KONG KING ONG ALEXANDER v. KAN HEUNG WING AND ANOTHER

DCCJ 3724/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 3724 OF 2008

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DECISION

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INTRODUCTION

1.  The case was about an unsuccessfulconveyancing transaction of a residential flat (“the Property”) in which the defendants (by Original Action) and the plaintiffs (by Counterclaim) were the vendors and the plaintiff (by Original Action) and the 1^st defendant (by Counterclaim) was the purchaser.  For the sake of convenience, I will simply refer to the two parties as the Vendors and the Purchaser respectively. 

2.  The Vendors apply in respect of their counterclaim against the Purchaser for a summary judgment:-

(1) for the forfeiture of the Purchaser’s deposit ($128,000 in total) for wrongful repudiation of the conveyancing transaction; and

(2) for the return of the proceeds of a cheque ($128,000) given to the Purchaser subject to a condition which was not satisfied. 

Mr Liu for the Vendors informed the court that in the present application the Vendors no longer pursue the damages for wrongful registration of a lis pendens on the Property,the claim of which has since become academic as the Property has already been disposed of.

ISSUES

3.  The key issue for the court to decide is whether the Vendors were entitled to forfeit the deposit paid by the Purchaser because of the allegedwrongful repudiation of the conveyancing transaction.  Shortly stated, the Vendors would be so entitled if:-

(i) they were not obliged to produce the following documents which Messrs Wong & Poon (W&P),[1] the Purchaser’s solicitors, had insisted on their production by way of requisition (“the 1^st Set of Requisitions”):

· Agreement for Sale and Purchase dated 15 March 1967, Memorial No UB575036 (“the SPA”)

· Agreement for Sub-Sale and Purchase dated 8 November 1996, Memorial No UB6847058 (“the SSPA1”)

· Agreement for Sub-Sale and Purchase dated 18 January 1997, Memorial No UB6919348 (“the SSPA2”)

(The SSPA1 and the SSPA2 collectively as the “SSPAs”); and

(ii) they were not obliged to reply to a subsequent set of requisitions (“the 2^nd Set of Requisitions”) raised by W&P on 7 July 2008 on the ground that they were out of time.

FACTUAL BACKGROUND

4.  The factual background of the case has been succinctly summarized by Deputy District Judge S Lo in his decision on the Vendors’ application for summary judgment against W&P[2] which I gratefully adopt insofar as relevant to the present application:-

(1) By a provisional sale and purchase agreement dated 25 May 2008 (“the Provisional Agreement”), the Vendors agreed to sell and the Purchaser agreed to purchase the Property.

(2) The Purchaser paid the Vendors an initial deposit of HK$35,000 upon signing the Provisional Agreement. Under the Provisional Agreement, it was agreed that a formal sale and purchase agreement was to be signed on or before 6 June 2008 and the completion was to be on or before 4 July 2008.  It was further provided that:

(i) If the Purchaser defaults, the Vendors have the right to forfeit the deposit.

(ii) If the Vendors default, the Vendors shall compensate the Purchaser by a sum equivalent to twice the amount of deposit paid, ie HK$70,000.

(3) On 6 June 2008, the Purchaser paid the Vendors a further deposit of HK$93,000. Thus, the total amount of deposit paid by the Purchaser was $128,000 (“the Deposits”). However, no formal sale and purchase agreement was ever signed by the parties.

(4) Under the cover of a letter dated 3 June 2008 from Messrs ST Poon & Wong (“STP”) (solicitors for the Vendors) to W&P, STP delivered certain title deeds and documents as listed in the schedule attached thereto.

(5) By a letter dated 11 June 2008 from W&P to STP, W&P acknowledged receipt of STP’s letter dated 3 June 2008 and raised the 1^stSet of Requisitions concerning the title of the Property, which included, inter alia, the following:-

“2. In order to complete the chain of title, please let us have the original of the following title deeds and documents for our perusal before completion:-

(i) [the SPA];

(ii) [the SSPA1];

(iii) [the SSPA2].

…”

(6) By a letter dated 24 June 2008 from STP to W&P, STP answered the 1st Set of Requisitions as follows:-

“2. (i) Kindly note that the requested document is pre-intermediate root document which need not be produced.

(ii) & (iii) Kindly note that the original of the said Agreement was withheld by the Land Registry pending for registration.

…”

(7) By a letter dated 30 June 2008 from W&P to STP, W&P said that they had not received a reply to the 1^stSet of Requisitions.

(8) By a letter dated 2 July 2008 from W&P to STP, W&P referred to the abovementioned letter dated 24 June 2008 and insisted on the production of the SPA, failing which a certified true copy thereof and a statutory declaration as to its loss.  W& P also asked for the SSPAs for perusal before completion. 

(9) By a letter dated 2 July 2008 from STP to W&P, STP continued to contend that the production of the documents was unnecessary:-

(a) In relation to the SPA, STP said that it fell within the pre-intermediate root period and asserted that it had merged with the subsequent assignment and ceased to have any legal effect.  STP also contended that an agreement for sale and purchase was not a title document and it was not necessary to make a statutory declaration accounting for its loss.

(b) In relation to the SSPAs, STP stated that they were not properly registered in the Land Registry and asserted that they had merged with the subsequent assignment.  Nonetheless, on a without prejudice basis, STP offered to let W&P have certified copies of the same as soon as possible.

(10) By a letter dated 3 July 2008 from W&P to STP, W&P still insisted on the production of the originals of the SPA and the SSPAs.

(11) By a letter inadvertently dated 23 April 2008 but sent on 4 July 2008 from STP to W&P, STP reiterated its previous views on the 1^stSet of Requisitions.  Nonetheless, on a without prejudice basis, STP offered to arrange the Vendors to make a statutory declaration as to the loss of the SPA upon completion.  STP also repeated its assertion that the SSPAs had merged with the subsequent assignment and had no legal effect on the Property and their production was not necessary.

(12) By a letter dated 4 July 2008 from W&P to STP, W&P asked for a certified true copy of the SPA, a draft of the statutory declaration relating to the SPA and the originals of the SSPAs.

(13) By a letter dated 4 July 2008 from STP to W&P, STP put on record that the Vendors and the Purchaser had agreed to postpone the completion to 11 July 2008.

(14) By a letter dated 9 July 2008 from W&P to STP, W&P raised further requisitions (“the 2^ndSet of Requisitions”) concerning additional documents not referred to in the 1st Set of Requisitions.

(15) By a letter dated 16 July 2008 from W&P to STP, W&P stated that the completion date was 4 July 2008 and that they were instructed to terminate the Provisional Agreement forthwith.

(16) By a letter dated 7 August 2008 from W&P to STP, W&P demanded the return of the Deposits plus compensation and threatened to commence legal action on behalf of the Purchaser.

(17) By a letter dated 19 August 2008 from STP to W&P marked “Without Prejudice”, STP enclosed a Cancellation Agreement signed by the Vendors and a cheque drawn in favour of the Purchaser in the sum of HK$128,000 (“the Cheque”).  In the said letter, STP stated that the sum represented the Deposits reimbursed to the Purchaser upon signing of the Cancellation Agreement and that, if the Cancellation Agreement could not be signed by the Purchaser within the next 5 working days, it should be returned to STP together with the Cheque.

(18) By a letter dated 20 August 2008 from W&P to STP, W&P returned the Cancellation Agreement unsigned by the Purchaser together with the Cheque to STP, indicating that the Purchaser would not sign the Cancellation Agreement and would commence legal proceedings against the Vendors.

(19) By a letter dated 21 August 2008 from STP to W&P marked “Without Prejudice”, and STP said that as requested they resent the Cancellation Agreement signed by the Vendors together with the Cheque.  In the said letter, it was expressly stated that the sum represented the Deposits reimbursed to W&P upon signing of the Cancellation Agreement and that, if the Cancellation Agreement could not be signed by the Purchaser within the next 5 working days, it should be returned to STP together with the Cheque (“the Condition”).

(20) On 25 August 2008, without the knowledge of STP and the Vendors, the Cheque was cashed.

(21) Notwithstanding the cashing of the Cheque, by a letter dated 27 August 2008 from W&P to STP, W&P enclosed a sealed copy of the Writ of Summons and stated that it had been served on the Vendors.  The Purchaser sued the Vendors for breach of the Provisional Agreement and sought a compensation of $35,000 together with the costs and expenses of investigating title, costs and interest.

(22) By a letter dated 29 August 2008 from STP to W&P marked “Without Prejudice”, STP wrote to put on record that Purchaser had failed to sign the Cancellation Agreement within 5 working days from STP’s letter dated 21 August 2008 and demanded W&P to return the Cheque together with the Cancellation Agreement immediately.

(23) By a letter dated 1 September 2008 from W&P to STP, W&P stated that Purchaser would accept the Cheque as refund of the Deposits but would not sign the Cancellation Agreement, enclosing the Cancellation Agreement unsigned by the Vendors without returning the Cheque.

(24) By a letter dated 2 September 2008 from STP to W&P, STP said that the release of the Cheque to the Purchaser and the Purchaser’s cashing of the Cheque without his signing and returning the Cancellation Agreement were wrongful and in breach of the Condition.

(25) On 20 March 2009, the Vendors filed the Defence and Counterclaim against both the Purchaser and W&P.

LAST ADJOURNMENT

5.  The Purchaser was adjudicated bankrupt on 27 August 2009 and the annulment order for the bankruptcy was granted on 11 July 2012.  At the hearing before Deputy District Judge S Lo on 8 January 2013, the Purchaser informed the court that he had obtained the consent of his creditors for a restructure of his debts under an IVA and the Vendors were two of such creditors.  As the Purchaser was acting in person, the learned judge adjourned the summary judgment application as against the Purchaser for parties to clarify whether the Vendors had entered into the IVA with the Purchaser and were receiving payment under the IVA.

6.  The situation has now been clarified with the Purchaser’s nominee under the IVA.  The Vendors’ claim against the Purchaser is categorized as “contingent” and the distribution to the Vendors has been held up pending the outcome of the case between the Vendors and the Purchaser.  Both the Vendors and the Purchaser agree that the present application could be dealt with without delay.

LEGAL PRINCIPLES

Summary judgment

7.  It is well-established that in an application for summary judgment on the ground that the defendant has no defence to a claim included in the writ or to a particular part of such a claim, the defendant will be granted unconditional leave to defend where the defence put up involves a triable issue of fact or law.  On the other hand, where the defence put up is shadowy or there is little or no substance in it or that the court is almost prepared to give judgment, then it is appropriate to grant leave to defend conditional on the amount claimed being paid into court: see Charmway Development Ltd v Long China Engineering Ltd [2001] 3 HKC 515, 518G; see also §§14/4/9-14, Hong Kong Civil Procedure 2013. 

Good title

8.  It is also well-established that good title does not mean perfect title.  The test for establishing good title is stated by Lord Russell in MEPC Ltd v Christian Edwards [1981] AC 205, at 220C:-

“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 a good title shown.”

Proving of title

9.  Section 13(1) of the Conveyance and Property Ordinance (“CPO”), Cap 219 provides that:-

“(1) Unless the contrary intention is expressed, a purchaser of land shall be entitled to require from the vendor, as proof of title to that land, only production of the Government lease relating to the land sold and-

(a) proof of title to that land-

(i) where the grant of the Government lease was less than 15 years before the contract of sale of that land, extending for the period since that grant; or

(ii) in any other case, extending not less than 15 years before the contract of sale of that land commencing with an assignment, a mortgage by assignment or a legal charge, each dealing with the whole estate and interest in that land;  …

(2) Where this section requires the production of any document, it shall be sufficient to produce a copy-

(a) attested, before 1 November 1984, by 2 solicitors' clerks; or

(b) certified by a public officer or a solicitor,

to be a true copy.”

Giving of title

10.  However, in Yiu Ping Fong & Anor v Lam Lai Hing [1999] 1 HKLRD 793, Yuen J (as she then was) made a distinction between “proving” of title on the one hand and “making or giving of title” on the other.  Her ladyship said,[3]

“ In my view, the real position is this. Unless there are express stipulations exonerating him from so ding, a vendor has an obligation to make or give a good title. There are two steps in the making or giving of good title.

The first is to show a good title.  In England, that is done by vendor’s solicitor producing an abstract of title. The title shown by that abstract is then proved by producing the title deeds and by proving such other facts as are necessary to make a good title. 

In Hong Kong, as a matter of practice, no abstracts are produced, and the two steps of showing and proving the title are telescoped into one by the vendor’s solicitor sending title deeds and documents to the purchaser’s solicitor for his perusal of title. 

The proving of title by the production of title deeds and documents is therefore but one step in the making or giving of title, and proving of title is not to be equated with making or giving title.  A vendor does not make or give title simply by producing the documents referred to in s.13(1). 

The effect of s.13(2) is, in my view, to facilitate the proving of  title when the vendor’s solicitors sends title deeds and documents to the purchaser’s solicitor for perusal after the formal agreement for sale and purchase is executed.  The vendor’s solicitor can simply send certified true copies of title deeds and documents instead of originals. 

Section 13(2) does not, in my judgment, exonerate the vendor from producing at completion the originals of such title deeds and documents, at least those that relate exclusively to the property being sold.

That is clearly so because s.13(1) refers (only) to proof of title.  And s.13(2) provides explicitly that it is only “where this section requires the production of any documents” that it would be sufficient to produce certified true copies.  The words which I have emphasized show clearly the limited circumstances in which s.13(2) applies. 

…

The handing over of original title deeds and documents (or at least those which relate exclusively to the property being sold) is an important part of the vendor’s obligation in a sale of land.  That obligation is well established in the common law.

A purchaser of land is entitled as a matter of proprietary right to possession of the original title deeds, Williams on Title (4^th ed.) at p.547, which is the best evidence of ownership.

Further, it is important for him to get possession of the original title deeds so that he can be sure that the property is not subject to an equitable mortgage by deposit of title deeds.  if the  deeds are in the hands of some person other than the vendor, the purchaser is thereby placed on enquiry as to the reason for this, and he has constructive notice of the facts which such enquiry would disclose (see Emmet on  Title, §5.147).

Where, therefore, as in this case, the vendor has given notice that she could not be able to produce the original 1986 assignment on completion, it is legitimate for the purchaser to examine whether there is sufficient conveyancing evidence to explain its loss.”

The above dictum was approved by the Court of Appeal (Tang VP, Fok JA and Johnson Lam J (as he then was) ) in De Monsa Investments Ltd v Whole Win Management Fund Ltd [2011] 4 HKLRD 478 and followed in Big Most Ltd v Chau Wa Hung [2012] 4 HKLRD 599.

11.  Based on the above case authorities, the common law duty to produce the original title deeds extended beyond the intermediate root and, notwithstanding s13, CPO, a vendor was required to supply all the original title deeds which related exclusively to the property sold which should be in his possession or power.  A purchaser was entitled to have the original title documents as a matter of proprietary right even if there was no real risk of any adverse claim to the title.  The handing over of original title deeds and documents was a necessary and integral part of the vendor’s obligation a conveyancing transaction: Choi Kar Yin v Wong Siu Hung (2007) HCMP1728/2006 (unreported); see also Hong Kong Conveyancing, Volume 1(A), at § VI[79.5]. 

12.  If an original title document could not be produced, it would be legitimate for the purchaser to examine whether there was sufficient conveyancing evidence to explain its loss.  The vendor must provide clear and cogent secondary evidence of the contents of the missing documents, their due execution and the fact of loss or destruction: Leung Kwai Lin v Wu Wing Kuen [2001] 4 HKCFAR 55. 

13.  In order to mitigate the effect of Yiu Ping Fong & Anor v Lam Lai Hing and to reduce the burden of a vendor in “giving title” as far as the production of pre-intermediate root title documents is concerned, the Legislature introduced in 2008 the new s.13A as follows:-

(1) Unless the contrary intention is expressed, a purchaser of land shall be entitled to require the vendor to deliver to him, for the purpose of giving title to that land, the original of both of the following only-

(a) if there is a Government lease that relates exclusively to the land, the lease; and

(b) any document that relates exclusively to the land and is required to be produced by the vendor as proof of title to that land under section 13(1)(a) and (c).

(2) Subsection (1) does not affect any rule of common law under which the vendor may discharge his obligation to give title to that land otherwise than by delivering the Government lease or document to the purchaser.

(3) If the vendor is not required to deliver to the purchaser a document in giving title to that land, the purchaser has no proprietary right or ownership in the document.

(4) …

The above provision came into operation on 11 July 2008. [4]

CONSIDERATION OF ISSUES

SPA as pre-intermediate root document

14.  The first reason given by STP for not producing the SPA was that it was a pre-intermediate root document which was not required for the proof of the Vendors’ title. 

15.  In the present case, the Provisional Agreement was dated 25 May 2008.  From the record of the Land Registry, and the intermediate root, ie, the earliest assignment/mortgage/legal charge not less than 15 years before that date, was the assignment to one Mr Kwok dated 1 June 1968, Memorial No UB635262 (“the Intermediate Root”). 

16.  The SPA is therefore a pre-Intermediate Root document which, by the application of s13(1) of CPO, the vendors were not required to produce as proof of their title to the Property, there being no contrary intention expressed in the Provisional Agreement to exclude the application of that section. 

17.  As regards the Vendors’ duty to give good title, however, s.13A, CPO, whichonly came into operation subsequent to the signing of the Provisional Agreement, has no application to the present case.  Therefore, the transaction is governed by the common law as stated in Yiu Ping Fong’s case: see De Monsa Investments Ltd v Whole Win Management Fund Ltd, supra, at para. 52 of that judgment.

18.  W&P asserted in their correspondence with STP that the SPA was a document “related exclusively to” the Property being sold and they referred to Yiu Ping Fong’s case.  In their letter dated 3 July 2008, W&P insisted that STP “is obliged to let us have [the original SPA] as part and parcel of your clients’ duty to give good title to our client.”  (Emphasis supplied)

19.  Thus, it would be missing the point to say just that the SPA was a pre-intermediate root document and therefore was not required for “proving good title”.  The SPA would still be required for “giving good title”, if it formed part of the title deeds or documents of the Property which the Purchaser was entitled to as a matter of proprietary right.  Although W&P was prepared to accept a certified true copy couple with a statutory declaration as to the loss of the original, STP eventually refused to provide the certified copy or the statutory declaration requested.  The refusal was part of the reason giving rise to W&P’s allegation that the Vendors had failed “to give and prove good title”. 

Merging of agreement with assignment

20.  STP sought to justify the non-production of the SPA and the SSPAs on the basis that they had merged with theirrespective subsequent assignments and ceased to have any legal effects.  It was also said that an agreement for sale and purchase was not a title document and therefore it would not be necessary to make a statutory declaration accounting for its loss.  STP relied on Lee Woon Tong & Anor v Kwan Pui Lui & Others, DCMP 3045/2005 (unreported) to support their contention.  See STP’s letter dated 2 July 2008.

21.  However, on a closer examination it is arguable that the case of Lee Woon Tong does not support the broad proposition that an agreement for sale and purchase is not a title document:-

(i) In Tang Wing Lam David & Anor v Chung Chi Keung Frederick [1999] 3 HKC 553, at 564 F, Barnett J said that in Hong Kong, by convention the phrase “title deeds” embraces not only documents by which title or interest is actually transferred but also documents which contain evidence necessary to complete the title.  As such, it was held in that case that a layout plan and a power of attorney could fall within the rubric “title deeds”. 

(ii) In Wong Bik Ching v Yu Hon Chung [1997] 4 HKC 38, at 45F-G, Recorder Edward Chan QC said,

“I am of the view that prima facie when an instrument was registered against the property and it was not apparent from the land search that the document had ceased to affect the property, the document ought to be treated as part of the title deeds which the vendors should make available to the purchaser. It may well be that upon perusal of the document, the enjoyment of the property was hardly affected by this document so that it would not have any effect on whether a good title to the property had been shown. However, without actually seeing the document, how can the purchaser know in what way, if at all, would he be affected by this document?”

(iii) NeitherTang Wing Lam David nor Wong Bik Ching was considered in Lee Woon Tong.

(iv) The learned judge in Lee Woon Tong had not given reasons as to why the sale and purchase agreement in question was not a title document.  On the other hand, the learned judge said that he thought that the sale and purchase agreement would affect title.  Therefore, there appears to be a conflict between that decision and the earlier judgments of Tang Wing Lam Davidand Wong Bik Ching.

22.  Besides, without the sight of the documents, it begs the question whether the SPA and the SSPAs had in fact merged with theirrespective subsequent assignments. In this regard, I note also what the learned author of Hong Kong Conveyancing says as follows,[5]

“It is a vexed question whether a vendor is obliged to produce, by way of showing his title, all the sale and purchase agreements relating to the property within the intermediate root period. The author can find no judicial authority in point and compliance with an obligation to do so would certainly be a burdensome and costly exercise for the parties. The Law Society has consistently maintained the view that sale and purchase agreements must be produced as they may contain provisions which survived completion and not merged into the assignment. The doctrine of merger is not, of course, absolute and obligations may arise by virtue of the sale and purchase agreement which continue to be enforceable not-withstanding the execution of the assignment. It can be argued that sale and purchase agreements must be produced to enable the purchaser to ascertain whether any such obligations do still exist.”

23.  Based on the above, it is in my view arguable that the Vendors in proving good title were prima facie obliged to produce the SPA and the SSPAs (or failing which, clear and cogent secondary evidence) to satisfy the Purchaser that there were no obligations which survived completion.   If the SPA or SSPAs contained covenants which survive completion, then arguably the documents would also form part of the title deeds.   It may well be that upon perusal of the documents requested, they would not have any effect on the title to the Property. However, since the documents or their copies were not before me, I am not in position to speculate on this. 

SSPAsnot properly registered

24.  Another reason provided by STP for not producing that SSPAs was that they were withheld by the Land Registry pending registration and that they were not properly registered: see STP’s letters dated 24 June 2008 and 2 July 2008 respectively.

25.  The “prima facie approach” stated in Wong Bik Ching v Yu Hon Chung,  supra, as to what documents should be made available by a vendor to a purchaser in proving good title was approved by the Court of Final Appeal in Chen & another v Lord Energy Ltd[1999] 1 HKLRD 206, where Li CJ said at p221H-I:-

“It should be emphasized that on this approach, the matter is only prima facie and it may therefore be displaced on examination. Provided this approach is understood to apply to registered instruments that are properly registrable under the Land Registration Ordinance (Cap.128), I think it is sound.”

26.  Although the above dictum is about registered documents, it is held in a subsequent case authority that the prima facie approach is equally applicable to instruments that are properly registrable but not formally registered: Goldenwick Ltd v Standard Chartered Bank (Hong Kong) Ltd [2008] 3 HKLRD 266, per Poon J at §24-33.

27.  Based on the above case authorities, in my view there is an arguable case that the SPA and the SSPAs should prima faciebe treated as part of the title deeds which the Vendors should make availableto the Purchaser, even though the SSPAs had not been properly registered but appeared in the land search as “deeds pending registration”. 

28.  As a matter of fact, the SSPAs appeared in the land search as “deeds pending registration” until 10 September 2008 at the latest when STP, by a letter wrongly dated as 8 September 2008, informed W&P that the two documents had been cancelled from registration in the Land Registry.  Subject to any evidence to the contrary, it seems therefore that the Vendors could have applied for the vacation of the SSPAs from the register earlier: see Hong Kong Conveyancing, Vol. 1(A), §VI[50.1].  At present, there is no evidence before me as to why this “obvious and most desirable solution” as described by the learned author was only adopted after but not before the repudiation of the Provisional Agreement.

Circumstances showing that SSPAs ceased to have effect

29.  Whilst accepting that the SSPAs are documents within the intermediate root period and should prima facie be made available, Mr Liu relying on a written submission prepared by counsel for the purpose of this application submitted that there is evidence in the present case that the SSPAs had ceased to have any legal effects:  

(a) by reference to the sequence of transactions as shown in the land search record, it was contended that the SSPAs were products of a series of hurried sale and sub-sale process in 1996 and 1997 in which the intention of the parties concerned was to earn quick money from property speculation.  The series of sub-sales eventually resulted in a direct assignment from a Mr Lo (as executor) to Mr Cheung and Ms Yeung, the immediate predecessors in title of the Vendors, in April 1997;

(b) even in the improbable situation that there were outstanding claims arising from the sale and sub-sale process in 1996 and 1997, it was wholly unrealistic that the parties concerned would come back to assert their claims on the Property more than 11 year later when the Provisional Agreement was signed in 2008.  In any event, their claims would have been time barred by 2008; and

(c) it was submitted, so the argument goes, that based on the above and 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, there was no real risk of a successful assertion against the Purchaser under the SSPAs.  Reference was made to Mexon Holdings v Silver Bay International Ltd (2000) 3 HKCFAR 109, per Litton PJ at 117D-E. 

30.  Whilst I recognize the force of the above submission, on further consideration, I am unable to accept it.  My reasons are as follows:-

(a) The contention about the alleged purpose of the sub-sales had not been drawn to the attention of W&P at the time and had not been relied upon by STP in their reply to the requisitions raised.  Therefore, even if this contention is later proved to be right, it may still be argued that the Vendors had not answered the requisitions properly: see Wong Bik Ching, supra, at   p45H-I. 

(b) It was not the Vendors’ case that they could not have produced the originals of the SSPAs. STP only said that the documents had been withheld by the Land Registry pending registration.  At one stage, STP offered to provide certified true copies to W&P.  The fact that the registration was subsequently cancelled in September 2008 suggests that it was within the power of the Vendors to vacate those documents from the register earlier or to make them available to the Purchaser.  However, no explanation has been given as to why neither of them had been done. 

(c) The title deeds were delivered by STP to W&P on 3 June 2008.  The requisition about the SSPAs was first raised on 11 June 2008 which was well within time.  If the Vendors had taken action to retrieve the SSPAs from the Land Registry and made them available to the Purchaser, further requisition about them would have been avoided.  On the other hand, without the sight of the SSPAs, it is arguable that a prudent conveyancing lawyer would not feel safe to advise his client that there were not any covenants or terms in them which might affect title and survive completion.  It may further be argued that Mexon Holdings Ltd v Silver Bay International Ltd, supra, is about a very different set of facts which are distinguishable from the present case.

(d) Although it may well be that the risk of a claim under the SSPAs is remote, there may be an argument available to the Purchaser that he should not be required to perform the task of risk assessment and that it lay ill in the month of the Vendors to say that the risk was remote, when it was within their power to remove the risk completely: De Monsa Investments Ltd v Whole Win Management Fund Ltd, supra, at §§74-78. 

The reply to the requisitions

31.  The law is clear that where a purchaser has made a reasonable requisition as to title, the vendor is not entitled to enforce the contract if he has not satisfactorily answered the requisition: see Active Keen Industries Ltd v Fok Chi Keong [1994] 2 HKC 67 at p 76. Moreover, if the requisition is not answered satisfactorily, it does not matter if the vendor does in fact have a good title: see Kok Chong Ho v Double Value Developments Ltd [1993] 2 HKLR 423 at p 432.

32.  In relation to the 1^st Set of Requisitions, in relation to the SPA the Vendors’ asserted that it was a pre-intermediate root document which needed not be produced.  They then asserted that it had merged with the subsequent assignment.  Whilst STP at one stage agreed to provide, on a without prejudice basis, a statutory declaration as to its loss, they subsequently retreated by asserting that the SPA was not a title document and it would not necessary to have a statutory declaration explaining its loss.  In relation to the SSPAs, the Vendors’ asserted that they were withheld by the Land Registry pending registration. Then, it was asserted that they were not properly registered and had merged with the subsequent assignment. 

33.  As discussed above, there are arguable legal issues in respect of each of the above assertions of the Vendors.  It may be that some of the issues could be solved by the production of further documents or evidence.  I note that from the correspondence, there appears to be discussions between the parties which had not been recorded in the correspondence.  It may also be that those discussions would have a bearing on the case.  All in all, it is my judgment that the legal issues should be left to mature consideration at trial rather than dealt with summarily: see Hong Kong Civil Procedure 2013, §14/4/12.

34.  In relation to the 2^nd Set of Requisitions raised for the first time on 9 July 2008, the Vendors’ arguments are that they were raised out of time in that the Purchaser had insisted on 4 July 2008 as the date of completion.  Even assuming that the date of completion had been postponed, as the Vendors asserted, to 11 July 2008, STP had not been allowed sufficient time to deal with them. 

35.  It appears to me that the Vendors are on stronger ground as regards the 2^nd Set of Requisitions than they are as regards the 1^st Set of Requisitions.  However, given my view that there are triable issues relating to the 1^st Set of Requisitions, I do not think that it is necessary or appropriate for me to deal with this aspect of the Vendors’ argument at this stage. 

CONCLUSION

36.  Based on the above, in my judgment, this is not a case where it can be said that the Purchaser has no defence to the Counterclaim.

37.  Moreover, the Original Action of the Purchaser and the Counterclaim of the Vendors arise out of the same subject matter and the two are connected.  As it is my view that the Purchaser has an arguable defence to the Vendors’ Counterclaim, as a corollary he also has an arguable claim against the Vendors in the Original Action.  As such, it is in my view appropriate for the Purchaser to be given unconditional leave to defence the Counterclaim so that the Original Claim and the Counterclaim can be heard and dealt with together: compared with §14/4/14, Hong Kong Civil Procedure, 2013.

38.  Besides, as W&P has already been granted leave to defence the Vendors’ Counterclaim against them, I think it is also in the interest of justice that there should be a trial between the Vendors and the Purchaser.  I am alive to the fact that the legal bases of the Vendors’ claim against W&P, which are ones of agency and breach of undertaking, are not the same as those against the Purchaser. However, the issue as to whether STP had satisfactorily dealt with the requisitions is bound to come up at that trial.  In order to ensure consistency, it is desirable that the two claims, one against the Purchaser and the other against his solicitor W&P, which share the same factual background, be dealt with together by the same judge.   

39.  In view of the above, I grant unconditional leave to the Purchaser to defence the Vendors’ Counterclaim against him.

40.  The Purchaser is acting in person in the present application.  I make an order nisi that the Purchaser’s costs in this application, if any, be paid by the Vendors in any event, to be taxed if not agreed.