remove, the Vendor should be at liberty on serving a written notice of not less than 14 days to annul the sale.

3. The Purchaser's case was that he changed Solicitors on about the 2nd September, 1993; that the new Solicitors received from their predecessors the "relevant title deeds and documents" on or about the 15th September, 1993; that under cover of a letter dated the 2nd March, 1994 a draft Assignment was sent to the Vendor's Solicitors for their approval; that a requisition was raised (and raised for the 1st time) by letter dated the 4th March, 1994; and that the Vendor replied by letter dated the 5th March, 1994 refusing to entertain the Purchaser's requisition by saying that the Purchaser's Solicitors had accepted title by sending the draft Assignment for the approval of the Vendor's Solicitors on the 2nd March, 1994.

4. There was no dispute that by letter dated the 22nd January, 1994, the Vendor's Solicitors gave notice to the Purchaser's Solicitors of the issue of the No Objection Letter thereby fixing the 7th March, 1994 (the 6th March, 1994 falling on a Sunday) as the completion date under Clause 3 of and Part II of the First Schedule to the Agreement; that by letter dated the 8th February, 1994, the Vendor's Solicitors sent a standard assignment form and a copy Deed of Mutual Covenant to the Purchaser's Solicitors to enable them to prepare the draft Assignment for the approval of the Vendor's Solicitors; and that no objection or requisition had been raised prior to the 4th March, 1994.

5. As the letter dated the 2nd March, 1994 is crucial in my judgment, I will set it out in full:

"We thank you for your letter dated 8/2/1994 together with the enclosures therein mentioned.

We are instructed by our client(s) to send you herewith our draft Assignment of the above property for your kind approval on your client's behalf, the Vendor hereof and should be grateful if you would kindly let us have by return your specific instructions as to which party our cheque for the balance of the purchase price should be drawn and (if the case so requires) as to how we should split our cheque.

We also enclose herewith, for your approval, a draft Undertaking to be given by you when we send you the amount payable on completion. If the said Undertaking or any of them are not agreeable to you, please state so in your reply forthwith, otherwise, such Undertaking shall be deemed to have been agreed to by you."

6. Neither the Affirmation in support nor the Affirmation in reply (which exhibited for the 2nd or the 3rd time some correspondence and further exhibited some title deeds and documents which Mr. Maurice Chan, Counsel for the Plaintiff, conceded were irrelevant to any of the issues before me; and had I found for the Purchaser, I would have been minded to disallow the costs of the Affirmation in reply) was anything said about why the Purchaser instructed his Solicitors to submit under cover of the letter of the 2nd March, 1994 a draft Assignment for the approval of the Vendor's Solicitors, if such title (if any) of the Vendor had not been accepted by the Purchaser and the Purchaser had not waived any objection or requisition to such title (if any) as the Vendor might have. There was nothing in the evidence or in the letter of 2nd March, 1994 to suggest that it was a mere time saving exercise to send the draft Assignment for approval pending satisfactory answer of a requisition yet to be raised. The Purchaser was content to issue the present Originating Summons on the 21st March, 1994 seeking:

(1) a Declaration that the vendor in a previous assignment had no power to sell the subject land by virtue of the Letters of Administration Ad Colligenda Bona;

(2) a Declaration that the requisition raised by the Purchaser by letter dated the 4th March, 1994 was a requisition which went to the root of the title and which had not been satisfactorily answered;

(3) a Declaration that the Vendor had failed to show good title to the subject property in accordance with the Agreement and that the Purchaser was entitled to rescind the Agreement;

(4) a Declaration that the Purchaser was entitled to the refund of the deposit paid, with loss and damages to be assessed; and

(5) other consequential reliefs;

and to have the disputes between him and the Vendor resolved on the basis of the affirmation evidence before me.

7. If the Purchaser had by his Solicitors' letter of the 2nd March, 1994 accepted such title (if any) as the Vendor might have and had waived any objection or requisition to such title (if any) as.the Vendor might have, then the Purchaser was not, in my judgment, entitled to any of the reliefs sought herein.

8. Mr. Chan referred to various passages in a number of textbooks. I do not propose to refer to any of them for the simple reason that they all cite one and only one case, i.e. Burroughs v Oakley (1819) 3 Swanst 159. At p. 171, the Master of the Rolls said that the preparation of the conveyance in that case was an important fact, as amounting to evidence that the parties had arrived at a stage of proceeding subsequent to the question of title, and must be supposed, therefore, to have removed or abandoned all objections, although the Master of the Rolls could not satisfy himself that that fact alone, in the circumstances of that case, was sufficient to exclude the common equity; and that what was material was not mere delay in the investigation of title, but delay accompanied by acts which afforded evidence of an intention to waive the examination.

9. The effect of the submission of a draft Assignment to the vendor's solicitors for approval has been considered by the Court of Appeal in Tread East Limited v Hillier Development Limited, Civil Appeal No. 209 of 1992, unreported, 17th June, 1993. In the Tread East case, the agreement was dated the 27th April, 1990; some documents had been delivered on the 25th April, 1990 before the signing of the agreement; the purchaser's solicitors raised the material requisition on the 8th May which the vendor's solicitors answered on the 30th May; there was no reply to the letter of the 30th May and further documents were delivered by the vendor's solicitors to the purchaser's solicitors. On the 24th July sent by hand the purchaser's solicitors forwarded a draft deed of assignment to the vendor's solicitors for their perusal, and, if in order, by execution for their client, and asking in whose favour the cheque for the balance of the purchase price should be drawn. There was no reference in the 24th July letter to any unanswered requisition. Subsequent to the submission of a draft assignment, the purchaser's solicitors passed on 3 requisitions raised by solicitors acting for the proposed mortgagee of the purchaser and insisted on an answer to the requisitions. On the 24th July letter enclosing the draft Assignment, Penlington J.A., said that:

"I am unable to see what further action the purchaser's solicitors could have taken whereby acceptance by them of the title offered on behalf of their client could have been inferred.

...The purchaser's requisitions had been forwarded on the 8th May 1990 and had been replied to on the 30th May. Nothing further had been received from the purchaser's solicitors indicating in any way that they were dissatisfied with the reply which, on the face of it, seemed to be perfectly proper. The draft conveyance was then sent almost two months afterwards. It certainly did not accompany the requisitions. Short of a letter from the purchaser's solicitors expressly stating that they considered their requisition had been satisfactorily answered, it is difficult to see what else they could havedone to indicate to the vendor's solicitors that they now accepted the vendor's title. The letter which accompanied the draft deed said it was for the vendor's solicitors' approval and enquired as to the way in which the cheques for the purchase money should be made out. There was not the slightest indication in that letter that there was any unsatisfied requisitions. As Mr. Patick Fung for the vendor has said, it is highly desirable that requisitions should be forwarded to the vendor's solicitors promptly. In my opinion from the circumstances here it must be implied the purchaser's solicitors had accepted the vendor's title on the 24th July by forwarding the draft deed of assignment."

10. Nazareth J.A. agreed with the reasons given by Penlington J.A. and added that:

"... I did not understand counsel on either side to suggest that an objection or requisition, even one which goes to the root of the title could not be waived. Plainly it can; and in many cases, that precisely is what is done when a calculated risk is taken by a purchaser on possible objections that are thought unlikely to arise. It was no doubt in recognition of this that Miss Chow for the purchaser submitted that such waiver had to be express. But she produced no authority for that proposition, which must be rejected.

... The evidence conclusively shows that the purchaser's solicitors accepted the vendor's solicitors' answer to their first requisition. Nothing was heard by the vendor's solicitors from the former after they received the answer until the 24th July 1990. Meanwhile, the purchaser's solicitors had actively sought to persuade the proposed mortgagee's solicitors that the title was not affected by the absence of any evidence of due execution. Had the finance sought been forthcoming, clearly the purchaser would have completed the purchase. What puts the acceptance of the title beyond argument is that the draft assignment was sent by the purchaser's solicitors to the vendor's solicitors on the 24th July 1990, prior to the second requisition and contemporaneously with their enquiry as to how the payment cheque should be split ... In my judgment the evidence that it was accepted is so overwhelming as not to admit of the possibility of any other conclusion."

11. Sears J. agreed that the appeal should be allowed on the narrow ground that the purchaser's solicitors had accepted title on behalf of the purchaser.

12. The Tread East case was, of course, binding on me. Mr. Chan sought to distinguish it on the ground that in the Tread East case the material requisition had been raised and an answer given, whereas in this case, no objection or requisition whatsoever had been raised prior to the submission of a draft assignment under cover of the 2nd March, 1994 letter. With respect, it was not a difference which assisted the Purchaser in any way. The Purchaser's current Solicitors received the material title deeds and documents by about the 15th September, 1994, and their predecessors had had them since sometime earlier. The relevant title deeds and documents had thus been with the Purchaser's Solicitors for over 5½ months by the 2nd March, 1994. The Vendor had to serve a 14-day notice if it wished to invoke Clause 11 of the Agreement. The Vendor did not have to consider invoking Clause 11 because by the 2nd March, 1994 which was less than 14 days away from the completion date of the 7th March, 1994, no objection or requisition whatsoever had been raised. On the contrary, the letter of the 2nd March, 1994 stated that the Purchaser's Solicitors had been "instructed by" the Purchaser to submit the draft Assignment for the approval of the Vendor's Solicitors; asked for instructions on how the cheque(s) for the balance of the purchase price should be made out; enclosed a draft Undertaking to be given by the Vendor's Solicitors upon completion by solicitors' undertakings; and did not refer to any outstanding objection or requisition, as none had been raised. In my judgment, this case was indistinguishable from the Tread East case. Relevant title deeds and documents had been sent more than 5½ months ago. Nothing whatsoever had been received from any of the Purchaser's Solicitors indicating in any way that any of them was dissatisfied in any way with the title of the Vendor. The draft Assignment was then sent more than 5½ months afterwards. It certainly did not accompany the requisition which was not raised until by letter dated 2 days after the letter of the 2nd March, 1994. In my judgment, short of a Letter from the Purchaser's Solicitors expressly stating that they considered they were satisfied as to title and/or waived any objection or requisition which the Purchaser might have, it is difficult to see what else they could have done to indicate to the Vendor's Solicitors that they had accepted the Vendor's title and waived any objection or requisition which the Purchaser might have. The letter which accompanied the draft Assignment said it was for the Vendor's Solicitors' approval and enquired as to the way in which the cheque(s) for the purchase money should be made out. There was not the slightest indication in that letter that there was any unsatisfied requisition, for the simple reason that none had been raised. In my judgment, from the circumstances here it must be implied, and conclusively implied, that the Purchaser's Solicitors had accepted the Vendor's title on the 2nd March, 1994 by forwarding the draft Assignment and having in the process waived any possible objection or requisition which the Purchaser might have. Having reached this conclusion, it was not open to the Purchaser to raise any requisition after the 2nd March, 1994, and the Vendor was, in my judgment, entitled to refuse to entertain the requisition raised in the 4th March, 1994 letter. The Purchaser was also not entitled to ask this Court to adjudicate on any of the issues raised in the first 2 Declarations sought or to adjudicate on the question whether the Vendor had any or any good title, and for this reason, I refused to permit the Purchaser to amend the Originating Summons to claim a Declaration that the Vendor had no title. It follows that the Purchaser was not entitled to any refund of the deposit paid or any of the other reliefs sought. I therefore dismissed the Purchaser's Originating Summons.

13. In deference to the submission of Mr. Chan, I would briefly deal with his contention that there was a duty on the part of the Vendor or the Vendor's Solicitors to point out defects in title. Mr. Chan cited passages in Paragraphs 361 and 362 in Volume 1 of Sihombing & Wilkinson on Hong Kong Conveyancing under the heading of "Vendor's Solicitor's Duty on Discovering a Defect in Title". Nothing in those passages supported the contention that the vendor's solicitors had a duty in law to disclose to the purchaser's solicitors all defects which the vendor's solicitors should be aware of on a perusal of such of the title deeds and documents as were to be supplied to the purchaser's solicitors. If this were the law, the Court of Appeal would have decided the Tread East case the other way. The defect, if defect it was, a question upon which I refrained from expressing any opinion, was apparent on the face of the Letters of Administration Ad Colligenda Bona, and the previous assignment, both of which had been supplied to the Purchaser's Solicitors more than 5½ months before the Purchaser's Solicitors submitted the draft Assignment for the approval of the Vendor's Solicitors.

14. Most, if not all, of the exhibits to the Vendor's Affirmation in opposition had been produced in the Purchaser's grounding Affirmation. Mr. Nelson Miu, Counsel for the Vendor, had nothing to say about my proposed order to disallow the costs of the exhibits to the Vendor's Affirmation, and I disallowed such costs.