Ma Yu Cheung v. Yu Wai Chun and Another

DCMP268/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 268 OF 2001

________________

J U D G M E N T

________________

1. This is an action by originating summons issued by the Plaintiff against the 1st and 2nd Defendants, the 2nd Defendant being the vendor of a property known as Flat E, 6th Floor, Block 2, Hsin Kuang Centre, No. 120, Lung Cheung Road, Kowloon, Hong Kong under a sale and purchase agreement between the Plaintiff and the 2nd Defendant dated 16 November 1987.

2. The Plaintiff's case may be stated briefly. On 16 November 1987, he entered into a sale and purchase agreement with the 2nd Defendant to purchase the aforementioned property for $490,000. The sale and purchase was completed on 12 March 1988 and the same was financed by a bank loan under a mortgage dated 8 March 1988. It was subsequently discovered by the Plaintiff and the bank that the agreement, the assignment and the mortgage could not be registered with the Land Registry because there had been registered with the Land Registry against the property a prior agreement for sale and purchase dated 20 January 1987 between the Plaintiff and the 1st Defendant. Under this prior agreement, the 2nd Defendant agreed to sell the same property to the 1st Defendant for $447,000. A deposit of $80,000 was paid by the 1st Defendant to the 2nd Defendant pursuant to the agreement and completion was scheduled to take place on 20 March 1987. According to the Land Registry as well as all available evidence, the sale and purchase of the property between the two defendants was never completed and, at any rate, no assignment of the property by the 2nd Defendant in favour of the 1st Defendant pursuant to the prior agreement has ever been registered with the Land Registry.

3. There were contacts between the respective solicitors acting for the three parties thereafter and at one stage it was suggested that the 1st and 2nd Defendants should enter into a cancellation agreement relating to the prior agreement. But eventually, nothing was apparently signed or done, and certainly no cancellation agreement has ever been registered with the Land Registry.

4. The matter dragged on and it would appear from the evidence that in early 1990s the Plaintiff eventually managed to get in touch with the 1st Defendant in Shenzhen, the Mainland. The 1st Defendant, according to the evidence, indicated to the representative of the Plaintiff that he had no objection to signing a cancellation agreement relating to his prior agreement with the 2nd Defendant, but he wanted the payment of a sum of $50,000 as a sort of 'lai see' payment. According to the evidence, the 1st Defendant did not link that demand for payment with any claim of interest towards the property in question. Neither the Plaintiff nor the bank agreed to make the payment as demanded and so nothing was concluded between the Plaintiff and the 1st Defendant.

5. Again, the matter dragged on and this afternoon I was told by Miss Wee, counsel for the Plaintiff, that the mortgage with the bank has been paid off.

6. On 30 January 2001, the Plaintiff took out the present action by originating summons against the 1st and 2nd Defendants claiming that the prior agreement between the two defendants must have been repudiated by the 1st Defendant's failure to complete the purchase, which repudiation must have been accepted by the 2nd Defendant's subsequent agreement to sell and assign the property in question to the Plaintiff. Accordingly, the Plaintiff asked for a declaration that the Plaintiff is and has been, since the assignment, the sole legal and beneficial owner of the property subject only to the mortgage and of course, as I have said, I have been told that the mortgage has since been discharged.

7. Second, the Plaintiff asked for an order that registration of the prior agreement between the two defendants in the Land Registry be vacated.

8. The originating summons was duly served on the two defendants. Affirmations of service have been filed with the court verifying the due service of the process. Neither defendant filed or served any acknowledgement of service or any intention to defend the present proceedings. So at today's hearing, the Plaintiff proceeded with his claim in the absence of the two defendants.

9. Subject to a question of jurisdiction, I must say that I am prepared to grant at least some declaratory relief in favour of the Plaintiff. Back in 1987 after the signing of the prior agreement, the 2nd Defendant, as the vendor, entered into a second agreement with the Plaintiff. Now, it would be very difficult for this court to say, even on a balance of probabilities, why the 2nd Defendant did so at that time. There could be a number of possibilities. One possibility is the one preferred by the Plaintiff, i.e. that the 1st Defendant had acted in breach of the prior agreement, that breach had been accepted by the 2nd Defendant at the latest when he contracted with the Plaintiff to sell the property to him. So if that was the true scenario, then of course the Plaintiff must have obtained a good title from the 2nd Defendant which is good against, amongst others, the 1st Defendant and some sort of declaratory relief, given the difficulties the Plaintiff subsequently faced in terms of registration, should be made available to the Plaintiff. But, as I say, that is only one possibility.

10. Another possibility would be that the parties, i.e. the Defendants, had simply after the prior agreement, agreed to extend the time for completion and somehow in breach of this prior agreement, as extended, the 2nd Defendant entered into a second agreement with the Plaintiff; and, to carry on with this example, somehow the 1st Defendant failed to follow-up with his prior agreement as extended and eventually abandoned the same. That would be another possibility.

11. Yet another possibility would be that actually it was the 2nd Defendant who acted in breach of the prior agreement in entering into the second agreement with the Plaintiff for the sale and purchase of his property. Now in that case, the 1st Defendant would be entitled to sue the 2nd Defendant for specific performance of the prior agreement and make a claim to the property. Alternatively, the 1st Defendant would be entitled to ask for the return of the deposit and sue the 2nd Defendant for further damages, if any. In that latter scenario, the 1st Defendant would also be entitled to make a claim against the property for a purchaser's lien because, as I have said, according to the documents, he had paid a deposit of $80,000 to the 2nd Defendant pursuant to the prior agreement.

12. So all these would be possibilities and, in my judgment, the Plaintiff in the present case is too ambitious when he claims in the originating summons that the prior agreement must have been repudiated by the 1st Defendant's failure to complete the purchase, which repudiation must have been accepted by the 2nd Defendant. That, as I say, is simply one of the possibilities in question.

13. But this is not necessarily the end of the matter for the Plaintiff. As I have said, since the commencement of the present proceedings on 30 January 2001, and despite the fact that the process was duly served on the two defendants, none of the defendants came forward to defend the Plaintiff's claim and none of them came forward to put forward a claim to the property, and I would also add that the 1st Defendant did not take out or file any contribution notice against the 2nd Defendant making any claim against the 2nd Defendant relating to the prior agreement between the two. So regardless of what was the actual position prior to 30 January 2001 and, more particularly, regardless of (as between the 1st and 2nd Defendant) who was right and who was wrong in relation to the non-completion of the prior agreement, or whether the prior agreement, whether extended or not, had been abandoned, it does not really matter to the Plaintiff anymore. Since 30 January 2001 when the question of the title to the property is put squarely before the court by way of litigation, the 1st Defendant has not come forward to make any claim against the Plaintiff, the 2nd Defendant or the property.

14. So in those circumstances, I think at the very least the Plaintiff would be entitled to a declaration that he is now the sole legal and beneficial owner of the property. I say "legal" because, of course, the 2nd Defendant has executed an assignment in favour of the Plaintiff; and I say "beneficial" because the 1st Defendant has not made any claim to the title of the property, despite the commencement of the present action to which he is a party. And I have not mentioned the mortgage because, as I have said, the mortgage has, according to counsel, been discharged.

15. In relation to the last point, since (subject to the jurisdictional point: see below) if I am going to make a declaration that will be in an unlimited form, I would require an undertaking from the Plaintiff to file supplemental evidence to verify that the mortgage has been discharged, as I was told by counsel.

16. That, so far as I can see, would be quite sufficient for the Plaintiff's purpose, there being no other third party involved in the present case. So, in other words, even though I may not be prepared to grant a declaration of the Plaintiff's title going back to 1988, that should not have any real effect on the Plaintiff's side.

17. Now I turn to the more interesting, if not difficult question, about jurisdiction. This court is a court of limited jurisdiction. Section 32 of the District Court Ordinance gives the court jurisdiction to hear and determine any action found on contract, quasi-contract or tort subject to a monetary limitation. Section 33 gives the court jurisdiction to hear any action for the recovery of penalty and so forth, subject to a monetary limit. Section 35 gives the court the jurisdiction to hear any action for the recovery of land subject to, again, a limitation based on the annual rent or the rateable value. Section 36 reads as follows:-

"The Court has jurisdiction to hear and determine any action which would otherwise be within the jurisdiction of the court and in which the title to an interest in land comes into question if -

a) for easement or licence the rateable value,

determined in accordance with the Rating Ordinance (Cap. 116) or the annual value, whichever is the less, of the land, over which the easement or licence is claimed, does not exceed $240,000;

or

b) for any other case, the rateable value,determined in accordance with the Rating Ordinance (Cap. 116) or the annual value, whichever is the less, of the land, does not exceed $240,000."

18. Section 37 is also relevant. It gives the court jurisdiction as follows:-

"1) Subject to the maximum limits in the amount or value set out in subsection (2), the Court has the jurisdiction of the Court of First Instance to hear and determine the following proceedings -

a) ...

b) ...

c) ...

d) proceedings for the specific performance, or

for the rectification, rescission or delivery up or cancellation of an agreement for the sale, purchase or lease of property;

e) ...

f) ...

g) ..."

The rest of the section sets out the maximum limits and other incidental matters.

19. As I said, in the present case, the Plaintiff claims that the prior agreement to which the Plaintiff was not a party, had been repudiated by the 1st Defendant which repudiation had been accepted by the 2nd Defendant and on that basis the Plaintiff claims against both the 1st and 2nd Defendants a declaration that he was and is at all material times the sole legal and beneficial owner of the property in question. Further, the Plaintiff claims for an order that the prior agreement, registered in the Land Registry, be vacated from registration.

20. Now, in my judgment, this is not an action found on contract, i.e. this is not an action, as Miss Wee tried to argue during submission, found on the sale and purchase agreement between the Plaintiff and the 2nd Defendant. Quite obviously, the Plaintiff is seeking a declaration of his good title to the property against a non-party to his agreement, i.e. the 1st Defendant. So this is not a case falling within section 32 of the Ordinance.

21. Turning to section 35 of the Ordinance, quite plainly this is not a case concerned with recovery of land because the Plaintiff has been and is in uninterrupted possession of the property since the completion of his sale and purchase of the property with the 2nd Defendant.

22. Now, skipping section 36 for the time being, and turning to section 37(1)(d), it is equally plain to me that I am not dealing with proceedings for the specific performance or for the rectification, rescission or delivery up or cancellation of an agreement for the sale and purchase of property. I am facing fairly and squarely a case concerning title to land.

23. Now what about section 36? As I said, under section 36, the caption of which reads "Jurisdiction where title in question", the court has jurisdiction to hear and determine any action which would otherwise be within the jurisdiction of the court and in which the title to an interest in land comes into question if certain jurisdictional limits are not exceeded. On the face of it and in a careful literal reading, the section itself does not confer any jurisdiction as such. It simply says that the court has jurisdiction to hear and determine any action "which would otherwise be within the jurisdiction of the court." In other words, the section does not confer positively any jurisdiction on the court; it simply removes a hurdle to the court's having jurisdiction, the hurdle being that the action is one concerning title to land if certain restrictions laid down in subsection (a) and (b) of section 36 are not exceeded. In other words, in order for the court to have jurisdiction to hear the case concerning title to land, the court must have otherwise got jurisdiction elsewhere. By "elsewhere", I am excluding section 36 itself. (In this regard, section 52 which gives the court "jurisdiction" to grant injunctions and "make binding declarations of right" only relates to the type of relief a court may grant in an action which it has jurisdiction to hear, but does not, in my judgment, deal with what type of actions the court may hear. It therefore does not help either.)

24. Returning to section 36, one possible reading of section 36 is this: For example, there was a sale and purchase agreement concerning land and a plaintiff sued a defendant in relation to breach of that sale and purchase agreement. Now that would be an action found on contract and would come within section 32 of the Ordinance, giving the court jurisdiction to hear the case. Now if in that action based on contract a title question was also involved, then section 36 would come into the rescue and provided that the jurisdictional limit in (a) or (b) are not exceeded, the court would have the jurisdiction to hear this case founded on contract, notwithstanding that title to land was involved.

25. That I must say is a fair reading of section 36. But if that is the correct reading of section 36, it must mean that the court does not have any jurisdiction in the present case to decide the title question or make the relevant declaratory relief relating to title because, as I say, this case is not concerned with an action found on contract. This is, as I say, fairly and squarely a title case with the Plaintiff seeking a declaration of title against his vendor and a prior intending purchaser whose contract with his vendor has been registered with the Land Registry. If section 36 does not by itself confer on the court jurisdiction to hear such a title action, then I cannot grant any relief to the Plaintiff, no matter how fair and just I would otherwise have considered it would be to do so.

26. But is that the correct construction? The District Court Ordinance was amended last year to give the court extended jurisdiction in civil matters. The monetary jurisdiction has been increased from the previous amount of $120,000 to $600,000 and other jurisdictions have been increased as well or added to the District Court, and, amongst others, section 36 has been added alongside section 35 and section 37. In my judgment, the intention behind these amendments in general, and the intention behind section 36 in particular, must have been to give the court some, albeit not unlimited, jurisdiction to deal with, amongst other things, land matters and one important land matter which the courts deal with all the time is a title problem.

27. So, in my judgment, section 36 should not be construed in such narrow way as I have indicated, although a literal reading of section 36 would require such a construction. For my part, I am quite prepared to construe section 36 to mean that the court has jurisdiction to hear any action concerning title to an interest in land if the jurisdictional limit set down in subsection (a) or (b) has been satisfied. In order to literally achieve this construction, I must confess one needs to construe, where necessary, the word "and" appearing immediately after the phrase "within the jurisdiction of the court" as "or". So, in other words, in my reading of section 36, the section should be construed as saying, where necessary (i.e. if the other sections do not confer jurisdiction), that the court has jurisdiction to hear and determine any action which would otherwise be within the jurisdiction of the court or in which the title to an interest in land comes into question if the jurisdictional limit in subsection (a) or (b) is not exceeded.

28. Now, this reading of mine would mean that if under other parts of the Ordinance the court has jurisdiction to hear a case, and the case contains a title question, then the case can be heard by the court provided that the jurisdictional limit in subsection (a) or (b) has not been exceeded. Alternatively, if the case concerns title to land, then again, if (a) or (b) is not exceeded, the court equally has jurisdiction to hear the case. That, in my judgment, accords well with the intention behind the amendments to the District Court Ordinance last year. Although some violence is done to the wording of section 36, in my judgment, that is justified by the circumstances, particularly if one bears in mind section 19 of the Interpretation and General Clauses Ordinance, Cap. 1, which reads;

"An ordinance shall be deemed to be remedial and shall receive such fair, large and liberal construction and interpretation as will best ensure the attainment of the object of the ordinance according to its true intent, meaning and spirit."

29. Adopting such legislatively ordained approach to statutory interpretation in the case of section 36 of the Ordinance, I have come to the construction of section 36 I mentioned above.

30. I would like to add only this: In my construction of section 36, as I say, one limb is that an action already derives jurisdiction from some other provisions in the Ordinance apart from 36 and if it does not exceed the jurisdictional limit under (a) or (b) of section 36, then according to my construction the court has jurisdiction to hear the case. Of course that must mean that the action somehow concerns land before section 36 would be relevant at all. If the action does not concern land or does not concern an easement or licence or any other interest in land, then one need not go to section 36 at all, since ex hypothesi the action is one which comes within the jurisdiction of the court under some other provisions other than section 36 of the Ordinance. In such a case, the word "and" means "and". But on the other hand, if the action is one which does not fall within any other jurisdictional provisions in the Ordinance but is one in which the title to an interest in land comes into question, then one needs to go to see whether (a) or (b) has been exceeded in order to determine whether the court has jurisdiction in the matter under section 36, in this case reading the word "and" as "or".

31. With that construction of section 36, I have also come to the conclusion that I do have jurisdiction to hear the Plaintiff's case in the present action by originating summons and, as I have indicated, I am quite prepared to grant the Plaintiff some relief.

32. So far as the relief is concerned, first, I am prepared to grant a declaration that the Plaintiff is the sole legal and beneficial owner of the property in question. Now this is done subject to the undertaking by the Plaintiff to file supplemental evidence to prove that the mortgage has been discharged.

(Submission re mortgage)

33. I have been informed by counsel that, in fact, the release of the mortgage has been registered and is apparent from the copy land search record put in evidence before me which is indeed the case. So in that case, I do not require any undertaking from the Plaintiff relating to proving the release of the mortgage in question. That deals with the declaratory relief.

34. As I have said, the Plaintiff also asks for an order that the registration of the prior agreement be vacated. Now in the High Court, this is done pursuant to the inherent jurisdiction of the High Court. The provisions in the Land Registration Ordinance, as we all know, only deal with the vacation of a lis pendens. Since I have ruled that upon a proper construction of section 36 the court does have a limited jurisdiction relating to title matter, in my judgment, the court also has, like the High Court, an inherent jurisdiction, in a case which the court has jurisdiction to hear, to order, by way of relief, the vacating of instruments from registration which ought never to have been registered, or the registration of which has since become unsustainable (as being no longer affecting land), or the vacating of which is considered by the court to be fair and just in all the circumstances of the case.

35. In the present case, given my above ruling and based on my conclusion relating to the facts of this case, I exercise my inherent jurisdiction to order the vacating of the registration of the prior agreement, i.e. the agreement for sale and purchase registered in the Land Registry by Memorial No. 3473955 between the two defendants, forthwith.

36. Costs of the action be paid by the Defendants to the Plaintiff, to be taxed if not agreed. Certificate for counsel.

37. Before parting with this case, I would simply mention this: This hearing before me this afternoon was pursuant to a notice of appointment for adjourned hearing of the originating summons in question. It was fixed to be heard by me in Chambers. This was not the correct procedure and I have directed that this hearing be heard in open court. This is in accordance with my understanding of the practice, as well as in accordance with the commentary by the learned editors in Hong Kong Civil Procedure 2001, para. 28/9/2, which says that:

"An originating summons is a form of originating process which enables parties to commence an action in a summary and less expensive way than the institution of an action by writ, but the public interest in seeing that justice is done in open court is in general the same for an action commenced by originating summons as for an action commenced by writ. Unless an originating summons is concerned only with administrative matters, such as the execution of trust or administration of estates or unless there were special reasons such as the security of the state or the protection of the interests of infants or disabled persons or the protection of trade secrets, it should be set down for substantive hearing in open court."

38. This case, in my judgment, did not fall within any of those exceptions and that was why I directed that this hearing be heard in open court.