GOLD CHECK INVESTMENTS LTD v. STAR INVESTMENT LTD

1992, M.P. No. 592

IN THE SUPREME COURT OF HONG KONG

MISCELLANEOUS PROCEEDINGS

HIGH COURT

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J U D G M E N T

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1. This is a vendor and purchaser summons. The purchaser claims that the vendor has failed to answer a requisition going, as it is sometimes put, "to the root of the title", as a result of which the court, it says, should hold that the vendor has failed to show good title to the property in accordance with its obligations under the contract.

2. The contract is dated 31st January 1992. It is a contract for the sale of the property Lot 497 in D.D. 131 at Tuen Mun, in the New Territories. The sale price is $10.5 million.

3. The contract contains the following material provisions:-

(1) A provision that the vendor shall show good title to the property. It is to furnish to the purchaser such certified copies of any deeds or documents of title, as may be necessary to prove such title: (See Clause 16.)

(2) A provision that the purchaser, if it wishes to raise requisitions or objections in respect of the title, must deliver them in writing to the vendor's solicitors as soon as practicable within 7 working days after the receipt of the title deeds in the possession of the vendor by the purchaser's solicitors; otherwise the purchaser will be deemed to have accepted the vendor's title. (See Clause 11.)

4. During the course of negotiations the title deeds had been supplied by the vendor to the purchaser and the purchaser had asked for a copy of the "Crown Lease/Conditions of Sale" affecting the property. However, it was not supplied with the "Crown Lease/Conditions of Sale".

5. There probably never was any Crown Lease. The original "lessee" from the Crown seems to have been content to rely on the contract into which he entered when he bought the land at auction in 1915.

6. So what was supplied to the purchaser were copies of a number of documents on Government files. These recorded that an application had been made, by one U.U Pun, for land at Tuen Mun, giving particulars of Lot 497 in D.D.131 in Tuen Mun as particulars of the land in question, which the applicant required for building purposes. The Assistant Land Officer had recommended to the Land officer a sale by public auction, at a premium of $84, for a term of 75 years at a rent of $10. The Land Officer had submitted those recommendations to the Colonial Secretary. He had approved them. The Land officer had thereupon given instructions to the Assistant Land officer to prepare Conditions of Sale. Notification had been given, in the Government Gazette, of the sale, by public auction and subject to the Conditions of Sale mentioned in the notice, of this and other land. The auction was to take place on 10th June 1915. The upset price was to be $84 and the annual Crown rent $10. The Conditions of Sale gave the purchaser a right to a Crown Lease. The Land Officer had instructed the Assistant Land Officer to report the result of the auction. On 10th June 1915 (the date of the auction) the Assistant Land Officer had reported to the Land Officer that the land had been purchased that day by "Applicant". On 12th June 1915 the Land Officer had reported that fact to the Colonial Secretary. He had passed the matter to the Treasury and the Local Auditor to note.

7. From all this, it is as plain as a pikestaff that this land was sold on 10th June 1915, by public auction, and on the gazetted Conditions of Sale, to U.U. Pun (who was the original "applicant").

8. The root of title offered was a memorial of a conveyance on sale of 2nd September 1947. This, for the purposes of section 13 of the Conveyancing and Property Ordinance, Cap. 217 ("the CPO"), constitutes a good root of title. The vendor was entitled to deduce title from this conveyance without producing any evidence of the intervening title between 1915 and 1947.

9. But the fact remains that the vendor was not (and has never been) able to produce a Crown Lease.

10. The original negotiations broke off in 1991 but were eventually resumed and the parties entered into the contract dated 31st January 1992 with completion due on 29th February 1992. On 13th January 1992. the vendor again submitted the deeds and documents of title to the purchaser. The purchaser raised no objection or requisition about the absence of a Crown Lease until a couple of days before completion of the transaction was due to take place. The period prescribed by the contract for requisitions had expired on 7th February 1992. Generally speaking, it was incumbent on the purchaser, if it wanted to raise a requisition on title, to do so by 7th February 1992. But this is not the case if the requisition which the purchaser raised want to the root of the title (not to be confused with "the root of title"). Section 13(1) of the CPO makes it clear that a purchaser of land is entitled to production of the Crown Lease relating to the land sold. That is a matter which goes to the root of the title.

11. In this case the purchaser was entitled to object to the non-production of the Crown Lease (or of the contract incorporating the Conditions of Sale, which would have been good enough). The purchaser was entitled to do so even after the time limited for raising acquisitions. because the matter of the Crown Lease went, in my judgment, to the root of the,title.

12. If the vendor had made the position clear by a special condition contained in the contract of 31st January 1992, or if it had offered the purchaser a statutory declaration explaining (if it could) why the original Crown Lease, or contract incorporating the Conditions of Sale, was not available (offering the other documents to which I have referred in this judgment as sufficient conveyancing evidence of the sale to U.U. Pun) that would have been another matter. But merely to provide these copy documents without any such condition, or statutory declaration, as if they were, in themselves, sufficient conveyancing evidence of the Crown Lease or of the contract for its grant, was not, in my judgment, enough.

13. For these reasons, I am of the opinion that the purchaser was entitled to object to the title offered and to refuse to complete the contract. I shall declare that a good title to the property has not been shown in accordance with the Agreement of 31st January 1992 and I shall order that the costs of the purchaser of this application be taxed, if not agreed, and paid by the vendor to the purchaser.