YEUNG YUN CHOI AND ANOTHER v. LAM PA KIN

HCMP 554/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 554 of 2016

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JUDGMENT

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1. This is a vendor and purchaser summons.

2. The property in question is the property known as Flat 7, 4^th Floor, Block O, Siu Hong Court, No. 2/22 Siu Hong Road, Tuen Mun, New Territories (“the Property”).

3. The 1^st and 2^nd plaintiffs are the registered owners of the Property as joint tenants.

4. The Property was originally part of the development of the Home Ownership Scheme and was subject to the alienation restrictions imposed by the Housing Ordinance (Cap 283) (“the Ordinance”).

5. By an assignment dated 23 November 1984 (“the 1^st assignment”), Ms Chi Kam Lin (“Ms Chi”) acquired the Property as purchaser from the Hong Kong Housing Authority as vendor at the consideration of $165,600.  Ms Chi thereby became the 1^st owner of the Property.

6. On 20 January 1997, Ms Chi as vendor and Ms Chan Wai Keun (“Ms Chan”) as purchaser entered into a sale and purchase agreement for the sale and purchase of the Property at the consideration of $1,420,000.  Pursuant thereto, by an assignment dated 15 April 1997 (“the 2^nd assignment”) Ms Chan acquired the Property from Ms Chi.  Ms Chan thereby became the 2^nd owner of the Property.

7. By a letter dated 16 April 1997 (“the premium payment letter”) the Hong Kong Housing Authority (“the Authority”) wrote to Ms Chi stating:

“ This is to certify the receipt of the premium payable under paragraph 1 of the Schedule to the Housing Ordinance (Cap. 283) for the above property, and to confirm that the alienation restrictions as specified thereunder in respect of the above property are removed. …”

8. There is no dispute between the parties that the purchaser shall not, inter alia, convey the land unless the purchaser has first paid to the Authority the amount of the premium calculated under the formula set out in clause 1(b) of the Schedule to the Ordinance.  There is also no dispute that on payment of the premium to the Authority, the alienation restrictions in paragraph 1 of the Schedule to the Ordinance are removed.

9. On 2 June 1997, Ms Chan as vendor and the 1^st and 2^nd plaintiffs as purchasers entered into a sale and purchase agreement for the sale and purchase of the Property at the consideration of $1,788,000.  Pursuant thereto, by an assignment dated 16 July 1997 (“the 3^rd assignment”), Ms Chan assigned the Property to the 1^st and 2^nd plaintiffs as joint tenants.

10. On 30 December 2015, the 1^st and 2^nd plaintiffs as vendor and the defendant as purchaser entered into a memorandum of agreement (“the memorandum“) for the sale and purchase of the Property at the consideration of $2,000,000.  The completion date set out in the memorandum was stated to be on or before 29 April 2016.

11. The 1^st and 2^nd plaintiffs as vendor are required to give title to the Property to the defendant (clause 10 of the memorandum).  On 4 January 2016, Hon & Co, solicitors for the 1^st and 2^nd plaintiffs, sent the title deeds and documents in relation to the Property to Godfrey Chun & Co, the defendant’s solicitors.

12. On 8 January 2016, Godfrey Chun & Co raised a number of requisitions.  The only relevant requisition for the purpose of these proceedings is the requisition 1 in relation to the 2^nd assignment (“the requisition”) as set out in the said letter:

“1. Letter of Removal of Alienation Restrictions Memorial No.TM785078

We note that the above Letter of Removal of Alienation Restrictions was dated 16^th April 1997 a day later than the date of Assignment Memorial No.TM785060 (ie., 15^th April 1997) (‘the Assignment’).  Pursuant to paragraph 4(b)(ii) of the Terms Covenants and Conditions set out under the schedule of Housing Ordinance Cap.283 (‘the Housing Ordinance’), the premium payable under para.1 of the Schedule to the Housing Ordinance should be paid before the Assignment.  Unless the premium is paid to the Housing Authority before the Assignment takes effect, Section 17B of the Housing Ordinance renders any assignment of the above property void.  Therefore, please let us know how you would rectify the aforesaid defect.  We enclose herewith a copy the relevant pages for your easy reference.”

13. As a result of the requisition that was raised, Hon & Co wrote to the Authority by a letter dated 11 January 2016 requesting the Authority to confirm that the 2^nd assignment for all intents and purposes was deemed to have complied with paragraph 4(b)(ii) of the terms, covenants and conditions set out in the Schedule to the Ordinance and that the Housing Department would not enforce section 17B of the Ordinance in respect of the 2^nd assignment.

14. By a letter dated 20 January 2016 the Authority replied to Hon & Co to the effect that the Authority was not in a position to comment and determine the matter as it was in essence a title issue.  The Authority was of the view that it was not for it to confirm that the 2^nd assignment was deemed to have complied with the covenants in the Schedule to the Ordinance and whether the 2^nd assignment was void under section 17B of the Ordinance.  They further advised that no prosecution under section 27A of the Ordinance would be instituted.

15. It is not disputed that if the premium was in fact paid to the Authority after the 2^nd assignment became effective then the 2^nd assignment was void under section 17B of the Ordinance.

16. By a letter dated 28 January 2016, in answer to the requisition raised, Hon & Co wrote to Godfey Chun & Co stating, inter alia, that:

“1. Letter of Removal of Alienation Restrictions Memorial No.TM785078

We enclose herewith copy of a letter we received from the Hong Kong Housing Authority dated the 20^th January 2016 together with its enclosure for your information.  Under normal circumstances, a Confirmatory Assignment to be executed by the parties to the Assignment Memorial No.TM785060 would cure the defect in question.  However as the said Assignment was executed in 1997 and after the lapse of over 19 years, it is unlikely if we will be able to locate the relevant parties or indeed if they are willing to come out to execute the Confirmatory Assignment if at all.  Therefore, we are advised by Counsel that the only course of action will be to take out a Vendor and Purchaser’s Summons to resolve the aforesaid defect.  We shall therefore be obliged if you will kindly take instructions from your client if he would object to this course of action.  Kindly let us have your reply as soon as possible.”

17. As can be seen, instead of answering the requisition, Hon & Co suggested that the only course of action was to take out a vendor and purchaser summons to resolve the matter.

18. By a letter dated 2 February 2016 to Hon & Co, Godfrey Chun & Co took the view that the requisition had not been satisfactorily and sufficiently answered.  As the defendant was willing and ready to complete the sale and purchase of the Property, the defendant did not object to the taking out of a vendor and purchaser summons provided that there would be no order as to costs and that the completion be deferred until after the vendor and purchaser summons was resolved.  This was agreed to by the 1^st and 2^nd plaintiffs.

19. The vendor and purchaser summons was issued on 9 March 2016 seeking the following relief:

“ 1. A declaration that a good title to the Property has been shown in accordance with [the memorandum];

2.  A declaration that the [requisition] has been sufficiently answered by the Plaintiffs.”

20. The question to consider is when the 2^nd assignment became effective.  There is no dispute that the premium was paid as confirmed by the premium payment letter dated 16 April 1997.  If the premium was paid before the 2^nd assignment became effective then good title has been shown.  However, if the premium was paid after the 2^nd assignment became effective, there is no dispute that the 2^nd assignment was void and that good title has not been shown.

21. Mr Fan, for the plaintiffs, relied on Wong Yiu Ting v Kwok Wing Chiu [2009] 1 HKLRD 399 where Lam J (as he then was) held that there was no problem with title in that case.  The court there was also concerned with an assignment of a Home Ownership Scheme property.

22. Lam J helpfully summarized the relevant legal principles in Wong Yiu Ting.

23. A deed takes effect upon delivery.  The date appearing on it is prima facie evidence of its effective date, although it is not conclusive (Lam J at para 18).

24. And at para 20,  Lam J said:

“Delivery takes place when the party executing a document intends it to take effect and it is usually inferred from conduct in terms of signing and sealing, see Barnsley’s Conveyancing Law and Practice p.449. But it ultimately depends on the intention of the executing party, see Bolton Metropolitan Borough Council v Torkington [2004] Ch 66; Longman v Viscount Chelsea (1989) 58 P & CR 189; Windsor Refrigerator Co Ltd v Branch Nominees Ltd [1961] Ch 88.”

25. On the facts of the case before him in Wong Yiu Ting, Lam J found that the common intention of the parties to the assignment in question was to comply with section 17B of the Ordinance and that the assignment did not become effective until the premium was paid.  He found that the evidence clearly established that the assignment did not come into effect until the premium had been paid, and that there was no problem with the title (paras 30 and 32).

26. I accept, as submitted by Mr Cheng, for the defendant, that the facts and evidence relied on in Wong Yiu Ting were different from the facts and evidence in this case.  Lam J in Wong Yiu Ting had overwhelming evidence of the common intention of the parties as to when the assignment became effective.

27. It is necessary to examine the evidence in this case.  The 2^nd assignment is dated 15 April 1997.  The 2^nd assignment was made pursuant to the sale and purchase agreement dated 20 January 1997.  Completion was to take place on or before 15 April 1997.  That was the same date as the date of the 2^nd assignment.

28. As stated at the bottom of page 2 of the 2^nd assignment it is clearly stated that:

“IN WITNESS whereof the parties hereto have executed this Assignment the day and year first above written.”

29. It is clear from the 2^nd assignment that it was signed on the date written thereon namely, 15 April 1997.

30. An important clause (“the Subject to clause”) also appears in the 2^nd assignment which provided that Ms Chi, the vendor, assigned to Ms Chan, the purchaser, the Property:

“… SUBJECT also to the terms covenants and conditions mentioned in the schedule to the Housing Ordinance (Cap.283) and any amendments thereto.”

31. Mr Fan relied on the Subject to clause and submitted that this showed that the parties were aware of the alienation restrictions and that the alienation restrictions had to be removed before the assignment became effective.

32. I would observe that there is no clause in the memorandum in this case similar to clause 33 in the sale and purchase agreement in Wong Yiu Ying (as set out by Lam J at para 10) where it was clear that the parties were aware of the need to comply with the requirement as regards the payment of premium.

33. Be that as it may, it seems to me that by including the Subject to clause in the 2^nd assignment, the court can and should infer that the parties to the assignment were also aware of the need to comply with the terms, covenants and conditions in the Schedule to the Ordinance, including the payment of premium before the assignment became effective.  Although a similar clause was not included in the sale and purchase agreement, the Subject to clause was clearly inserted in the 2^nd assignment.  It seems to me that the Subject to clause must have been included in either the original draft of the 2^nd assignment or was added by way of amendments made and agreed before the assignment was signed on 15 April 1997.  It seems to me that prior to 15 April 1997 the parties to the 2^nd assignment were aware of the need to pay the premium to the Authority before the 2^nd assignment became effective.

34. The premium payment letter certified that the premium that was payable was paid.  Although the letter is dated 16 April 1997, it does not state when the premium was in fact paid.

35. I would observe that, on the evidence, Hon & Co did not make enquiries from the Authority as to when the premium was in fact paid.  There is also no evidence that Hon & Co made any enquiries from the solicitors who were acting for Ms Chi or Ms Chan in the conveyancing transaction resulting in the 2^nd assignment.

36. It seems to me that the premium payment to the Authority could have been paid either on 16 April 1997, the date of the premium payment letter, or before that date.  It matters not, in my view, because, as I have said, the court can and should infer from the inclusion of the Subject to clause in the 2^nd assignment that the parties thereto were aware of the need to pay the premium before the assignment became effective.

37. I am satisfied that the common intention of the parties to the 2^nd assignment was to comply with the terms, covenants and conditions in the Schedule to the Ordinance, including the payment of premium to the Authority before the 2^nd assignment became effective.  It seems to me that Ms Chi’s intention was that the 2^nd assignment would not become effective until the premium had been paid to the Authority.  That being so, it matters not if the premium was paid on 16 April 1997, the date of the premium payment letter, as the 2^nd assignment did not become effective until after the premium was paid despite the fact that the 2^nd assignment was dated and signed on 15 April 1997.

38. I am satisfied that good title to the Property has been shown by the 1^st and 2^nd plaintiffs.

39. I am, however, not satisfied that the requisition has been sufficiently answered by Hon & Co by their letter dated 28 January 2016.  As I have said, Hon & Co simply suggested that a vendor and purchaser summons be taken out to resolve the matter instead of sufficiently and satisfactorily answering the requisition raised.

40. I am satisfied that the 1^st and 2^nd plaintiffs are entitled to the first declaration sought but that they are not entitled to the second declaration sought.

41. I grant a declaration to the 1^st and 2^nd plaintiffs against the defendant that a good title to the Property has been shown.

42. The parties have agreed that there should be no order as to costs.  I, therefore, make no order as to costs.