QUADRO PROPERTIES INTERNATIONAL CO. LTD. v. FUNG KAI FUNG

1992, No.A8933

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H E A D N O T E

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SALE OF LAND - VENDOR'S OBLIGATION TO SHOW GOOD TITLE AND TO ROVE GOOD TITLE - MISSING TITLE DEEDS - PLAIN COPY TITLE DEEDS SUPPLIED TO PURCHASER ON COMPLETION - BEST EVIDENCE RULE-ALLEGED AGREEMENT TO COMPLETE THE SALE WITH PLAIN COPY TITLE DEEDS.

1992, No.A8933

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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Facts

1. By an Agreement dated 29th October 1992 ("the Agreement"), the Plaintiff agreed to buy from the Defendant the property situated at Flat 3, 6th Floor, Block B, Kam Wah Garden, Tuen Mun, Hong Kong ("the property"). The completion date of the transaction was 7th December 1992 The time of the completion was between the hours of 9 a.m. to 5 p.m.

2. Clause 10 of the Agreement provided that,

"Such of the documents of title as relate exclusively to the Property shall be delivered to the Purchaser. All other documents of title in the possession of the vendor shall be retained by the vendor who shall, if so required on completion of the sale, give to the Purchaser a covenant for safe custody thereof and for production and delivery of copies thereof, such covenant to be prepared by the Purchaser."

Clause 11 provided that:-

"The Vendor shall give good title to the Property. The Vendor shall prove his title to the Property at the Vendor's expense and shall at the like expense make and furnish to the Purchaser such certified copies of any deeds or documents of title as may be necessary to prove such title. The costs of verifying the title by inspection and examination, including search fees, shall be borne by the Purchaser who shall also, if the Purchaser requires certified copies of any documents in the Vendor's possession relating to other premises retained by the Vendor as well as to the Property pay the cost of such certified copies."

3. Clause 14 provided that time shall be of the essence of the Agreement.

4. The Agreement was signed pursuant to a provisional agreement dated 19th October 1992 entered into between the parties.

5. On 27th October 1992, the title deeds to the property were sent by Norman Yung & Co., the Defendant's solicitor to Mr Chow Huk Pui ("Mr Chow") of Vivien Chan & Co., the solicitor for the Plaintiff. After reviewing the title deeds, Mr Chow noted that the following title deeds were missing:

(a) Legal Charge Memorial No.292260;

(b) Receipt on Discharge of a Charge Memorial No.511109;

(c) Assignment Memorial No.511110;

(d) Agreement for Sale and Purchase Memorial No.511180;

(e) Assignment Memorial No.514400; and

(f) Legal Charge Memorial No.514401.

("the six title deeds")

6. By letter dated 30th October 1992, Mr Chow wrote to Norman Yung & Co., requesting the six title deeds.

7. On 2nd December 1992, Mr Chow found that the six title deeds were still not supplied to him. He sent a letter by fax and by post to Norman Yung & Co. on 2nd December 1992. This letter stated that it was the vendor's obligation to show a good title to the property and he was not in a position to approve the vendor's title if he did not have the title deeds. Nothing was heard or received from Norman Yung on that day or on the following day.

8. On the morning of 4th December 1992, Mr Chow received a telephone call from Mr Thomas Leung ("Mr Leung") of Norman Yung & Co. Mr Leung advised him that they were not yet able to produce the six title deeds for his perusal. Mr Chow at that time was concerned that the completion was to take place in 3 days' time but the six title deeds were still not produced for his perusal.

9. Mr Chow said that the Defendant was obliged under the Agreement to produce the original of the six title deeds and not mere copies and to prove his title by the time fixed for the completion. Failure to produce the six title deeds would mean failure to prove title, thus casting serious doubt on the Defendant's beneficial interest in the property. This would entitle the Plaintiff to, inter alia, rescind the purchase unless a satisfactory explanation is provided.

10. Mr Chow said that the mere production of the six title deeds would not be sufficient as proof of good title. The contents of such title documents must be thoroughly examined and, if any question or doubt should arise upon such examination, the Defendant must clarify and remove them satisfactorily in order to prove his good title. He was worried that Norman Yung & Co. would produce the six title deeds on or shortly before 7th December 1992 and the Defendant might argue that he had proved his title before the completion, leaving him (i.e. Mr Chow) with practically no time to examine the six title deeds carefully and raise requisitions on title prior to the completion. He was not the least worry if the vendor failed to produce the six title deeds before the completion as the Plaintiff would in such an event be entitled, inter alia, to rescind the purchase.

11. In view of his worry, he asked Mr Leung what would happen if the six title deeds were to be produced shortly before the completion leaving him with not sufficient time to examine them. He asked whether the Plaintiff would be allowed extra time to examine the Defendant's title deeds in such an event. It did not occur to him at that time that the six title deeds would not be produced to him prior to the completion in breach of the Agreement. His request for the six title deeds was first made on 30th October 1992 and ample time had been given to the Defendant. Mr Leung had not indicated the whereabouts of the six title deeds nor any difficulties in producing them before the completion. Mr Chow at that time expected that the six title deeds would be produced prior to the completion in accordance with the Agreement and thus his requests were made solely for the purchaser's protection in the event that the six title deeds should be delivered to him immediately before the completion.

12. Mr Leung replied that they would act reasonably in the event that the six title deeds were not produced until shortly before the completion and they would not insist to complete on 7th December 1992. Mr Leung further proposed that should Mr Chow require time to review the six title deeds, he, namely Mr Leung, would agree to postpone the completion to 2 days after the delivery of the six title deeds.

13. Mr Chow told Mr Leung that 2 days would be sufficient for his review of the six title deeds. He said that apart from the maters mentioned above neither he nor Mr Leung had suggested that the completion of the sale be postponed. He also urged Mr Leung to supply him as soon as possible with plain copies of the six title deeds as an interim measure so that he could peruse them in the meantime in order to save the perusal time and raise requisitions thereon, with verification of their authenticity upon the production of the six title deeds. Mr Leung agreed and said that they would let him have copies of the six title deeds as soon as they could.

14. During the telephone conversation, Mr Leung requested Mr Chow to dispense with the production of six title deeds and to proceed with the completion with Norman Yung's undertaking to let him have certified copies of the six title deeds after the completion. Mr Chow did not find Mr Leung's request acceptable and he refused his request.

15. By a letter dated 4th December 1992, Mr Chow wrote to Messrs Norman Yung & Co. The letter stated that:-

"We refer to our letter dated 2nd December 1992 and the telephone conversation between your Mr Leung and our Mr Chow this morning and confirm your advice that you will send us the title documents requested by us (or copies thereof) for our perusal as soon as you can.

Please note that we are not in a position to advise our client to complete the purchase of the above property in view of the circumstances unless your client is able to prove his title to our satisfaction well in advance of the scheduled completion date and in any event within today.

Without prejudice to our requisitions on title and your client's obligation to prove good title, we enclose our draft Assignment for your approval on behalf of your client.

Please in the meantime let us have your specific instructions as to how the cheques for the balance of the purchase price should be split."

16. Mr Chow said that the draft assignment was sent to Norman Yung & Co. for the sole purpose of saving time. It was on the express understanding that there would be no prejudice to the Plaintiff's requisitions on title and the Defendant's obligation to prove good title. In view of his refusal to accept Mr Leung's suggestion to dispense with the production of the six title deeds and to proceed with the completion upon their undertaking to supply certified copies of the six title deeds after completion, he was not prepared to and did not send the draft form of completion undertaking for Messrs Norman Yung & Co.'s approval at that stage. Messrs Norman Yung & Co. did not object to that letter.

17. Nothing further was received or heard from Norman Yung & Co. until 7th December 1992. In the morning of 7th December 1992, Mr Chow received a phone call from Mr Leung who advised him that they were sending to him copies of the six title deeds and requested him to examine them upon receipt thereof. Mr Chow agreed.

18. At around 3 p.m. on 7th December 1992, Mr Chow had still not received any title deeds or correspondence from Norman Yung & Co. He was really uncomfortable with the situation and he sent a letter by fax and by post to Norman Yung & Co. The letter stated that:-

"We refer to our letter dated 4th December 1992 and note that we are still not in receipt of the title documents requested by us.

In the circumstances, we are not in a position to advise our client to complete the purchase in the meantime until your client has shown a good title to the property.

All our clients' rights and remedies are in the meantime reserved."

19. Mr Chow reported the situation to the Plaintiff and sought its further instructions. The Plaintiff instructed him to rescind the purchase if the Defendant failed to provide a good title on or before the scheduled completion date.

20. At about 4 p.m. on the same day, Mr Chow received from Norman Yung & Co. a letter dated 7th December 1992 together with plain copies of the six title deeds. The letter stated, inter alia, as follows:-

"We refer to your letter to us dated 4.12.1992 and write to inform you that your draft assignment of the above property has been duly approved by us without amendment. Kindly also let us have your draft undertaking for our approval at your earliest convenience. We also send you herewith copies of the relevant title deeds and documents as requested in your letter to us dated 30.10.1992 for your perusal and hereby also undertake to let your have the certified copies and/or original of the same as soon as we received the same hereof."

21. Mr Chow said that no further title deeds or documents were received prior to 5 p.m. on 7th December 1992 and in the circumstances, the Defendant had failed to prove his title before the scheduled completion date.

22. In accordance with the Plaintiff's instructions, he wrote to Norman Yung & Co. on 8th December 1992 advising them of the Plaintiff's election to rescind the purchase of the property.

23. Under cross-examination, Mr Chow said that when the documents arrived at around 4 p.m., he did not peruse all of them; he had taken instructions from his client, and his instruction was that if the vendor failed to show good title as provided in the Agreement, the purchaser would proceed to rescind the contract. He did not inform Norman Yung & Co. about this on 7th December 1992 because the Plaintiff did not have the right to make the election then and the time provided in the Agreement for the completion of the sale was 5 p.m.

24. On 4th December 1992, in the conversation with Mr Leung, Mr Chow said that they did not discuss about certified documents, they talked about title deeds or " " (kai). The agreement reached was that if the Defendant was not able to deliver the six title deeds in accordance with the provisions of the Agreement and if the time did not allow him to peruse those documents, Mr Leung would give him time to peruse the documents and Mr Leung would not insist on the day of completion. Mr Chow, however, did not agree to postpone the completion.

25. Mr Chow agreed that he had asked Mr Leung to supply him with copies of the documents because the usual practice was for the vendor's solicitors to assist the purchaser's solicitors by supplying them with copies of documents so that they may have time to read the documents. When asked whether it was unusual to complete the sale even if the original documents were not supplied, Mr Chow replied that it would depend on the nature of the documents. In the present case, the missing documents were important documents. They were assignments from the vendor's predecessors to the vendor. There was also a charge. The original documents should be with the vendor at all times. Mr Chow said that he insisted on the production of the original documents because the vendor's obligation was to produce the original title deeds and his inability to produce the title deeds cast serious doubt on the title. Mr Chow denied that he sent the draft assignment because he wished to complete the purchase on a later day, if not on 7th December 1992.

26. Mr Chow said that the Plaintiff had in fact agreed to purchase other properties in Kam Wah Building. Three of the properties were handled by Norman Yung & Co. They were Flat 2, 24th Floor, Block A ("the 24th floor flat"); Flat 3, 8th Floor, Block B ("the 8th floor flat") and the property. In respect of the 8th floor flat the sale was completed even though there were missing title deeds. The missing documents were Modification Letter Memorial No.490499 and Deed Poll Memorial No.550308 ("the two documents"). Mr Chow said that requisition was satisfactorily dealt with in that flat. Although he did not receive the certified copies of the two documents on the completion date, he was satisfied with the undertaking by the vendor's solicitors that they would supply the certified copies in due course. The two documents related to the whole of the development of the Kam Wah Building whereas the six title deeds related exclusively to the property. He explained that he was not worried about the two documents transaction because they should be in existence before the completion of the development of the building. The vendor would not have the original documents and they should be with the developer. The documents had been duly registered in the Land Registry and he had had an opportunity of examining the certified copies of the two documents in relation to the purchase of the 24th floor flat. The sale of the 8th floor flat was completed on 30th November 1992 with an undertaking by Norman Yung & Co. to supply certified copies of the two documents.

27. Mr Leung Chi Ming, Thomas ("Mr Leung") was a conveyancing clerk formerly in the employ of Norman Yung & Co. On 19th October 1992, Norman Yung & Co. received instructions from two of its clients, namely the Defendant and one Mr Chow Kui Kwong. Both of them would like to sell their properties to the Plaintiff. The completion date for the sale of the Defendant's property was 7th December 1992 while the completion date for Mr Chow Kui Kwong's property (i.e. the 8th floor flat) was 30th November 1992. Mr Leung handled the sale under the supervision of a solicitor. He has 6 years experience as a conveyancing clerk. Upon receipt of the instructions he requested the mortgagees to supply the title deeds in order to produce the same to the Vivien Chan & Co.

28. On 3rd November 1992 he received the title deeds of the 8th floor flat from the mortgagee's solicitors, Gallant Y.T. Ho & Co. and he sent them to Vivien Chan & Co. on 12th November 1992.

29. On 26th October 1992, he received the title deeds of the Defendant's property from Tsang, Chan & Wong, the mortgagee's solicitors, and he sent them to Vivien Chan & Co. on the following day.

30. On 26th November 1992, four days before the completion of the sale of the 8th floor flat, he received a letter from Vivien Chan & Co. dated 25th November 1992 enclosing the draft assignment of the 8th floor flat and the draft undertaking for their approval. Vivien Chan & Co. suggested to them that they should undertake to send the certified copies of two title deeds namely the Modification and the Deed Poll within seven days when they received the same from the Land Registry.

31. Mr Leung said that the suggestion "was in accordance with the solicitors practice that if some documents were not available on completion, solicitor may undertake to deliver them after completion. It was operated on the extent that the Vendor shall be relieved from producing the original or the certified true copy thereof. Such waiver of right was an acceptable practice and was not unusual in our daily conveyancing transaction". Mr Leung said that "he took it that the purchaser should not raise objection to the title on the missing documents and at the same time agreed not to exercise the right of rescission even though the certified true copy title deeds were produced after the completion date. This kind of arrangements sometimes would happen when the purchaser had made his own search at the Land Registry".

32. In view of the above, he was satisfied with the purchaser's suggestion. The draft undertaking was duly approved, the sale and purchase of the 8th floor flat was completed as scheduled. Certified copies of the missing title deeds were sent to Vivien Chan & Co. after the completion of the sale.

33. In respect of the Defendant's property, Mr Leung said that he received the letter of 30th October 1992 from Vivien Chan & Co. on or about 1st November 1992. He then realised that seven documents (apart from the six title deeds, the letter also asked for the certified copy of Modification Letter Memorial No.490499) were missing from the bundle of documents which he had received from the mortgagee's solicitors. He had no idea as to why they were missing because the whole bundle of title deeds were passed from the mortgagee's solicitors to Norman Yung & Co. and then from Norman Yung & Co. to Vivien Chan & Co. He did not know whose fault it was. He did not check the deeds. Instead of going back to the mortgagee's solicitors for the missing title deeds, the usual way to remedy the situation was to apply to the Land Registry for a set of certified copies of the missing deeds. He understood that it would take about two to three weeks for the certified copies to be issued. For the purpose of proving title, certified copies were as good as original deeds. He therefore telephoned the search agency Vastkin Limited to obtain certified copies of the missing deeds.

34. On 4th December 1992, he saw the letter from Vivien Chan & Co. of 2nd December 1992 reminding him of the missing documents. He discovered then that the certified true copies of the title deeds had not been sent to him by Vastkin Limited. He immediately telephoned Vastkin Limited but was told that his order for the certified true copy deeds was mislaid. He realised that the completion date was due in three days and he had no time to wait for another set of certified copy deeds to be issued. A practical solution was to obtain a set of plain copy deeds from the Land Registry which could be done in two to three days time and to undertake to produce the certified copies to the purchaser's solicitors after the completion.

35. He immediately telephoned Mr Chow as he remembered on the completion of the 8th floor flat one week ago, Vivien Chan & Co. had suggested that the certified true copy deeds were to be sent to them after the day of completion. Mr Leung informed Mr Chow all about this and asked whether he would agree with his suggestion. Mr Leung asked Mr Chow whether he would proceed to complete on the scheduled date or whether he would need a postponement. Mr Chow said that he agreed with Mr Leung's arrangement provided that Norman Yung & Co. send a set of the plain copy deeds to him as soon as they could so that he would have time to peruse the documents. Mr Chow added that two days was sufficient and if there was no problem with the title, they could complete within two days of the delivery of the copy deeds. Mr Chow further said he would let Mr Leung have the draft assignment for approval and Mr Leung should give him instructions on the cheques.

36. In the afternoon later on the same day, Mr Leung received a fax letter from Mr Chow confirming the conversation. He noticed from the letter that Vivien Chan & Co. was not asking for postponement of the completion date nor threatening rescission of the Agreement because of the Defendant's inability to provide the original or certified true copies of the deeds. He took it that Vivien Chan & Co. was satisfied with the arrangement. He telephoned his client and asked him to come on the day of the completion to execute the documents.

37. In the morning of 7th December 1992, Mr Leung received the copy title deeds from Vastkin Limited. He immediately delivered the same by hand to Vivien Chan & Co.

38. Mr Leung also telephoned Mr Chow informing him that the copy deeds were forthcoming. Mr Chow answered him that he needed time to examine the title deeds to see whether the title was good before they could sign the documents.

39. At about 3:06 p.m. he received a letter from Vivien Chan & Co. saying that they still had not received the title documents. He immediately telephoned Mr Chow and was told that the documents had arrived and he was in the process of perusing the documents. An hour later he still had not heard anything from Vivien Chan & Co. He concluded that they might assume the completion had to be postponed to the following day. Mr Leung told his client to go home and return the next day.

40. On 8th December 1992, to his surprise, Mr Leung received a faxed letter from Vivien Chan & Co. informing him that the Plaintiff had given instructions to rescind the Agreement on the ground that the certified true copy deeds were not sent to them and alternatively the vendor had failed to prove title. The letter of 8th December 1992 from Vivien Chan & Co. stated, inter alia, that:-

"We refer to our letter dated 7th December 1992 and note that your client has failed to show a good title to the above property in accordance with Clause 11 of the Agreement for sale and purchase dated 29th October 1992 by 5 p.m. on 7th December 1992, the time stipulated for completion of the sale. The said Clause 11 expressly provides that 'the vendor shall give good title to the property (and) shall prove his title to the property at the vendor's expense and shall at the like expense make and furnish to the purchaser such certified copies of any deeds or documents of title as may be necessary to prove such title.

It is noted that despite our letter dated 30th October 1992 and our subsequent reminders dated 2nd and 4th December 1992, as well as the fact that time is of the essence of the sale pursuant to Clause 14 of the Agreement for Sale and Purchase you still have not sent us the title deeds and documents as required to prove your client's title. We further note that your letter dated 7th December 1992 only reached us at 4 p.m. on 7th December 1992 and its enclosures are only plain copies of the title deeds and documents required.

We are therefore instructed to advise that, pursuant to Clause 18 of the Agreement for Sale and Purchase, our client has elected to rescind and terminate the Agreement for Sale and Purchase forthwith."

41. Mr Leung reported the matter to his solicitor and he also explained to the Defendant what had happened in the past two months and asked whether he would agree to return the deposit to the Plaintiff. The Defendant said that he was not happy at all with the decision of the Plaintiff. He believed that it was only an excuse for the Plaintiff to pull themselves out of the property slump. He said he would not return the deposit.

42. Mr Leung had not heard anything further from Vivien Chan & Co. that afternoon. He was instructed by the Defendant to write to the Plaintiff warning it of the forfeiture of the deposit and pressed for completion. The letter of 8th December 1992 (page 24 of the agreed bundle) stated that:-

"We refer to your letter of even day and are surprised to note that your client elects not to complete the sale and purchase as agreed. In the afternoon of 7th December 1992, our Thomas Leung telephoned your Mr Chris Chow concerning whether there was any questions on the title deeds that were sent to you on 7th December 1992. Your Mr Chow replied that he was in the course of perusing the same and would advise your client to complete if there was no problem on the title deeds and documents supplied. As a matter of fact, on 7th December 1992, your client has not mentioned anything that he would not complete the sale and purchase due to the alleged failure to prove title on the part of our client. Furthermore, even at around 3:06 p.m. on 7th December 1992, we received a letter from you confirming the position that your client is still intended to complete pending the supply of the relevant title deeds and documents. Nothing in that letter ever mentions anything that your client would not complete the sale and purchase.

In the premises, we take the view your client is not entitled to rescind the relevant Sale and Purchase Agreement. Your client has waived his contractual right if any under Clause 11 of the relevant Sale and Purchase Agreement. Your allegations in your aforesaid letter are hereby denied.

Please be advised that if your client do not complete the sale and purchase of the above property by 6:00 today, all deposit paid hereunder will be absolutely forfeited and the said sale and purchase against will be discharged completely.

Meanwhile, our client's rights hereby expressly reserved."

43. There was another letter dated 8th December 1992 from Norman Yung & Co. to Vivien Chan & Co. (page 20 of the agreed bundle) which stated that:-

"We refer to our letter to you dated 7th December 1992.

We would like to draw to your kind and urgent attention that our client did prove his good title to the subject property and your client is hereby demanded to complete the purchase of the subject property on today before 5 p.m. and our client's rights pursuant to Clause 17 of the Agreement dated 29.10.1992 is hereby reserved.

We hereby express our gratitude for your kind and urgent attention to this matter in advance."

44. On 9th December 1992, Mr Leung received a further letter from Vivien Chan & Co. which stated that:-

"We refer to your letter dated 8th December 1992.

Our Mr Chow had two telephone conversations with your Mr Leung on 7th December 1992, one before your letter of the same date was received by us and the other after the said letter was received.

In the first telephone conversation, your Mr Leung called and advised that you had just received the copy documents from Vastkin and that you would send us the same immediately. Our Mr Chow merely replied that he would peruse the copy documents as soon as they were received, without any suggestion whatsoever that original title deeds could be dispensed with.

Our letter dated 7th December 1992 faxed to you at 3:06 p.m. clearly set out our position. We there noted the non-receipt of the title documents requested by us in our letter dated 30th October 1992 and advised you that we were not in a position to advise our client to complete the purchase in the meantime. We also expressly stated that all our client's rights and remedies were in the meantime reserved, which rights and remedies of course include the right to rescind under Clause 18 of the Agreement for Sale and Purchase. You did not challenge this on 7th December 1992, as clearly you have no ground to do so, and your allegation that our client has not mentioned anything on 7th December 1992 that he would not complete the sale and purchase due to your client's failure to prove title cannot be substantiated.

Sometime after your said letter was received by us, your Mr Leung again called our Mr Chow and enquired whether the same had been received by us. Our Mr Chow confirmed receipt of the said letter. Our Mr Chow, however did not state that he would advise our client 'to complete if there was no problem on the title deeds and documents supplied.' Our Mr Chow merely said that he would peruse the copy documents as soon as he could to revert. Your Mr Leung then asked when our client would be prepared to complete. Our Mr Chow replied that we would have to approve your client's title first, bearing in mind our repeated requests for title deeds have been ignored, and that we would let you know if there was any problem on title which could be detected from the copy. documents supplied to us in the meantime.

We would also refer to the telephone conversation between your Mr Leung and our Mr Chow on 4th December 1992 when our Mr Chow expressly stated that it was your client's duty to prove good title and mere delivery of copy documents would not suffice and that we have to be satisfied in all respect with your client's title. Your Mr Leung expressly agreed with our Mr Chow on that point.

We do not understand how you could allege in your letter dated 7th December 1992 that you had received a letter from us 'confirming the position that (our) client is still intended to complete pending the supply of the relevant title deeds and documents'. If there was ever such a letter from us to that effect, please show it to us. All our client's rights and remedies have been expressly reserved by our letter dated 7th December 1992.

We also reject your allegation that our client has waived its contructual right under Clause 11 of the Agreement for Sale and Purchase with respect to your client's obligation to prove good title and would be interested to know the evidence you have in support of such allegation.

Our client is entitled to rescind the Agreement for Sale and Purchase for the reason stated in our letter dated 8th December 1992, which decision was made after having considered all its rights and remedies, we are unaware of any rule of law which requires our client to give your client prior notice of its intention to rescind, in particular when your client is in blatant breach of his obligation to prove title and the Sale and Purchase Agreement provides for completion on 7th December 1992 and makes time of the essence. In any event, we are of the view that your client has already been adequately warned of its obligation to prove title by our two letters dated 2nd and 4th December 1992. We do not understand why your client has chosen to ignore our warnings to his detriment.

We repeat our demand for return of all the sums mentioned in our letter dated 8th December 1992 by 5:00 p.m. today."

45. Mr Leung explained the matter to the Defendant. Again the Defendant refused to return the deposit. Mr Leung passed the papers to his solicitor and the matter was taken over by his solicitor.

46. By a letter dated 10th December 1992, Norman Yung & Co. wrote to Vivien Chan & Co. as follows:-

"We refer to your letter dated 9th December 1992. All the allegations contained in your said letter are hereby denied. As your client failed to complete the sale and purchase by 6 p.m. on 8th December 1992, all the deposit paid by your client has been absolutely forfeited. The Sale and Purchase Agreement dated 29th October 1992 is terminated accordingly. Our client shall sell the above property for third party and look for your client for all the loss and damages he may suffer."

47. Under cross-examination, Mr Leung said that he had made a note of the conversation with Mr Chow on 4th December 1992 in the conveyancing file but the note might have been lost. In this conversation with Mr Chow, he told Mr Chow that the six title deeds could not be given to him for his perusal and he would make photocopies at the Land Registry and supply him with the copies. After this conversation, he received the letter of 4th December 1992 from Mr Chow. He called Mr Chow again because the letter stated that Norman Yung & Co. would give the title deeds to Vivien Chan & Co. Mr Leung asked Mr Chow if the transaction would be completed there was no problem with the documents. Mr Chow replied that the sale would be completed in two days of the receipt of the title deeds subject to any problem with the title deeds. After this coversation he did not write to the Plaintiff's solicitors confirming this agreement. He said there were two reasons for not writing. Firstly, there was another property in Kam Wah Building handled by Mr Chow and Mr Chow had agreed to complete the transaction without looking at the relevant documents. The second reason was that "there are several days between 4th and 7th. The original completion date should be 7th. According to the oral agreement, the completion should be two days from the receiving of the title deeds. If we can deliver the copies to Mr Chow on 6th, then the date of completion would be on 8th and that would bear some effect on my client."

48. Mr Leung agreed that on 4th December 1992, he had not reported to the Defendant of the possible extension of the completion date. He agreed that he had no authority to vary the completion date without reference to his client.

49. He agreed that in the letters of 7th December 1992 and 8th December 1992 (page 20 of the bundle) from Norman Yung & Co. to Vivien Chan & Co. no reference was made to the oral agreement of 4th December 1992. These two letter were drafted by him. The letter of 8th December 1992 (page 24 of the bundle) from Norman Yung & Co. to Vivien Chan & Co. was prepared by his supervising solicitor based on the information supplied by him. He agreed that this letter also did not refer to the oral agreement of 4th December 1992. When asked about the absence of reference to copy documents or certified true copies in that letter, Mr Leung said that there was an understanding that Mr Chow would peruse the photocopies. If he required the certified copies it would take three weeks for the same to be obtained from the Land Registry, so he told Mr Chow that he would let him have the photocopies. Mr Chow did not object to this or insist on the production of certified copies.

50. When asked whether it was his belief that plain copies were sufficient for proof of title, his replied was that "this is a daily conveyancing practice". When asked if it was his belief that the purchaser was obliged to accept plain copies because of the conveyancing practice, Mr Leung's reply was; "But it is a copy title deed from the Land Registry. Title deed would show who is the owner. They got the register of those. Title and title deeds are two different things. It doesn't mean that if I had the title deeds in my hand, I would be the land owner."

51. He maintained that a vendor could discharge the obligation of proving title by producing the plain copies of the documents if they came from the Land Office.

52. Mr Leung said that there were two ways of dealing with missing title deeds. The first was to write to the mortgagee's lawyer to ask for the deeds. However, this would take time because "theoretically, the set of title deeds and documents would be given to the bank when nothing is missing, so the legal representative who is responsible for redeeming the mortgage would not be responsible to check to see if there is any documents missing. So it would be a waste of time to write to him." The alternative was to get copies from the Land Registry first and to obtain certified copies later. His practice was to go to the Land Office and not to the mortgagee's solicitor. Up to the present moment, he was not aware whether the original documents were still in existence. He agreed that the documents might not be missing and they might have been with the mortgagee's solicitor.

53. Mr Leung was asked about paragraph 3(i) of the Defence and Counterclaim which stated that:-

"On 4th December 1992, one Mr Thomas Leung, ('Leung') of the Defendant' solicitors telephoned one Mr Chris Chow ('Chow') of the Plaintiff's solicitors informing him that the Deeds were coming from the Land Office. Over the telephone, Chow replied that his client would complete the sale and purchase within 2 days from the date of receipt of the Deeds. Chow further requested Leung to provide him as soon as possible the manner as how the cheque should be split upon completion and in any event at least one day earlier because the Plaintiff would require time to prepare the cashier order for completion themselves."

He said the word "Deeds" in that paragraph meant plain copies because the original would not be coming from the Land Office and there would not be enough time to obtain the certified copies.

54. He denied that there was no agreement between him and Mr Chow. He said he had informed Mr Huen, his solicitor about the agreement but he did not know why the agreement was not referred to in the correspondence; it was the solicitor who signed the correspondence.

Vendor's obligation

55. Clause 10 of the Agreement provided that such of the documents of title as relate exclusively to the property shall be delivered to the purchaser. Clause 11 also provided that the vendor shall give good title to the property.

56. The obligation of a vendor in sale of land is two-fold. Firstly, he must show a good title to the property. This he could do by the production of all the relevant documents relating to his good title. Secondly, he is required to make or prove a good title by proving it as a matter of evidence (see for example Ng Chek Kok v. Kiu Wai Ming [1992]1 HKLR 5).

57. In Selkirk v. Romar Investments Limited [1963]1 WLR 1415, the Privy Council held that a purchaser's solicitor should seek to obtain for his client the best evidence that could be obtained in confirmation of the title offered.

58. In Goldenfix Properties Limited v. Cheer Hope Investments Limited, MP No.2940 of 1992, Godfrey, J. (as he then was) held that:-

"In my judgment, in a case (such as this) where a vendor is bound to provide proof of due execution (i.e. a case where as I hold there is no presumption which is of assistance), the purchaser is entitled either to the best evidence, or to such an explanation why the best evidence is not available as, in effect, to make the secondary evidence tendered the best available evidence."

59. When a deed or other documents of title has been lost or destroyed, secondary evidence of its contents and execution may be given upon proof of loss or destruction, and, if that evidence is clear and cogent, a purchaser cannot object to a title depending on the lost document (Para.158, Volume 42, Halsbury's Laws of England, 4th Ed.).

Was the vendor's obligation discharged?

60. The Defendant argued that he had shown and proved a good title to the property by tendering the plain copies of the six title deeds. Mr Leung suggested that according to the conveyancing practice that constituted proof of good title since the documents were obtained from the Land Registry. This is plainly wrong. Where the court is satisfied that a title document existed and that all reasonable efforts had been made by all relevant persons who had or might have possession of it, the court can allow secondary evidence to be produced. In the present case, Mr Leung did not even make any enquiries with the mortgagee's solicitors as to the six title deeds. The original of the six title deeds may or may not exist. However, no attempt had been made to ascertain their whereabouts. There is no evidence showing that they had been lost or destroyed so that secondary evidence in the form of plain copies may be used.

In the absence of the original title deeds and in the absence of an explanation why the originals were not available, the obligation of the Defendant was clearly not discharged by the production of the plain copies of the six title deeds to the Plaintiff.

Did the Plaintiff's solicitor agree to complete the transaction?

61. The Defendant claimed that on 4th December 1992, Mr Chow agreed that the sale would be completed within two days from the receipt of the copy documents with an undertaking by Norman Yung & Co. to provide certified true copies of the title deeds after the completion of the sale. The Defendant further relied on the oral agreement reached on 7th December 1992 when Mr Chow agreed that if there was no problem with the copy deeds, the Plaintiff would complete the purchase of the property.

62. After considering all the evidence in this case, I do not accept that there were such agreements between the parties. I accept Mr Chow's evidence that he had not agreed to dispense with the production of the original of the six title deeds and to complete the sale with the undertaking of Norman Yung & Co. to supply certified copies of the title deeds after the completion. I accept his evidence that he had asked Mr Leung to supply him with plain copies of the title deeds so that he could peruse them in order to save time and to raise requisitions. The authenticity of the six title deeds would be verified upon the production of the original documents. The reference to copy title deeds in the letter of 4th December 1992 supports rather than contradicts his evidence. I accept his explanation that there was a difference between this transaction and the transaction in respect of the 8th floor flat in which he had agreed to complete the sale with an undertaking by Norman Yung & Co. to supply him with certified copies of two missing title deeds after the completion. He had seen those documents previously in another transaction and those two documents related to the development of the whole building whereas the six title deeds related exclusively to the property. His evidence was not shaken in cross-examination.

63. The burden of proving the existence of the agreements lies with the Defendant. Mr Leung agreed that without the authority of the vendor, he could not extend the completion date of the transaction. Quite surprisingly, he did not report to the Defendant of the agreement he reached with Mr Chow on 4th December 1992. On 7th December 1992, subsequent to the telephone conversation in which Mr Chow told him that he was reading the documents, Mr Leung heard nothing further from Vivien Chan & Co. and he concluded that Vivien Chan & Co. might assume the completion was to be postponed to the next day. If the agreement reached was that the completion was to be 2 days after the receipt of the copies, there was no reason to assume that the completion was to be carried out on the following day and not 2 days after the delivery of the documents. In this connection it is noted that while paragraph 3(ii) of the Amended Defence & Counterclaim pleaded that on 7th December 1992 Mr Chow informed Mr Leung if there was no problem on the deeds, the Plaintiff would complete the sale, in the letter of 8th December 1992, Norman Yung & Co. wrote that,

"Mr Chow replied that he was in the course of perusing the same and would advise your client to complete if there was no problem on the six title deeds and documents supplied".

Was there an agreement to complete the sale or did Mr Chow merely said he would advise his client to complete the sale? Mr Leung had never clarified this and in his witness statement which the parties agreed was to be used as evidence in chief, he did not refer to the agreement reached on 7th December 1992.

64. The agreements relied upon by the Defendant had never been raised in the correspondence between the parties. The letters from Norman Yung & Co. dated 7th, 8th and 10th December 1992 did not refer to the agreements. Mr Leung's explanation why he did not confirm by letter the agreement of 4th December 1992 was in fact not an explanation at all. He said that he had related the events truthfully to the handling solicitor but he could not give any explanation why the agreements were not referred to in the correspondence. If there was indeed an agreement that the parties would complete the transaction by the use of the plain copies with an undertaking by the Defendant to supply certified copies later, this would provide a complete answer to the Plaintiff's election to rescind the Agreement. One would have thought that any solicitor properly appraised of the facts would immediately raise this matter when the Plaintiff decided not to complete the sale. The handling solicitor was not called to give evidence. I am not satisfied that the Defendant has discharged this burden.

Relief

65. In the circumstances, I am satisfied that the Plaintiff is entitled to the relief it seeks in its claim. I am satisfied that it is entitled to:-

(1) a declaration that good title to the property had not been shown in accordance with the Agreement;

(2) a declaration that the Defendant do indemnify the Plaintiff against any claims of the estate agent in the sum of $9,800 or any judgment awarded in favour of the agent in relation thereto.

The Plaintiff was required to pay the agent $9,800 as commission and this claim was not disputed by the Defendant.

(3) the return of $80,000 being initial deposit paid on 19th October 1992, $18,000 being further deposit paid on 29th October 1992 and $14,700 being stamp duties.

(4) the cost of the investigation of the title in the sum of $11,580.

The particulars of the cost are set out in the fee note of the Plaintiff's solicitors dated 16th December 1993 (page 86 of the Agreed Bundle.) This item is not challenged by the Defendant.

66. Mr Warren Chan, Q.C., counsel for the Plaintiff, relying on Komala Deccof & Co. S.A. and Others v. Perusahaan Pertambangan Minyak Dan Gas Bumi Negara (Pertamina) [1984] HKLR219 asked for interest to be awarded at 1% over the prevailing prime rates from 8th December 1992 which was the day of demand of the return of the money. In commercial cases, the interest is intended to reflect the rate at which the plaintiff would have had to borrow money to supply in place of that which was withheld.

67. The principle should apply in the present case. There shall be interest on $80,000, $18,000 and $14,700 from 8th December 1992 at 1% over the prevailing prime rates until judgment and thereafter at judgment rate until payment. In respect of the sum of $11,580 which was the cost of the investigation of the title, it is not clear when this sum was being paid. In the circumstances, I would award interest at judgment rate on this sum from judgment until payment.

68. The Plaintiff is entitled to the cost nisi of this action.

69. While originally the Defendant relied on a Counterclaim, this was abandoned at the hearing. The Counterclaim is therefore dismissed.

70. There shall be judgment for the Plaintiff accordingly.