GAIN BEAUTY LTD v. HARVEST WELL TECHNOLOGY LTD

HCMP787/2008

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 787 OF 2008

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J U D G M E N T

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1. The vendor and purchaser summons before me concerns with one and only one requisition.  The basic facts are all agreed between the parties.  The sale and purchase agreement of the property in question was dated 18 January 2008. 

2. By a letter dated 25 January 2008 the plaintiff’s solicitors acting for the purchaser raised one requisition and it is in respect of two relevant documents (“the Documents”), i.e. (a) Agreement for Sale and Purchase dated 23 February 1962 by Memorial No. UB373129 and (b) Cancellation Agreement dated 23 October 1963 by Memorial No. UB416732. 

3. These two documents appeared in the land search under a column “Incumbrances”.  There was no date given and no party given.  Of course the vendor obtained a certified true copy of these two documents from the Land Office and, funny enough, both parties did not include these two documents in the bundle of documents before me and no one mentioned about their nature.  In fact Miss Lorinda Lau appearing for the plaintiff told me that she did not even know what was the content of these documents.  I asked the vendor side to produce the two documents and fortunately solicitors for the defendant vendor have their office in Lippo Centre and therefore within a few minutes they retrieved the certified true copies from their office and produced right way before me. 

4. The nature of the Documents is important to my mind in the vendor and purchase summons especially when the issue is whether the Documents have been lost and therefore there should be an explanation of the circumstances how they were lost and who probably has custody of them and why they were lost. 

5. It turned out that the first agreement for sale and purchase was dated 23 February 1962 and registered in the Land Office on 25 July that year.  It was between the first developer called Sino-European Investment Corporation Limited, I mean the developer of that very building Cheong Kee Building(章記大厦)and the purchaser was one South-East Asia Scientific Company Limited.  The Cancellation Agreement was dated 23 October 1963 and it was registered with Land Office on 15 November 1963.  All these particulars were gathered by me from the documents themselves when they were produced before me with no objection from the other side.  I will explain why there was no objection and the relevance of these particulars.

6. On 4 February 2008, the plaintiff demanded originals of the Documents and if they were lost, they demanded certified true copies and statutory declarations explaining how they were lost.  Enquires were made from the original solicitors for the developer who prepared the two documents and according to one statutory declaration of Mr Chan Kwok Man Raymond, a solicitor of Messrs Lau, Chan & Ko and he said he was responsible for conveyancing matters of the firm.  Obviously he was not in the firm in 1962.  I do not know whether he was born by then, but anyway he was the one currently responsible for conveyancing matters of Lau, Chan & Ko.  He said he received a letter from the vendor’s solicitors asking them to check their records to see if the two missing documents were in their possession.  Upon their review of the matter they found that the Documents were executed over 40 years ago and Lau, Chan & Ko had already destroyed the relevant files of that age.  

7. Thereupon Miss Lau for the plaintiff submitted that Mr Chan did not say these two documents were in that file and therefore it is not a statutory declaration saying how the Documents were lost or to be exact the circumstances as to who had custody of the Documents and the circumstances how the Documents were lost. 

8. I read Mr Chan’s statutory declaration by inferring from what he said as follows :

(1) he was the one in charge of conveyancing matters and therefore he is the person who has custody of the Lau, Chan & Ko’s conveyancing files; and

(2) those files of more than 40 years ago had already been destroyed.  

In other words, he said these two documents or copies thereof were probably in the file or probably at least certified true copies were there in the file.  We do not know whether the original documents were in the file and if they were in the file they had been destroyed. 

9. Miss Lau submitted that the then vendor and purchaser in the 60s both of them would have the original and that is the two limited companies, the vendor and purchaser I mentioned in 1962 and the Cancellation Agreement in 1963.

10. Another surprising thing in this case is both firms of solicitors now appearing before me had never made any searches in the Company Registry as to what had happened to these two limited companies, Sino-European Investment Corporation Limited and South-East Asia Scientific Company Limited.  In my past experience in vendor and purchaser summons the first thing the solicitors would do is to make a company search to see if these companies are still in existence.

11. This obviously was not done by either firms of solicitors and I cannot assume anything.  I cannot even assume these two companies have already been wound up because they are more than 40 years ago.  Although I can take judicial notice that for some Hong Kong developers, and especially with reputable developers, they would use a limited company to develop one project, and then after the project was completed to the extent of selling all the units and the sharing of the profit by way of issuing dividends to the shareholders, the company would be voluntarily wound up.  We cannot rely on the fact that searches have been made, companies have has already been wound up and therefore we cannot ascertain who got custody of the original of these two documents.

12. We are now supplied with certified true copies of the two documents, so one part of the requisition has already been answered.  The other part is the statutory declaration of one Fan Chor Ho.  He is the director of the vendor company. In fact according to the land search, the property was sold by a sale and purchase agreement in October 1963.  In 1979, it was assigned to one P.F. Enterprises Limited.  In 1999, it was assigned to the present vendor.

13. Mr Fan is a director Harvest Well, and this company acquired the property, as I have said, from the predecessor in title, PFEL, and he declared that from day one there was no such two documents in the title deeds.  Since he put all the title deeds in the safe and he has not taken any documents out from the package he therefore truly believed that from day one when they acquired the property the two documents had never been given to them by their predecessor in title.

14. The next question is : are they title documents?  There was an agreement for sale and purchase, but there was no assignment one year later and the whole situation was back to square one and, that is, the property had not been sold at all.  It cannot be argued that sale and purchase agreement is not title deed, albeit that it has been cancelled.  But possibly, I cannot put it higher, solicitors in those days did not take it as title deed and therefore it was not included at all in the title deed documents.  From Mr Fan’s statutory declaration I can only accept that the present vendor did not have this title document at all amongst the title deeds documents.  Anyway, if there are title deeds documents then the present vendor never has it, the originals were probably still with the two vendor and purchaser in the year 1962.  We do not know what had happened to these companies. 

15. So the next question to consider is : had the vendor explained the circumstances why the original of the title deeds were lost?  If company searches have been made on these companies, of course if they have wound up then we can assume that the companies which have wound up have destroyed the two documents.  If one of them is in the file of Lau, Chan & Ko, being solicitors for the developer and Lau, Chan & Ko had destroyed the title deeds and therefore there is an explanation of the circumstances of losing the title deed documents.  

16. From the evidence before me, since these two documents were really old documents, the vendor could rely on section 13(2) of the Conveyancing and Property Ordinance, Cap. 219 which says :

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

(a)    …

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

to be a true copy.”

17. The two missing documents were certified by a Land officer and therefore, to my mind, once the other side has given evidence to explain why they had never had the title deeds and what efforts they had made to find out where these two documents were, albeit the unsatisfactory situation is the vendor solicitors had never made a company search for the two limited companies, I am satisfied that the production of the certified true copies would be sufficient in the circumstances of this case.

18. The next question to decide is the vendor solicitors had given a 7-day notice to annul the sale and purchase agreement by their letter dated 28 February 2008.  This is an important letter and I therefore include it in full.  It reads :

“  With reference to your letter dated 4^th February 2008, we repeat our view mentioned in our letter to you dated 28^th January 2008.  The  requested Agreement for Sale and Purchase Memorial No.UB373129 and the Agreement for Cancellation Memorial No.UB416732 (collectively called ‘the two Agreements’) have ceased to have any effect on title of the captioned property.  Their production is not necessary.

   For a gesture of our goodwill, we have written to M/s. Lau, Chan & Ko for obtaining the two Agreements.  However, we are informed that the relevant file has been destroyed and cannot be retrieved since it was a case over 40 years ago.  Hence, our client is unable to produce the two Agreements to your client.

   In the circumstance, unless you shall advise us within the next 7 days that you withdraw your requisition relating to the two Agreements, we shall have no alternatives but give you notice pursuant to clause 7(e) of the Agreement for Sale and Purchase made between our respective clients dated 18^th January 2008 to annul the sale.”

19. The purchaser before me took the stance that this would amount to giving the seven days’ notice to annul the sale and purchase agreement.  Therefore, on 6 March, they wrote and said since you have exercised the right to annul the agreements we would now accept the rescission and please give us back the deposit.  But then of course the vendor’s solicitors wrote back on the same day and said :

“  Kindly note carefully the wording in our last letter.  In our last letter, we drew your attention to our client’s right under clause 7(e) of the Agreement.  We threatened to give a notice under clause 7(e) if your requisition is not withdrawn.  But we have not yet given any notice to annul the sale yet.  The clause only gives our client, the Vendor, but not your client, the Purchaser, the right to annul the sale and purchase.

   Therefore, your request for refund is misconceived and declined.

   ….”

20. Is the vendor’s solicitor right in their construction of their previous letter on 28 February 2008?  I think they are right.  A careful reading of this sentence would give the intended effect.  It says :

“… unless you shall advise such within the next 7 days that you withdraw your requisition relating to the two Agreements, we shall have no alternatives but give you notice pursuant to clause 7(e) of the Agreement for Sale and Purchase ….”

It means, as a matter of English, “We shall do what?  We shall have no alternatives but we shall give you notice pursuant to clause 7(e)”.   The conjunction “but” separated the two sentences.  Actually the first sentence is “we shall have no alternatives”, the second sentence is “we shall give you notice unless you advise us within 7 days that you withdraw your requisition”.  In other words, if you do not withdraw your requisition, we shall give you the notice.  Thus this letter is not the notice itself, and no such notice has been given yet.  Solicitors obviously know that in giving notice they would say that “we are now giving you notice which we hereby do”, and that is the magic phrase for giving notice.  But here, they use a future tense “we shall give you notice”, therefore there was no such notice given. 

21. Of course, perhaps, the solicitors for the purchasers consider that it is a windfall and they considered that since the other side have given their notice, they want to have their deposit of $600,000 back.  But solicitors for the vendor immediately clarified the situation.  The purchaser’s solicitors insisted that was a notice and calculated the seven days and they said they would like to have the refund of the deposit by 11 March 20008.  They even apologized that in their previous letter their demand for immediate refund of the deposit was wrong and they should wait until 11 March 2008.  There were subsequent correspondences between the parties.

22. The next important letter is solicitors for the vendor wrote on 19 March 2008 :

“We refer to your letter of 4^th February 2008 [the requisition letter] and enclose

(a)    a draft statutory declaration by a director of our client for your comments [the draft affirmation of Mr Fan I previously mentioned]; and

(b)    certified copies Agreement for Sale and Purchase … and Cancellation [the two documents in question] …”

23. But of course the purchase’s solicitors then stated by a letter of 26 March 2008 :

“We noted that once your client has given the notice to rescind, that is end of the case.  Your client cannot now retract from the said notice.  The transaction has already been annulled upon expiry of the notice period.  We are instructed to reiterate our client’s demand for refund of the initial and further deposit of HK$600,000.00 forthwith.”

24. Notice the stance of the purchaser’s solicitors there and then, and that is, they considered the sale and purchase has already been annulled, there is no more any completion date stipulated to be on 28 April 2008, they have no obligation and responsibility to complete and they demanded the refund of their deposit.  And that of course was taken by the vendor’s solicitors as evincing an intention not to complete the purchase which they immediately wrote back on the same day.  

25. Then came the statutory declaration of Mr Chan Kwok Man, Raymond of Lau, Chan & Ko, as I have said earlier, on 1 April 2008.  

26. On 21 April 2008, the vendor’s solicitors wrote to the purchaser’s solicitors and enclosed therewith Mr Fan’s statutory declaration of even date which, I am told, was exactly in the form of draft affirmation given to the other side earlier as aforesaid.  On 24 April 2008, the vendor’s solicitors wrote to the purchaser’s solicitors and stated how the balance of the purchase price of $5.4 million should be paid, whereupon the purchaser’s solicitors wrote the next day and enclosed with the sealed copy of the originating summons herein which was filed on that day together with the affirmation of Cheung Ka Wai, that is, the solicitor acting for the purchaser.  At the same time, in another letter, they said this :

“We should be grateful if your would seek instructions from your client that completion of the transaction shall not take place until conclusion of the Originating Summons (V-P Summons) hereof.  Otherwise we are afraid that we may have to take out an application to the Court to postpone completion.  We await your reply.”

27. Whereupon, of course, the vendor’s solicitors take the stance that they have answered the requisition satisfactorily and completion date should take place before 5 p.m. on 28 April 2008 as agreed, and there should not be any extension of time.

28. The purchaser’s solicitors’ letter asking for completion date to be extended to the end, to the conclusion of their originating summons is an ingenious way of having the cake and eat it or, to use a lawer’s language, approbating and reprobating.  On one hand they consider the sale and purchase agreement was annulled and therefore they have accepted the rescission and the case came to an end, that was the declaration they are seeking from this court in this originating summons.  But then at the same time they said the completion date of the transaction which they earlier in the same sentence said has already came to an end, should be extended.  One would then ask what should be extended if they took the stance that there was no such agreement by then?  And they even asked for extension to the conclusion of the originating summons which may mean the decision of the Court of Final Appeal if this case would go as far as that.  But I understand that the amount involved may be not just $600,000 because they are saying that the property was sold for $5.4 million.  But any way, that is the question for the Court of Appeal and the Court of Final Appeal.  The question before me today is : are they allowed to do so?  In my opinion, they are not allowed to do so.

29. As a last resort, Ms Lau, in her ingenious argument by way of reply, then submitted that Mr Fan’s statutory declaration came on 21 April and therefore the completion date should be extended to 29 April or 30 April because they would have seven days to consider the documents supplied under the requisition and, that is seven business days excluding Saturday, would end by 30 April.  Thus, she submitted that, the forfeiture of the deposit at 5:08 p.m. or 17:08 hour came two days earlier.  That, to my mind, is just an ingenious argument but because by then :

(1)  there was no mention of this seven business days;

(2)  more importantly, they have taken out the stance that the sale and purchase agreement has already been annulled, and they should stand or fall by such stance; and

(3)  finally, they have already taken an originating summons for such a declaration and they have reached a point of no return by their stance that the agreement has already been cancelled.

30. All in all, I consider in conclusion that the vendor had clearly proven a title.  In addition, I would say there is no breach at all for these two lost documents since no one can imagine the then vendor and/or purchaser could make use of them to create an equitable mortgage.  They are not assignments, one is a sale and purchase agreement which was clearly cancelled by another agreement and registered with the Land Office.  The then vendor and the then purchaser, if they wanted to make use of the documents to create equitable mortgage within these 45 to 46 years, it would be most unlikely; it is unlikely that they could have or would have done so in the past or will still do so in the future.

31. Thus I dismiss the plaintiff’s originating summons and, unless I hear otherwise, I award costs to the defendant, to be taxed if not agreed. 

32. The registration of the sale and purchase agreement dated 18 January 2008 and registered on 22 January 2008 by Memorial No. 08012201060021 shall be vacated forthwith from the Land Registry.