LEUNG SHUK HAN AND ANOTHER v. NG CHUN SHING AND ANOTHER

HCMP 464/2002

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 464 OF 2002

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REASONS FOR JUDGMENT

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Introduction

1. This is a vendor-purchaser summons taken out by the plaintiffs (purchasers) pursuant to s. 12, Conveyancing and Property Ordinance (Cap. 219). At the end of the hearing on 16 April 2002, I dismissed this action indicating that reasons for doing so would be handed down later. They are as follows.

Background Facts

2. The background facts are undisputed and can be summarised as follows. The plaintiffs and the defendants entered into an agreement dated 28 December 2001 ("the Agreement") for the sale and purchase of a domestic unit at King Tin Court, No. 12 Chui Tin Street, Shatin, New Territories ("the Property"). The Property was previously purchased from the Housing Authority under the Home Ownership Scheme.

3. Completion was scheduled to take place on 16 February 2002. Deposits in the total sum of $114,500 were paid under the Agreement. Clause 9 of the Agreement, a clause usually found in sale and purchase agreements drafted by solicitors, provided that:-

"[The defendants] shall give and prove a good title to the Property in accordance with Section 13 of ... Cap. 219 ... ".

Further, clause 11 of the Agreement provided that requisitions on or objections to title were to be raised in writing within the prescribed time.

4. On 29 December 2001, the defendants' solicitors delivered the title documents to the plaintiffs' solicitors. Requisitions on title were then raised by the plaintiffs. By the time when this action was commenced, the only outstanding requisition on title was related to whether an assignment in May 1994 contravened the alienation restrictions of the Housing Authority. Because this is the crucial issue in this action, the relevant matters will be set out below.

5. S. 17B, Housing Ordinance (Cap. 283) stipulates that:-

"(1) Where-

(a) (i) land in an estate is sold under section 17A; ... and

(b) the person to whom the land is sold purports to ... assign or otherwise alienate it; and

(c) that person acts in breach of-

(i) any term or condition of the agreement for sale and purchase or any covenant in the deed of assignment relating to the land; ... , the purported ... assignment or other alienation, together with any agreement so to mortgage, charge, assign or otherwise alienate, shall be void".

It is undisputed in this action that the provisions of Cap. 283 apply to the Property and that its sale in November 1983 (referred to below) fell within s. 17A thereof.

6. As stated above, the Property was sold under the Home Ownership Scheme. The Housing Authority assigned the Property to one of the defendants' predecessors-in-title in November 1983. Subsequently, there was an assignment of the Property to another of the defendants' predecessors-in-title on 31 May 1994 (Memorial No. 765402) ("the May 1994 assignment"). A few days later, by a letter dated 6 June 1994, the Housing Authority stated:-

"In consideration of your payment of the premium assessed in the sum of $407,349.00 (receipt of which is hereby acknowledged), I confirm that the alienation restrictions as specified under the Schedule to ... Cap. 283 ... in respect of [the Property] are removed. You are advised to arrange for registration of this letter in the Land Registry".

It is unclear from the documents exhibited herein if the payment of premium took place before the date of the May 1994 assignment or after.

7. The relevant part of the Schedule of Cap. 283 referred to above used to be:-

"1. Subject to paragraph 4 of this Schedule, the purchaser shall not at any time alienate, convey, ... or purport to alienate, convey, ... or enter into any agreement to alienate, convey, ... the land sold other than to the Authority, ... unless-

(a)

...

(i) a period of 10 years has elapsed from the date of the first assignment of the land-

(A) from the Authority to any purchaser ... ,

	...
	... and

(b) the purchaser has first paid to the Authority the amount of the premium calculated under the following formula ... ".

No reliance has been placed by the defendants on para. 4 of the Schedule.

8. In view of the above, the defendants (correctly) accepted in this action that they had not established that the May 1994 assignment fell outside s. 17B, Cap. 283 and therefore had not been rendered void.

The Issues Herein

9. The only dispute between the parties herein was whether a document called "Deed of Confirmation and Ratification" dated 15 December 1995 (Memorial No. 852856) ("the Confirmation Deed") validly passed title to the assignees thereof. The Confirmation Deed was executed by the same parties as those who executed the May 1994 assignment. The material parts of the Confirmation Deed read:-

"WHEREAS:-

... This Deed is supplemental to [the May 1994 assignment] ...

... Doubt has arisen as to whether the Vendor has validly assigned [the Property] to the Purchaser by [the May 1994 assignment] And in order to remove such doubt, the Vendor and the Purchaser have agreed to enter into this Deed in manner hereinafter appearing.

NOW THIS DEED WITNESSETH as follows:-

... In pursuance of such agreement and in consideration of the premises the Vendor as beneficial owner ASSIGNS and CONFIRMS to the Purchaser All that [the Property] TO HOLD the same unto the Purchaser as Joint Tenants ... subject to the payment of the due proportion of the yearly Crown rent reserved by and the covenants conditions and provisos contained in the Crown Lease AND SUBJECT to and with the benefit of a Deed of Mutual Covenant ... ".

10. Counsel for the plaintiffs argued that the Confirmation Deed was invalid because:-

(a) a subsequent deed cannot ratify an earlier assignment which was void ab initio;

(b) the consideration in support of the Confirmation Deed has not been clearly specified;

(c) its recital stated that it was a supplemental assignment. Hence, the parties thereto still treated the May 1994 assignment as subsisting and valid. The defendants herein should not be allowed to argue that the Confirmation Deed can stand as an independent assignment.

Counsel for the plaintiffs also argued that because s. 17B had been breached, there was a risk of re-entry by Government. He also argued that the recital wrongly stated that there was doubt as to the validity of the May 1994 assignment when in fact that assignment was void.

11. While as a general proposition, the plaintiffs may be correct as regards point (a) above, this argument has no relevance to this action because the operative part of the Confirmation Deed was clearly expressed as an assignment in its own right. At least for the purpose of this action, the reference in the recital to "This Deed is supplemental to [the May 1994 assignment] ... " has no bearing on that question.

12. There are several answers to point (b) above. First, the Confirmation Deed is in nature an agreement under seal and, as such, did not need to be supported by consideration. Secondly, insofar as consideration was needed, consideration was given (among other things) by the vendors thereof conveying title to the Property to the purchasers and by the purchasers agreeing to make "... payment of the due proportion of the yearly Crown rent ... " and to observe "... the covenants ... contained in the Crown Lease ... ". Thirdly, consideration was given by the parties thereto by way of the vendors conveying title to the Property and the purchasers not asking for the return of the price they paid under the May 1994 assignment (such being repayable because the May 1994 assignment was void). The last-mentioned matter can be inferred from the operative part of the Confirmation Deed where it stated "In pursuance of [the agreement to enter into the Confirmation Deed to remove any doubt as to whether the vendor has validly assigned the Property by the May 1994 assignment] and in consideration of the premises ... ", as well as the history leading to the execution of the Confirmation Deed.

13. There is no substance in point (c) above. I do not see how there could have been an estoppel in the context of this action. Even if somehow an estoppel has arisen by reason of the reference to doubt in the validity of the May 1994 assignment, the estoppel can only affect the parties to the May 1994 assignment. It cannot affect the defendants herein.

14. A breach of s. 17B, Cap. 283 only means that the May 1994 assignment was void. Title to the Property will remain with the assignors of the May 1994 assignment in such case. I totally fail to see how a real risk of re-entry by Government can arise. Lastly, it is unclear from the documents referred to above if premium has in fact been paid before or after the May 1994 assignment. If payment had been made before the May 1994 assignment, then the May 1994 assignment would not have been rendered void by s. 17B, Cap. 283. Hence, the part of the recital of the Confirmation Deed stating that there was doubt as to the validity of the May 1994 assignment may not have been a mistake. Even if it was a mistake, I do not consider it is of sufficient importance to render the Confirmation Deed ineffective.

Conclusion

15. For the above reasons, this action should be (and was) dismissed.