CHAN HOI MIU v. LAW PROMISE AND ANOTHER

DCCJ 3592/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3592 OF 2011

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DECISION

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1.  The 1^st and 2^nd defendants are the registered owners of a property commonly known as Flat 2 4^th Floor Block C, Yue On Court, 3 Yue On Court Road, Ap Lei Chau, Hong Kong (‘the Property’).  They derived their interests under the terms of an order of the Family Court on their parents’ divorce in FCMC 8083 of 1995.

2.  On 21 February 2011, the 1^st and 2^nd defendants entered into an agreement for sale and purchase of the Property as the vendors with the plaintiff as the purchaser at a purchase price of HK$2,438,000.00 (‘the Agreement’).

3.  Under Clause 12(1) of the Agreement, the vendors are required to give title to the Property in accordance with section 13A of the Conveyancing and Property Ordinance (cap 219)

4.  Under Clause 14 (1) of the Agreement, requisitions or objections of the title have to be delivered in writing to the vendors’ solicitors within 7 days after receipt of the title deeds and documents by the purchaser’s solicitors.

5.  Clause 14 (2) further provides :

“If the Purchaser shall make and insist on any objection or requisition in respect of the title conveyance or any matter appearing on the title deeds or otherwise which the Vendor shall be unable or (on the ground of difficult, delay or expenses or on any other reasonable ground) unwilling to comply with or if the title of the Vendor shall be defective, the Vendor shall notwithstanding any previous negotiations or litigation be at liberty on giving to the Purchaser or his solicitors not less than seven (7) working days’ notice in writing to annul the sale in which case, unless the objection or requisition shall have been in the meantime withdrawn by the Purchaser or the same shall have been complied with by the Vendor, the sale shall at the expiration of the notice be annulled and the Purchaser shall in that event be entitled to the return of all deposits paid for purchase of the Property forthwith but without costs or compensation and, if that return is made within 7 days, without interests.”

6.  Clause 17 of the Agreement provides:

“if the Vendor (other than due to the default of the Purchaser) shall fail to complete the sale in accordance with any of the terms and conditions of this Agreement, the deposit money paid by the Purchaser to the Vendor shall be returned forthwith to the Purchaser in full who shall also be entitled to recover from the Vendor such damages (including but not limited to the stamp duty paid by the Purchaser) (if any) as the Purchaser may sustain by reason of such failure on the part of the Vendor and it shall not be necessary for the Purchaser to tender an assignment to the Vendor for execution before taking proceedings to enforce specific performance of the agreement or for damages for breach of the agreement.”

7.  Clause 19 of the Agreement specified that time shall be of the essence.  The completion date of the sale under the Agreement was 27 April 2011.  Pursuant to the Agreement, the plaintiff paid a deposit of $150,000.00 and a further deposit of $93,800.00.

8.  On 3 March 2011, the plaintiff’s solicitors raised requisition upon receipt of the title deeds and documents from the defendants’ solicitors.  The requisition was as follows:

“Under the said Order dated 22 February 1996 (under FCMC 8083/1995) and re-amended on 17 October 1997and 22md April 2010 (the said Order”), the name of your clients is “Law Promise formerly known as Wan Yu Ting (温雪霆 )” and “Law Agreement McGrady formerly known as Wan Yu Ching (温雨晴)”.  However, the same appeared in Deed of Assignment Memorial No. 10120202330030 (“the said assignment”) and the Formal Agreement for Sale and Purchase dated 21 February 2011 is “Law Promise formerly known as Wan Yu Ching  (温雨晴)” and “Law Agreement formerly known as Wan Yu Ting (温雨霆)”. Besides the date of the said Assignment in page 1 thereof is “5h” day of November 2010 and the name of the Registrar of High Court in page 6 is missing. In the circumstances, please (i) clarify the aforesaid discrepancy; (ii) let us have the documentary evidence issued by the Immigration Department of Hong Kong to prove your client’s identity; (iii) let us have a sealed copy of the said Order duly  re-amended (if the name of your clients is incorrect under the said Order ); (iv) a Confirmatory Assignment duly stamped and duly signed by all parties concerned to rectify the aforesaid mistake and to remove any doubt arising from such mistake; (v) the Consent Letter given by Housing authority in respect of such confirmation Assignment and (vi) the Approval Letter issued by the Assistant Director (Legal Services) (“AD(LS)”) together with draft confirmatory Assignment duly approved by AD(LS); (vii) a completed Memorial and your cheque covering the registration fees of the said Confirmatory Assignment, Consent Letter and Approval Letter; (viii) Sealed copy Order dated 19 April 2010 as referred to in page 6 of the Said Assignment.”

9.  On 26 April 2011, the defendants’ then solicitors Messrs Tam Pun and Yip (“TPY”) wrote to the plaintiff’s solicitors requesting a postponement of the completion date to 3 May 2011 and gave an undertaking by letter to: 

“(1) Procure Messrs Lo, Wong & Tsui (the solicitor for the petitioner under FCMC 8083/1995) to have the re-Amended Order amended;

(2) Procure Messrs Lo, Wong & Tsui to apply for a consent letter from Hong Kong Housing Authority to enter into Confirmatory Assignment;

(3) Procure Messrs Lo, Wong & Tsui to have the Confirmatory Assignment be approved by Hong Kong Housing Authority;

(4) Procure Messrs Lo, Wong & Tsui to apply for a separate Order for execution of Confirmatory Assignment by the Registrar on behalf of Wan Kam Tung;

(5) Procure the Vendors to enter into the confirmatory Assignment duly approved by Hong Kong Housing Authority and forward the signed Memorial thereof together with its registration fee payable to the purchaser.”

10.  TPY also confirmed to the plaintiff’s solicitors by letter on the same day that an application to amend the said Order had been taken out to correct the names of the defendants and agreed to supply the same to the plaintiff’s solicitors within 21 days.  The plaintiff expressed her willingness to complete the purchase of the Property subject to good title being proved.

11.  On 3 May 2011, the parties agreed to postpone the completion date to 8 July 2011 to enable the defendants to show good title to the Property.  At the same time, the plaintiff expressly reserved her right to damages suffered as a result of the postponement of the completion date.  The plaintiff, however, claimed that time remained of the essence in spite of the postponement of the completion date.

12.  On 8 July 2011, Messrs Lo, Wong & Tsui, who had by then taken over as the defendants’ solicitors, informed the plaintiff’s solicitors by letter claiming it would take several months for the Housing Authority to approve and re-execute the Confirmatory Assignment to rectify the Chinese names of the vendors to the re-amended names that appeared in the re-re-amended order in FCMC 8083/1995of 30 May 2011, served a 7 day notice on the plaintiff requesting the plaintiff to withdraw the requisition and to complete the sale of the Property within 7 days.  A second letter dated 19 July 2011 was sent by the defendants’ solicitors requesting the plaintiff to withdraw the requisition and to complete the sale within 7 days with a demand for the return of title deeds informing the plaintiff that the deposit would be returned to her should she refuse to complete the purchase.  On 27 July 2011, the plaintiff’s solicitors returned the title deeds to the defendants’ solicitors.

13.  On 2 August 2011, the plaintiff accepted the defendants’ revocation of the Agreement and the return of deposit.  However, she claimed the defendants’ rescission was wrongful and that she is entitled to be compensated for the loss and damages sustained as a result of the rescission.

14.  The defendants denied the plaintiff is entitled to damages claiming the requisition raised was unreasonable and improper as it was clear to the plaintiff that the title deeds contained a typographical error and that it was reasonable to request the plaintiff to withdraw the requisition failing which the defendants were entitled to rescind the Agreement.  The defendants asserted that they have shown good title to the Property in any event.

15.  In the present action, the plaintiff, in spite of having received the returned deposit, demanded damages and loss suffered claiming the defendants knew that she had intended to lease out the Property for rental income.  

16.  The issue in these proceedings is whether good title has been shown by the defendants and whether the plaintiff’s requisition was necessary and relevant.  The plaintiff has taken out an application for summary judgment on liability against the defendants under Order 14 rules 1 and 3.  The court is asked to determine if the defendants have a good defence on merits.

The Law on proving good title

17.  In the case of Kan Wing-yau & anor v Hong Kong Housing Society [1988] 2 HKLR 187, the Court of Appeal held that:

“the obligation on the vendor to prove title meant that the title proved must be one which can at all times, and in all circumstances, be forced upon an unwilling purchaser in an action for specific performance. The court would not force a doubtful title on a purchaser. A doubtful title was one which would expose the purchaser to risk or hazard. The court must be satisfied beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the incumbrance it was only if the blot on the title were purely theoretical and not a practical blot that it could be ignored.” (pp. 194E and 198B)

18.  At page 194 of the report, Clough JA said:

“A useful modern definition of the obligation of a vendor to make good title is that of Wilberforce, J. in re Stirrup’s Contract [1961] 1 WLR 449 at p 454 where he indicated that:

            “…… a purchaser is entitled to be satisfied that his vendor is seised of the estate which he is purporting to sell, in this case the fee simple, and that the vendor is in the position, without the possibility of dispute or litigation, to pass that fee simple to the purchaser.”

Wilberforce, J. considered that obligation to be discharged by the vendor’s document of title if it shows beyond doubt that the vendor “is in possession of the estate and that he is in a position to convey it without any blot or possibility of litigation to the purchaser.” In that case a question of law was involved.

In the M.E.P.C. case the House of Lords, having accepted that the court should not shrink from determining the rights of the parties on a vendor and purchaser summons where the question, whether a sufficiently good title had been shown, depended on a conclusion or inference as to fact, went on to lay down a stringent test which they held the vendors in that case had satisfied when making title. The test was expressed in the opinion of Lord Russell of Killowen at p. 220 C-D in the following terms:

“In my opinion if the facts and circumstances of a case are so compelling to the mind of the court that the court concludes beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the incumbrance, the court should declare in favour of good title shown.””

19.  In the Court of Final Appeal case of  Mexon Holdings Ltd v Silver Bay International Ltd [2000] 1 HKLRD 935, Litton PJ held at p.942F:

“First principles

A good title does not mean a perfect title, free from every possible blemish.  Whenever a question like this arises, it must be approached from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain.”

Whether the requisition was necessary and relevant

20.  There is no dispute that under clause 12 of the Agreement the plaintiff was entitle to raise requisition in accordance with section 13 of the Conveyancing and Property Ordinance.  The issue is whether the requisition raised was relevant and necessary.

21.  Mr Lam, counsel for the defendants, submitted that the case is fact sensitive and leave to defend should be granted.  He further submitted that the defendants have proved good title and the requisition was neither relevant nor necessary.  He relied on the examples of Sunluck International Development Ltd v Hing King Development Ltd [1997] 4 HKC 134, and Buildon Investment Co Ltd v Leung Sai Sum & anor [1989] 2 HKC 499.

22.  In the case of Sunluck, where two of the Chinese characters of the plaintiff’s name in the common seal of the company were different to that which appeared on the company chop, Le Pichon J (as she then was) decided in favour of the vendor on the basis that the agreement and the assignment in the earlier transaction of 1993 included the plaintiff’s business registration number and the business registration certificate which bore that number was that of the plaintiff with the Chinese name of “成利國際投資有限公司” but no company with a Chinese name of “成利國際發展有限公司”.  She found the facts left no doubt as to the identity of the purchaser in the 1993 transaction.

23.  In the Buildon case, Liu J (as he then was) held in favour of the vendor on the basis that the identity card issued before the will carried two different Chinese characters for the name and the assent and the subsequent conveyancing document had followed the identity card, that the composition of the second and third Chinese characters were close, they were phonetically identical.  He found the deed of assent would prima facie pass a good title, as the identity of the party may be ascertained from the indicia of identity afforded by the very deed itself.

24.  Each case must stand on its own facts.  This is particularly so in cases involving titles in conveyancing matters.  The present case is no exception.  Evidence which would assist the clarification of the identities of the vendors would lend assistance to the determination of whether a good title has been shown.  Further, evidence on the withdrawal of the undertakings would be relevant to determine if the purchaser was reasonable in rejecting the title..

25.  Lindley L.J. held in Re Heaysman’s and Tweedy’s Contract (1893):

“It is a general principle that a purchaser ought not to be forced to accept a doubtful title or to buy a lawsuit. In applying that principle, however, we must exercise our common sense, and see if the supposed lawsuit has any basis whatever. We must see if there is the slightest reasonable chance of any such lawsuit being instituted. If we come to the conclusion that the supposed lawsuit exists only in the imagination of the purchaser, we ought to disregard it, giving him the advantage of every reasonable doubt.”

26.  It is evident from the correspondences exchanged between the parties before the completion date that the defendants knew the names in Chinese of the vendors on the title documents were erroneous.  It was clear to the parties that the mistakes stemmed from the Family Court order in FCMC 8083 of 1995.  The defendants’ solicitors agreed to rectify the errors and seek to obtain an amendment of the order from the Family Court to be followed by the execution of a confirmatory assignment with the consent and approval from the Housing Authority.  This arrangement was accepted by the plaintiff who agreed to postpone the date of completion to 8 July 2011.  For reasons unexplained, the defendant decided on 27 July 2011 not to proceed with the sale if the plaintiff should insist on requisition being satisfactorily answered and to return the deposit.

27.  Clause 14 (2) of the Agreement provided that should the vendor be unable to (on grounds of difficulty, delay or expenses or on any other reasonable ground) or unwilling to comply with or if the title of the vendor shall be defective, he shall be entitled to give the purchaser 7 days notice in writing to annul the sale unless the purchaser should withdraw the requisition.  Clause 14(2) further provided that the vendor shall return the deposit within 7 days of the notice of annulment without costs or compensation and interest.  The defendant annulled the sale based on this clause in the agreement.

28.  The correspondences exhibited failed to disclose the reason why the defendants decided to annul the sale, it is not known if it was due to difficulties involved in proving good title or they were unwilling to comply with the terms of the Agreement.  Therefore, it will be necessary to find out if the defendants have proved good title beyond reasonable doubt and can invoke the provision under clause 14(2) at the trial for evidence to be adduced on whether the defendants were entitled to simply return the deposit without cost, compensation or interest to the plaintiff.

29.  For the aforesaid reasons, this action ought to proceed to trial.  I grant unconditional leave to defendants to defend and order costs of the application and the hearing to be costs in the cause with certificate for counsel.