LIU KIN LEUNG v. TSANG MI LING

HCMP 7660/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 7660 OF 1999

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J U D G M E N T

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1. This is a vendor and purchaser summons taken out by the Plaintiff Purchaser by way of an Originating Summons filed on 11 December 1999. The Plaintiff's counsel, Mr Roland Lau, informed me that paragraphs (2), (4) and (6) of the reliefs sought in the Originating Summons would not be pursued. Essentially, what the Plaintiff is seeking is a declaration that the requisitions numbered 4, 5 and 6 in the letter dated 18 January 1999 from Messrs C. K. Tse & Kan ("the Purchaser's solicitors") to Messrs Fung, Wong & Ha ("FWH") had not been satisfactorily answered by the Defendant Vendor and that the Plaintiff is entitled to terminate the agreement for sale and purchase dated 15 January 1999 ("the Agreement"). The Plaintiff also seeks an order for repayment of the deposit and the amount of stamp duty paid by the Plaintiff, interest and costs.

2. There is no factual dispute on any matter material to what I have to decide. After explaining the position to the Defendant, who appeared in person, she indicated to me that she did not wish to cross-examine the deponents of the Plaintiff's affirmations, being the Plaintiff and the Plaintiff's former solicitor. Likewise, the Plaintiff's counsel informed me that he did not wish to cross-examine the Defendant on her affirmation, notwithstanding that there was an order dated 6 April 2000 giving leave to both parties to cross-examine the deponents on their affirmations.

3. I allowed the Plaintiff to give evidence to supplement his affirmation as he had not dealt with the amount of stamp duty and the legal costs in the transaction for sale and purchase in his affirmation. Other than that, the evidence before me consisted of two affirmations filed on behalf of the Plaintiff and the Defendant's affirmation which is in Chinese.

4. The background and facts relevant to this dispute may be set out as follows.

5. A provisional agreement for sale and purchase was entered into between the parties on 9 December 1998 and the Agreement on 15 January 1999. The subject of the sale and purchase was the property known as Unit E, 24/F, Block 1, Richland Gardens, No. 80 Wang Kwong Road, Kowloon, Hong Kong ("the Property"). The consideration was HK$1,660,000.00, 10% of which was paid by the Plaintiff as deposit and part payment on or before the signing of the Agreement. Completion of the sale and purchase was to take place on or before 9 February 1999 and time was expressly provided to be of the essence of the Agreement.

6. Other material terms of the Agreement are as follows:

7. Before the parties signed the Agreement and on or about 21 December 1998, the Purchaser's solicitors had noticed from the land search records that the Property was subject to, inter alia, two encumbrances: (1) a writ of summons issued on 17 May 1991 in High Court Action No. A3642 of 1991 ("the High Court Action") with Mr Cheung Yuk Ping as the plaintiff and the Vendor as the defendant; and (2) a sealed copy order in the High Court Action dated 22 March 1993 which was made by consent ("the High Court Order"). I should explain that Mr Cheung is the former husband of the Defendant.

8. By the High Court Order, it was ordered inter alia as follows:

9. Having become aware of the terms of the High Court Order, the Purchaser's solicitors naturally raised requisitions about this in their letter to FWH dated 18 January 1999. They were the requisitions numbered 4, 5 and 6 referred to in the Originating Summons. There appeared to be an obvious clerical error in the requisition numbered 4(a) in that the words "the Defendant, the Vendor" and "the Plaintiff [i.e. Mr Cheung]" were interposed. The gist of these requisitions may be set out as follows:

10. Under cover of a letter dated 6 February 1999, FWH supplied a sealed copy of the Family Court Order to the Purchaser's solicitors. This order was made by Deputy Judge W Leung and is in Chinese. For reasons which are not known to me, notwithstanding that the Order was made in September 1998, the approved sealed Order was issued and filed only on 3 February 1999. Under Paragraphs 1 and 3 of that Order, it was provided that the High Court Order was to be "discharged" in that Mr Cheung was required to vacate the Property which was the matrimonial home and to deliver up vacant possession thereof to the Defendant within one month of the date of the Order.

11. Paragraph 2 of that Order, which is crucial to the present proceedings, required Mr Cheung to transfer his 45% beneficial interest in the Property to the Defendant. The actual words used were as follows:

12. On receipt of the Family Court Order, the Purchaser's solicitors raised further requisitions by their letter to FWH dated 12 February 1999. FWH was asked whether the sealed copy order of the Family Court had been lodged with the Land Registry for registration. FWH was also asked whether the parties to that order had complied with the terms of the Order. Once again, the Purchaser's solicitors requested for a duly stamped and registered assignment by which Mr Cheung transferred his 45% interest in the Property to the Defendant, pursuant to Paragraph 2 of the Family Court Order.

13. FWH's answer to the requisitions was in two letters dated 22 February 1999. Regarding Paragraph 2 of the Family Court Order, they stated that according to Paragraph 1 of that Order, the High Court Order was "dismissed". This is clearly wrong and is just not a proper reading of the Family Court Order. By that erroneous reasoning, FWH asserted that Mr Cheung "by now has no further interest" in the Property and "no assignment is necessary". As for the requisition on the occupation of the Property by Mr Cheung, all that FWH had said was "vacant possession will be delivered to [the Plaintiff] on completion". I rule that by their letters dated 22 February 1999, FWH had not answered satisfactorily the Plaintiff's requisitions.

14. Matters did not seem to progress further with subsequent correspondence between the solicitors. In one of the two letters from the Purchaser's solicitors to FWH dated 24 February 1999, the Purchaser's solicitors pointed out that Paragraph 2 of the Family Court Order stated that Mr Cheung "is to transfer" his 45% interest in the Property to the Defendant and that the Order did not say that Mr Cheung's interest was thereby "vested" in the Defendant. Hence, the Plaintiff would insist on an assignment by Mr Cheung of his interest to the Defendant before completion. The Purchaser's solicitors again enquired if Mr Cheung had delivered up vacant possession to the Defendant pursuant to the Family Court Order.

15. FWH reiterated their reply in their letters dated 2 March 1999 that the High Court Order had been "dismissed" by the Family Court Order. That, as I have stated above, is plainly wrong. On the enquiry as to delivery of vacant possession by Mr Cheung, FWH simply repeated that "vacant possession will be delivered to [the Plaintiff]". Again, that is not a satisfactory answer.

16. The next letters were on 8 March 1999. By that time, this was past the completion date of 9 February 1999 and the extended completion date of 14 working days under Clause 41 of the Agreement. I understand from the Plaintiff's counsel that as there was no delay by the Plaintiff in obtaining a Home Starter Loan, the extension of completion date under Schedule 8 was not applicable. Three letters were sent by the Purchaser's solicitors to FWH on 8 March 1999. The Purchaser's solicitors again pointed out that by Paragraph 2 of the Family Court Order, Mr Cheung was ordered to transfer his 45% interest to the Defendant and it was necessary for him to execute an assignment for that purpose as the Order did not declare that the interest of Mr Cheung was thereby vested in the Defendant. The Purchaser's solicitors also proposed to FWH to extend the completion date to 21 April 1999 on condition that the Defendant was to provide before that date an assignment by Mr Cheung of his interest in the Property to the Defendant and that the Defendant was to enter into a supplemental agreement with the Plaintiff to confirm the new completion date for the record of the Hong Kong Housing Society. It was emphasized that the Plaintiff wished to deal with the sale and purchase "sensibly and co-operatively". The postponement was proposed because the Plaintiff's Home Starter Loan was due to expire on 26 May 1999 and he would not be able to renew it but would have to apply for the loan afresh in competition with other applicants if there was no completion before the expiry of the loan.

17. As no reply was received from FWH, the Purchaser's solicitors repeated their proposal on the postponement of the completion date in their letter dated 18 March 1999. On 25 March 1999, FWH replied to say that they had no further instructions to act for the Defendant in the sale and purchase of the Property.

18. The matter was taken up for the Defendant by another firm of solicitors, Yem & Associates ("Y&A") who had acted for the Defendant in the matrimonial proceedings. By the letter dated 27 March 1999 of Y&A to the Purchaser's solicitors in reply to the requisition for an assignment by Mr Cheung of his interest to the Defendant on or before 21 April 1999 as proposed by the Purchaser's solicitors, Y&A suggested that it might be "more apt" for the Defendant to apply to the Family Court for an order to the effect that when Mr Cheung was to transfer his interest to the Defendant, there would be no necessity to execute any assignment or related document. This proposal was made "in view of the difficulty of calling forth" Mr Cheung to execute an assignment. Y&A did not elaborate in that letter as to why it was "difficult" to get Mr Cheung to execute an assignment.

19. The Purchaser's solicitors replied by a letter dated 29 March 1999 and suggested amendments to the order that Y&A proposed to seek from the Family Court. The effect of the amendments proposed was to make it clear that by the order of the Family Court, the interest of Mr Cheung was immediately vested in the Defendant. Further, the Purchaser's solicitors stated that the Plaintiff would give the Defendant not more than 4 weeks' time from 29 March 1999 to "deal with the order", i.e. by 26 April 1999. The Purchaser's solicitors did not make any proposal as to the extension of the completion date, presumably this would be within a reasonable time from the deadline by which the proposed order was to be obtained from the Family Court.

20. Y&A did not say whether they would agree to the deadline by which they were to obtain the order. They lodged an application only on 8 April 1999. This was heard on 12 May 1999, which was after the deadline. However, the Purchaser's solicitors did not make any complaint or give any notice to Y&A that they regarded the Defendant was in breach for failing to answer the requisitions satisfactorily by the new deadline. Nothing happened until 13 May 1999 when Y&A wrote to the Purchaser's solicitors enclosing for their information a draft order of Deputy Judge W Leung dated 12 May 1999 and stating that a sealed copy of the same would be delivered when available. That order of the Deputy Judge is also in Chinese. It recited that Mr Cheung was absent at the hearing. In Paragraph 1 of that Order, it is stated that the Defendant's application was for an order to the effect that upon the transfer by Mr Cheung of his 45% interest to the Defendant, there was no need for Mr Cheung and the Defendant to execute any assignment or any related document and that the interest was to be vested in the Defendant immediately. It was provided in Paragraph 1 of that Order that there was no need to make any order on the Defendant's application. In Paragraph 2 of that Order, it is stated that the Family Court had no jurisdiction to make any declaration.

21. The Purchaser's solicitors responded by their letter to Y&A dated 14 May 1999. They noted that Y&A had failed to obtain the proposed order from the Family Court. They again pointed out that the 45% beneficial interest of Mr Cheung in the Property had to be resolved and as no order was obtained from the Family Court, an assignment was a must. In the absence of an assignment, there was a blot on title. Good title of the Property had not been shown and proved and the requisition had not been satisfactorily answered. By that letter, the Purchaser's solicitors informed Y&A that the Plaintiff would not complete the sale and purchase of the Property. The title deeds and documents were returned to Y&A on 27 May 1999 and a demand was made for the return of the deposits forthwith.

22. I should mention that an order was made subsequently by Deputy Judge W Leung on 5 August 1999 in which he exercised his power under Section 26 of the Matrimonial Proceedings and Property Ordinance, Cap. 192 and directed that the matter be referred to the Registrar of the High Court to settle a proper instrument for the transfer of Mr Cheung's interest pursuant to the Family Court Order. A deed between Mr Cheung and the Defendant was made on 26 August 1999 by which Mr Cheung relinquished in favour of and assigned to the Defendant all his 45% beneficial interest in the Property with the intent that the entirety of the Property should thenceforth become vested in the Defendant solely. By that Deed, Mr Cheung also covenanted that he had not done any act whereby his 45% beneficial interest might be impeached, charged, affected or encumbered. The Deed was executed by the Registrar for Mr Cheung. Having failed to get the Plaintiff to complete the transaction after the Deed was obtained in August 1999, the Defendant registered a memorandum of determination of the Agreement in the Land Registry in September 1999 and she sold the Property to another purchaser in November that year at a lower price due to the fall in property prices subsequently.

23. There is no question that the Defendant did have good title to convey after the Deed was executed in August 1999. The question is whether she had shown good title and had answered the requisitions satisfactorily as at 14 May 1999 when the Plaintiff terminated the Agreement.

24. In my view, she had not. I think the Purchaser's solicitors had made a valid point about Paragraph 2 of the Family Court Order by which Mr Cheung was ordered to transfer his 45% interest in the Property to the Defendant. The Order did not say that Mr Cheung's interest "is thereby transferred" to the Defendant, or that Mr Cheung's interest "is immediately vested" in the Defendant. Paragraph 2 of that Order is completely silent as to how and when that transfer of interest was to be effected, in contrast to Paragraphs 1 and 3 of that Order by which Mr Cheung was required to vacate and deliver up vacant possession of the Property to the Defendant within 1 month of the Order. There is, in my view, an ambiguity about Paragraph 2 of the Family Court Order and it cannot be said that it is shown beyond reasonable doubt that the Defendant was in a position, without the possibility of dispute or litigation, to pass the entire legal and beneficial interest in the Property to the Defendant, as she was required to do under Clause 26 of the Agreement.

25. I am mindful of the fact that in the subsequent Order of the Deputy Judge on 12 May 1999, he had apparently ordered that there was no need to make any further order on the Defendant's application and that he had no jurisdiction to make any declaration. It might well be that the learned Judge had no doubt or ambiguity as to the effect of the Family Court Order. But that is beside the point. As stated by Clough JA in Kan Wing Yau & Anr v. Hong Kong Housing Society [1986-88] CPR 525 at 532I to 533B:

26. In my view, the requisitions raised by the Purchaser's solicitors and which they regarded as not having been satisfactorily answered are matters which may be "reasonably and fairly questioned by ... competent persons". For this reason, I find in favour of the Plaintiff. I make a declaration as sought in paragraph (1) of the Originating Summons that the requisitions numbered 4, 5 and 6 in the letter dated 18 January 1999 from the Purchaser's solicitors to FWH had not been answered sufficiently or satisfactorily by the Defendant and that the Plaintiff is entitled to annul the sale and purchase of the Property and/or to terminate or rescind the Agreement. I also make an order that the deposit of HK$166,000.00 be returned to the Plaintiff and that the Defendant is to pay the Plaintiff HK$12,450.00 being the stamp duty paid by the Plaintiff, with interest on these sums at the current judgment rate from 11 December 1999, being the date the Originating Summons was issued. Lastly, I make an order nisi that the Defendant is to pay the Plaintiff his costs of this application.