NG HUNG HING AND ANOTHER v. CHEUNG KWONG YIN

HCMP1091/2000

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.1091 OF 2000

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J U D G M E N T

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1. The plaintiffs as purchasers entered into an agreement with the defendant as vendor for the purchase and sale of part of a village house at Tai Po. The property is known as the 2nd floor and the main roof of the Remaining Portion of Lot No.1425 in Demarcation District No.7, Tai Po, New Territories, Hong Kong ("the Property"). The agreement was dated 10 September 1999 ("the Agreement"). The plaintiffs paid deposits totalling $176,000. Unfortunately, because of disagreement about requisitions on title completion never took place. The plaintiffs now seek the determination of the court of the following questions :

1. (1) In the absence of the original or a copy of the Power of Attorney, whether secondary evidence, i.e. a memorial registered in the Land Registry on 14 December 1957 ("the Memorial"), is deficient and is not sufficient to prove due execution of the said Power of Attorney;

(2) Whether the Memorial is clear and cogent to prove the contents of the said Power of Attorney;

(3) Whether the Memorial contains any specific power for the attorney to execute a release (dated 10 January 1996);

(4) Whether the loss of the Power of Attorney has been proved; and

(5) As the copy of a certified copy of the original Crown Lease and the plan were unclear and partially illegible, whether the defendant was required to adduce secondary evidence to show the contents of the said Crown Lease and the plan thereof.

2. Whether a good title to the Property has been shown in accordance with the Agreement and the provisions of the Conveyancing and Property Ordinance, Cap.219.

Background

2. By a schedule of Block Crown Lease dated 15 January 1907, the Government granted a lease to one Cheung Hing Tsun of Lot No.1425. Cheung Tak Lam, alias Cheung Chun Kai, the father of the defendant in this case, succeeded to the Property in 1919. The defendant herself succeeded to the Property on 7 December 1995.

3. On 22 October 1928, Cheung Chun Kai mortgaged Lot No.1425 to Man Ying Tso to secure a payment of $50 which fell due on 22 October 1929 ("the Mortgage"). In 1950, Man Tim Wan succeeded to the Mortgage interest of Man Ying Tso. As appears from a Memorial dated 14 December 1957 and registered in the Land Registry, Man Tim Wan appointed Tsoi Hing Yee as his attorney to redeem certain mortgages including that over Lot No.1425 (the "Power of Attorney").

4. Since it appeared to the defendant that the Mortgage of Lot No.1425 to Man Ying Tso had never been redeemed, in 1995, she decided to institute proceedings to have it discharged. Inquiries were made and both Man Tim Wan and Tsoi Hing Yee were found. The defendant issued an originating summons against them for a declaration that the lot vested in her for the entire legal and beneficial interest free from the Mortgage, on the ground of limitation of their right of action. The proceedings were settled by a payment of $20,000 to Man Tim Wan. Tsoi Hing Yee as his attorney (he being out of Hong Kong) executed a release dated 10 January 1996 in favour of the defendant.

5. Lot No.1425 was then divided up into Section A and the Remaining Portion by a Deed Poll dated 10 January 1996 and developed. Village houses were built on each portion. The District Lands Officer issued a Certificate of Compliance dated 23 August 1999, which opened the way for the defendant to sell apartments in the house on the Remaining Portion, including the suit premises. The parties entered into the Sale and Purchase Agreement dated 10 September 1999. It provided for completion to take place on 22 October 1999. This was extended to 29 October 1999. The Agreement contained the usual undertaking for the vendor to give and show good title in accordance with section 13 of the Conveyancing and Property Ordinance, Cap.219, the usual provision for requisitions to be made within seven days of delivery of title deeds, and a clause making time of the essence.

The Requisitions

6. Before completion, the plaintiffs' solicitors raised various requisitions on title. We are here concerned with two of them. One relates to the Power of Attorney and the other relates to the Block Crown Lease.

7. On 10 September 1999, the plaintiffs' solicitors wrote to the defendant's solicitors noting that the Power of Attorney did not contain specific power for the attorney to execute the release and asking for sight of it. They also asked for a legible certified copy of the Block Crown Lease. The defendant's solicitors replied on 4 October 1999 that the Power of Attorney was created specifically, inter alia, for redeeming the Mortgage and that both the defendant and the attorney had made Statutory Declarations in respect of its non-revocation. They further stated that in their opinion, the certified copy of the Block Crown Lease already sent was acceptable.

8. In further correspondence, both sides maintained their respective positions. With regard to the Power of Attorney, the plaintiffs' solicitors said that there were no specific powers in it as to acknowledgement of receipt and execution of the release. The defendant's solicitors replied that the words clearly showed the intention of the owner and the specific power given to the attorney, and further referred to the Statutory Declaration which showed that the Mortgagee had been paid. The plaintiffs' solicitors insisted that a Power of Attorney must be strictly construed and that this one continued no specific powers; and further that there was no receipt by the Mortgagee for the redemption money. The plaintiffs' solicitors reiterated their arguments about specific powers and their demand for sight of the Power of Attorney and on 27 October 1999, the defendant's solicitors indicated that they were instructed that the defendant had lost it, and undertook to produce a Statutory Declaration to this effect within seven days of completion. They further referred to the proceedings between the defendant, the Mortgagee and the attorney and opined that following them the risk of litigation was fanciful rather than real. The plaintiffs' solicitors did not accept this but claimed that the Memorial did not comply with the requirements, inter alia, of section 13 of the Conveyancing and Property Ordinance. The defendant's solicitors then claimed that they had supplied secondary evidence in the form of the Memorial and this was sufficient. Then, the completion date was passed and there was no further correspondence on the point.

9. The plaintiffs' solicitors also claimed that the Statutory Declaration by the defendant was not deposed within the period stipulated in section 5(4)(b) of the Powers of Attorney Ordinance, but I need not deal with that as the point was not pursued before me.

10. With regard to the Block Crown Lease, the plaintiffs' solicitors throughout demanded a legible copy of the attached plan. This could not be supplied because the original, dating from 1907, is barely legible in any event. When the defendant's solicitors pointed this out, the plaintiffs' solicitors complained that the captioned lot could not be located; therefore, doubt would arise as to whether the building or any part of it was within the lot boundaries; and that the plans attached to the Sale and Purchase Agreement, as well as the Certificate of Compliance were "for reference only" and, therefore, could not show that the building or any part of it was within the lot boundaries. The defendant's solicitors countered with a certified copy of a certificate by an Authorised Land Surveyor that the "as-built house had fallen within its legal title boundary position". The plaintiffs' solicitors did not accept this but simply reiterated their demand for a legible copy of the Block Crown Lease plan.

11. Finally, on 29 October 1999, the plaintiffs' solicitors demanded the return of the deposit and the defendant's solicitors purported to forfeit it.

The Power of Attorney

12. I do not understand what need there was for the requisition in respect of the Power of Attorney.

13. By their letter of 2 September 1999, the defendant's solicitors sent the title deeds and documents to the plaintiffs' solicitors. These included the defendant's Statutory Declaration dated 8 June 1999. This set out, inter alia, the fact that the defendant had issued proceedings against the Mortgagee and the attorney, had paid $20,000 to the Mortgagee and had obtained a release executed by the Mortgagee on the attorney's behalf.

14. The plaintiffs' solicitors then had documents before them which showed that the encumbrance of the Mortgage, dating from 1928, had been removed on 10 January 1996 by the release. In other words, there was simply no encumbrance on the title at all.

15. It is true that the wording of the Memorial dated 14 December 1957 seems inappropriate. It shows a mortgagee purporting to give his attorney power to redeem a mortgage, whereas the right of redemption of a mortgage lies with the mortgagor. In a vacuum, this may have raised a query, though for my own part, I think that there could only be one meaning, namely, that the Mortgagee was giving his attorney the power not to redeem the Mortgage but to give effect to the mortgagor's redemption by accepting the payment and executing the release. The point is that this Memorial does not exist in a vacuum, but has to be looked at along with the later proceedings which quite clearly show that the Mortgagee was sued, and compromised by accepting $20,000 following which the attorney executed the release and the proceedings were discontinued. The Mortgagee, who was legally represented in the proceedings could not now come back and successfully challenge the title of a later purchaser on the ground that the attorney did not have his authority to execute the release. Of course, it is argued that the Mortgagee himself did not issue a receipt for the $20,000 but given that there was evidence, among the other documents, of a cheque in his name sent to his solicitors, I can see no merit in that.

16. It is also to be noted that even if the Mortgagee were to try to challenge the title of a later purchaser, he would still have the uphill battle of overcoming the provisions of section 19 of the Limitation Ordinance, under which his right of action would have expired in 1949. Counsel for the plaintiff says that the defendant cannot now rely on this because it was never raised in answer to requisitions but, nevertheless, it further goes to show that there is no real risk of any successful challenge to the title.

17. It is obvious that the Mortgagee had been paid off and any risk of litigation arising out of the Power of Attorney was fanciful rather than real. That is what the defendant's solicitors said in their letter of 27 October 1999, and I agree with it. I am satisfied beyond reasonable doubt that the plaintiffs would not be at risk of a successful assertion against them of this encumbrance. I also take the view that the requisition was not necessary but that in any event it has been satisfactorily answered. I find that in respect of the Power of Attorney, the defendant has given and shown a good title in accordance with the Agreement and the Conveyancing and Property Ordinance.

18. This being so, it is not necessary for me to go into a lengthy discussion of whether the Memorial can prove the contents or the due execution of the Power of Attorney; whether it contains any specific power for the attorney to execute the release, or whether its loss has been proved, so as to make it admissible as secondary evidence.

The Block Crown Lease plan

19. It is true that the copies of the plan before me are simply inadequate to show the boundaries of Lot No.1425. I accept that the original plan is just as inadequate. Given the age of the plan it is not surprising. So to insist on a more legible copy is ultimately pointless.

20. There is a Division Plan attached to the Deed Poll. It contains a Note, as follows :

"The lot boundaries on this plan have been derived by reconciliation between the original land registration boundaries and mapping detail as shown on contemporary survey sheets. The boundaries should not be interpreted as a definitive positional record of the land parcel, they are FOR IDENTIFCATION purposes only and may be amended as the result of field survey or on the obtaining of better evidence."

21. The Lands Department's approval letter of 27 February 1998 imposes conditions that the roofed over area of the house is to be constructed on the lot and that the house or any part of it, other than the balconies, canopy, air conditioner hood and overhang shall be erected within the lot boundary. There are provisions as to the permitted projection of such balconies, canopy etc. over government land. There is a requirement that in the case of any projection over private land, the prior written consent of the owner of that land shall first be obtained and registered. The Certificate of Compliance dated 23 August 1999 certifies that all the conditions in the approval letter have been complied with, but it also contains a disclaimer as follows :

"No survey of the occupation boundaries of the said building bas been made by Government. Confirmation of compliance hereinbefore mentioned is not to be taken as any indication that the said building or any projection therefrom is within the registered boundaries of the lot. In this regard, Government expressly denies any liability for any claims or damages whatsoever arising out of or in connection with your construction of the said building."

Finally, there is the surveyor's certificate already referred to.

22. The plaintiffs say that because the Block Crown Lease plans are illegible, it is incumbent on the defendant to produce secondary evidence to prove the legal title and the boundaries. They rely on Wong Wai Ming v. Wang Tat Chi [1993] 1 HKC 341.

23. They say that the plans attached to the Deed Poll cannot be relied on because they are "for identification only". The same applies to the Certificate of Compliance because of the terms of the disclaimer. The certificate of the surveyor is inadequate because it is a bare assertion rather than a formal survey report, giving no explanation of how the conclusion was arrived at.

24. By section 13 of the Conveyancing and Property Ordinance, the vendor must produce the Government lease. A certified copy is sufficient. This the defendant did. It was not for him to do the impossible, i.e. produce a legible copy of an illegible original. Further, once the defendant's solicitors had indicated that they could not produce any more legible copy, they had answered the requisition. They could do no more. The plaintiffs had no right to insist on it.

25. By their letter of 27 October, the plaintiffs' solicitors explained why they wanted a legible copy of the plan; it was particularly to satisfy themselves that the building and any projections from it were within the boundaries of the lot. They particularly referred to the Certificate of Compliance which expressly disclaimed responsibility on the part of government if it were later found that the building and its projections were not within the lot. They had not explained this before.

26. What was not requisitioned for was a survey plan or other proof that the building and its projections were within the lot boundaries. Requisitions on title should be formulated with reasonable precision if they are to be effective; see Chan Chik Sum v. Great Pearl Industries Ltd [1997] 1 HKC 27. No doubt a requisition for such survey plan would have been effective, but the defendant's solicitors had been sent by the plaintiffs' solicitors' letter of 27 October, a certified copy of the Authorised Land Surveyor's certificate. Counsel for the plaintiffs attacks this on the ground that it is a mere statement with no explanation of how the surveyor came to his conclusion, but it seems to me that this comes too late. To my mind, if there had been a specific requisition for proof that the building and its projections fell within the lot boundaries, the certificate would have answered it. But if explanations were required, they should have been requisitioned at the time.

27. I, therefore, take the view that the defendant through his solicitors effectively answered the only requisition made, i.e. for a more legible plan; and that if the reason given for seeking a more legible plan could be regarded as a requisition, it too was answered by the certificate.

28. In any event, when one looks at the question of title, it seems to me that there is really no serious risk of any challenge to it on the ground that the building or any part of it is not within the lot boundaries. The Certificate of Compliance was issued on the basis that the conditions in the approval letter had been complied with. It is evidence that they had been complied with. Granted that there is a disclaimer in the certificate it seems to me that this is aimed quite simply at the avoidance of liability on the part of government for any claims for damages, particularly by third parties. If the government sought to rely on this disclaimer as enabling it to take enforcement action against a future owner for non-compliance, it seems to me that it would look very silly indeed, because it would be saying in effect that the certificate which it had issued simply did not mean what it said. It would not, in any event, be in the nature of good government for a government department to proceed against innocent owners on this basis. See Jumbo Gold Investment Ltd v. Yuen Chong Leung and Anor [2000] 1 HKLRD 763. I am satisfied beyond reasonable doubt that there is no real risk of enforcement action by government if the building or its projections do not fall within the lot boundaries.

29. I find that the defendant has given and shown a good title in accordance with the Agreement and the Conveyancing and Property Ordinance. The plaintiffs' originating summons must be and is dismissed with costs nisi to the defendant to be taxed if not agreed.