C & W WATCH CO LTD v. CHU KWOK TAI

HCMP 920/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 920 OF 2005

____________

____________

____________

______________

J U D G M E N T

______________

I. Introduction

1.  CW Watch agreed to buy and Chu Kwok Tai to sell a unit in the Kwun Tong Industrial Centre. 

2.  By a requisition, CW Watch's solicitors (CYC) asked Chu's solicitors (CDK) to provide originals of 8 documents.  CDK refused, saying that the requisition was unwarranted and Chu was not obliged to produce the documents.

3.  Chu not having furnished the documents by completion date, CW Watch alleged that Chu was not in a position to give good title.  CW Watch consequently treated the sale agreement as rescinded.  CW Watch now demands the return of its $107,000 deposit.

4.  Chu denies any breach of the agreement.  He contends that, by refusing to complete, CW Watch repudiated the sale agreement. Chu thus says that he can keep the deposit.  He claims additional sums as damages.

5.  I have to decide the following issues:-

(1)	whether CW Watch was entitled to ask for the 8 documents;
(2)	whether CW Watch was entitled to treat the agreement as rescinded;
(3)	whether Chu is entitled to retain the $107,000 deposit and seek further damages.

II. Background

6.  The Agreement for the sale and purchase of the unit was dated 24 March 2005.  It provided as follows:-

“	(1)	Clause 5:-
		“	Such of the muniments of title as relate exclusively to the said Premises hereby agreed to be sold will be delivered to the Purchaser....”
	(2)	Clause 6(a):-
		“	The Vendor shall give a good title to the said Premises and shall prove its title to the said Premises in accordance with Section 13 of the Conveyancing and Property Ordinance at the Vendor's expense commencing with the Government Lease in respect of the said Premises and shall make and furnish to the Purchaser such certified or attested copies of any deed or documents of title, wills and matters of public record as may be necessary to complete such title....””

7.  Completion was to take place on 25 April 2005.

8.  On 11 April 2005 CYC wrote to CDK that "in order to give a good title" Chu was obliged to produce the following documents:-

(1)	Original Deed of Gift Memorial No.2225394.
(2)	Original Further Charge Memorial No.2288857.
(3)	Original Release Memorial No.2697107.
(4)	Original Further Charge Memorial No.2456953.
(5)	Original Agreement for Sale and Purchase Memorial No.UB1598790.
(6)	Original Mortgage Memorial No.UB1755747.
(7)	Original Re-Assignment Memorial No.UB2225393.
(8)	Original Mortgage Memorial No.UB2225395.

9.  A long correspondence ensued between CYC and CDK on the request, with CDK denying an obligation to produce the documents. In particular, CDK argued that, since all 8 documents pre-dated the intermediate root of title, they did not have to be produced. CDK relied on Conveyancing and Property Ordinance (Cap.219) (CPO) s.13(1) and Agreement cl.6(a) in support of its view.

10.  In fact, none of the 8 documents have ever been in Chu's possession. When Chu bought the unit from his predecessor in title, he did not ask to see any of the documents which CYC were requesting.  At no time did Chu offer a statutory declaration in relation to the documents.

III. Discussion

A. CW Watch's entitlement to the 8 documents

11.  CPO s.13 provides as follows:-

"	(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.
		...."

12.  All parties accept that, if the 15 year period in CPO s.13 applies, the intermediate root of title would commence from an Assignment dated 14 December 1984.

13.  Chu reasons from this that, by CPO s.13, except for the Government Lease, CW Watch cannot compel him to produce originals of documents preceding the 1984 Assignment.  The 8 documents being all pre-intermediate root documents, Chu argues that he has no legal obligation to produce the same in order to show good title.

14.  But CPO s.13 cannot be read in a vacuum.  The obligation under s.13(1) is qualified by its opening words: "[u]nless the contrary intention is expressed". 

15.  Agreement cl.6(a) expressly provides that good title be shown from a document other than an intermediate root of title.

16.  Clause 6(a) specifies:-

"The Vendor … shall prove its title to the said Premises in accordance with Section 13 of the [CPO] … commencing with the Government Lease in respect of the said Premises…"

17.  Clause 6(a) manifests a contrary intention requiring that title be shown "commencing from the Government Lease," not from an intermediate root of title document. 

18.  As a result, CPO s.13(1) does not mandate a shortcut of proving title by an intermediate root document.

19.  It follows that CW Watch was entitled to request original copies of the 8 documents.  The documents clearly concern title to the unit being sold.  Although they are prior to the intermediate root document, they do not precede the Government Lease which is stipulated to be the document from which good title is to be shown.

20.  Chu attempted neither to provide original or certified copies of the 8 documents, nor explain by statutory declaration why the 8 documents could not be produced.  Therefore, as at the date of completion, Chu was unfortunately in breach of his obligation to show good title.

21.  Mr. Lee (appearing for CW Watch) has cited Yiu Ping Fong v. Lam Lai Hing Lana [1998] 4 HKC 476 (Yuen J) and Guang Zhou Real Estate Development (HK) Co. Ltd. v. Summit Elegance [2000] 2 HKLRD 855 (Deputy Judge Chu) in support of his case. 

22.  In Yiu Yuen J differentiated between an obligation "to give good title" and one "to show good title".  She believed that a vendor typically had to do both in an ordinary sale of land.  She held that CPO s.13(1) applied only to the latter obligation, but not to the former.  She thought that on completion a vendor was still obliged, absent clear agreement to the contrary, to provide originals of title deeds and documents relating exclusively to the property sold. 

23.  In Guang Zhou Real Estate Judge Chu interpreted Yiu as holding that the obligation to "give" (as opposed to "show") good title extended to production of documents pre-dating even an intermediate root of title.

24.  I confess to doubts about the correctness of Yiu and Guang Zhou Real Estate on the point raised by Mr. Lee.  In particular, I am unsure whether there is a distinction between "giving" and "showing" good title.  The supposed distinction would emasculate CPO s.13 of practical effect.  But, given my conclusion based simply on the construction of Agreement cl.6(a), it is unnecessary and undesirable for me to explore the question further here.

B. CW Watch's entitlement to treat the agreement as rescinded

25.  From my conclusion that Chu breached the sale agreement, it follows that CW Watch was entitled to treat the agreement as repudiated by Chu and at an end.

C. Chu's entitlement to the deposit and further damages

26.  It also follows from my conclusion that Chu cannot retain the $107,000 deposit.  Nor would Chu be entitled to additional damages.

27.  Chu has claimed a number of heads of actual damage.  As far as I can see, the total damages claimed amount to less than the deposit. 

28.  A deposit represents liquidated damages.  The Agreement arguably does not preclude Chu from seeking further damages, over and above the deposit, to the extent that Chu has suffered greater loss than $107,000.  But since total actual damages allegedly suffered by Chu are seemingly less than $107,000, then even if I had been in Chu's favour on liability, I would still have refused to award an amount over the deposit.

IV. Conclusion

29.  CW Watch is entitled to the return of its deposit.  Chu's counterclaim for damages is dismissed.

30.  I will hear the parties on costs and consequential orders.