LEAD PROPERTIES LTD v. SECRETARY FOR JUSTICE

HCMP 1105/2022
HCMP 1106/2022 and
HCMP 1107/2022
(Heard together)

[2022] HKCFI 3297

HCMP 1105/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1105 OF 2022

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HCMP 1106/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1106 OF 2022

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HCMP 1107/2022

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1107 OF 2022

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REASONS FOR DECISION

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A. INTRODUCTION

1.  By Originating Summonses dated 12 August 2022 (“OSs”), the Plaintiffs as registered owners of certain landed properties all situate at Haven Court, No.134 Leighton Road, Hong Kong apply for the following orders:

(a)  A declaration that a dissolved company, Tai Kee Leong Company Limited, being the 1^st vendor of the Properties (particularised in §10 below)  (the “1^st Vendor”), was a trustee of the legal estate in the Properties before its dissolution on 19 May 1979 (the “Dissolution”).

(b)  A declaration that the respective the Plaintiffs are the Properties’ legal and beneficial owners.

(c)  Vesting orders in respect of the Properties in favour of the respective Plaintiffs (or alternatively, the purchasers under the respective 1^st assignments concerning the Properties, the “1^st Assignment(s)”, i.e. vesting in the respective Plaintiffs (or the purchasers under the respective 1^st Assignments concerning the Properties)  all the estate, right, title, benefit and interest in and of the 1^st Vendor in respect of the Properties before its Dissolution.

2.  The Secretary for Justice (“SJ”), who is a proper defendant for this kind of application has been duly served and has not indicated a specific objection to the Plaintiffs’ applications for the reliefs.

3.  The Properties are, presently, the subject matters of application in the Lands Tribunal (on compulsory sale for redevelopment)  (i.e. Land Compulsory Sale Main Application No.23000 of 2019). This application is necessitated by some title defects in the Properties.

4.  Although the Lands Tribunal application paper has been registered as lis pendens against the Properties, as at the date of the hearing, no one has indicated that the Plaintiffs’ interests in and/or titles of the Properties are subject to any other interests.

B.  Applicable Legal Principles

5.  Section 45 of the Trustee Ordinance (Cap 29)  (“the Ordinance”)  provides:

“In any of the following cases, namely—

...

(b)  where a trustee entitled to or possessed of any land or interest therein, whether by way of mortgage or otherwise, or entitled to a contingent right therein, either solely or jointly with any other person—

... (iii)  cannot be found, or, being a corporation, has been dissolved; ...

the court may make an order (in this Ordinance called a vesting order)  vesting the land or interest therein in any such person in any such manner and for any such estate or interest as the court may direct, or releasing or disposing of the contingent right to such person as the court may direct ...” (Emphasis added.)

6.  Once the preconditions set out in the statute have been satisfied, the Court has the discretion to vest the property directly in the beneficiary: see Re Lee Yang, Shiu Chuen Joyce [2021] 4 HKLRD 252 at §16 per DHCJ Paul Lam SC.

7.  Procedurally, the SJ is a proper defendant (see Re Lee Yang, Shiu Chuen Joyce (supra)  at §§17-18 per DHCJ Paul Lam SC; Chung Yiu Kwan formerly known as Chung Chun Lee v Secretary for Justice DCMP 2652/2016 (unreported, 7 April 2017)  at §4 per HHJ Winnie Tsui (as she then was)):

(a)  If a company is dissolved, every property and right vested in or held on trust for the company immediately before the dissolution may be vested in the Government as bona vacantia.

(b)  The SJ should be joined to represent the Government in two capacities:

(i)  First, he would be involved as representing the Government as the person to be divested of the property, whether or not it was asserted on behalf of the Government that the property was bona vacantia.

(ii)  Secondly, he would be involved in a separate capacity if it was sought to assert on behalf of the Government that the property was bona vacantia.

8.  In Fook Tai Investment Co Ltd v Secretary for Justice[2013] 4 HKLRD 102, Chung J granted a vesting order in favour of the plaintiff in circumstances where the assignor company mis-described the property in the assignment executed prior to its dissolution.

9.  In Chan Ping Sang Johnny v Secretary for Justice [2017] 2 HKLRD 1082, Lisa Wong J granted a vesting order in favour of the purchasers in circumstances where a wrong common seal was affixed by the vendor company prior to its dissolution.

C.  ANALYSIS

10.  The Plaintiffs are the registered owners of various landed properties at Haven Court, No.134 Leighton Road, Hong Kong (“Properties”):

(a)  Lead Properties Limited:

Shop No.16, G/F, Haven Court; and

Shop No.26, G/F, Haven Court

(b)  Harvest Fortune Limited:

Shop No.14, G/F, Haven Court

(c)  Billon Glory Properties Limited:

Block L, 3/F, Haven Court

Block M, 3/F, Haven Court

Block C, 3/F, Haven Court

Block F, 3/F, Haven Court

Block K, 3/F, Haven Court

Block B, 3/F, Haven Court

Shop No.18, G/F, Haven Court

Shop No.32, G/F, Haven Court

11.  There are the following common threads concerning all the Properties:

(a)  The 1^st Vendor of the Properties was Tai Kee Leong Company Limited.

(b)  The 1^st Vendor has affixed the wrong seal when it proceeded to assign its interests in the Properties to the respective purchasers under the 1^st assignments (i.e. the 1^st  Assignments).

(c)  Such seal of the 1^st  Vendor affixed on all the 1^st Assignments was not the actual common seal of the 1^st  Vendor. Instead, it was a mere chop/stamp of the 1^st  Vendor.

(d)  As the common seal of the 1^st Vendor was not duly and properly affixed, the 1^st Assignments (which were deeds in nature), though properly signed by two directors and with considerations duly received as acknowledged therein, were therefore defectively executed by the 1^st Vendor.

12.  Subsequent to the 1^st Assignments, there were further assignments of the Properties, eventually to the Plaintiffs as the current registered owners of the Properties. As a result, these further assignments only assigned the equitable/beneficial interests in the Properties to the Plaintiffs.

13.  The above defects were not rectified prior to the 1^st Vendor’s Dissolution on 19 May 1979. It was only discovered very recently in the course of the Plaintiffs’ business planning and asset management, no doubt, as a result of the compulsory acquisition.

14.  It is well established that:

(a)  As disposition of any legal interest in land has to be done by way of a validly executed deed, the 1^st Vendor continued to hold the bare legal titles in the Properties: see, Chan Ping Sang Johnny(supra)  at §9 per Lisa Wong J.

(b)  That said, equitable/beneficial interests have passed: see, Chan Ping Sang Johnny (supra)  at §9 per Lisa Wong J.

15.  Applying to the facts of the present case, the 1^st Vendor at the material times held the Properties on trust for the respective purchasers of the 1^st Assignments immediately after the execution of the 1^st Assignments, as the 1^st Assignments concerning landed properties were specifically enforceable.

16.  In view of the 1^st Vendor’s Dissolution, I agree that vesting orders can be granted in favour of the Plaintiffs and there is nothing pointing to exercising the judicial discretion otherwise. See Chan Ping Sang Johnny(supra)  at §§8-10 per Lisa Wong J and section 45 of the Ordinance. I am of the view that judicial discretion should be exercised in favour of effectively rectifying a title defect so that the Plaintiffs who provided proper consideration should enjoy the full beneficial and legal rights as owners of the Properties.

17.  Mr Cheung for the Plaintiffs submitted that:

(a)  The Plaintiffs’ primary position is that the vesting orders should vest in the Plaintiffs all the estate, right, title, benefit and interest in and of the 1^st Vendor in respect of the Properties before its Dissolution.

(b)  Alternatively, the same should be vested in the respective 1^st purchasers under the 1^st Assignments with some riders on the terms of the OSs as set out below.

18.  The Plaintiffs’ primary position is that they are the equitable/beneficial owners of the Properties and thus the vesting orders can be granted in favour of them, i.e. vesting in the Plaintiffs all the estate, right, title, benefit and interest in and of the 1^st Vendor in respect of the Properties before its Dissolution.

19.  Mr Cheung fairly and helpfully submitted that the Plaintiffs’ primary position depends to some extent on whether this Court accepts that the equitable/beneficial interests in the Properties have been assigned by the respective 1^st purchasers under the 1^st Assignments through the conveyancing chains to the Plaintiffs. This makes the present case slightly different from the authorities (where the chains were shorter).

20.  Having considered the case carefully, I am satisfied that that there is sufficient evidence to demonstrate that, on the balance of probabilities, the equitable/beneficial interests in the Properties have been assigned by the respective 1^st purchasers under the 1^st Assignments through the conveyancing chains to the Plaintiffs.

21.  First, and as a start, there is adequate basis for supporting that the Plaintiffs are the equitable/beneficial owners of the Properties:

(a)  The affixation of the wrong seal does not render the 1^st Assignments void. Rather, the 1^st purchasers have acquired, in equity, from the 1^st Vendor the equitable/beneficial interests in the Properties: see Chan Ping Sang Johnny (supra)  at §9 per Lisa Wong J.

(b)  The further assignments, executed by deeds, could then continue to pass the equitable/beneficial interests in the Properties (though not the legal titles, due to the nemo dat rule)  down the conveyancing chains to Ps. Whilst not of the same fact pattern, the decision of Andrew Cheung J (as Cheung CJ then was)  in Tam Chi Kwong v Secretary for Justice [2007] 2 HKLRD 373 has demonstrated that assignments by deeds can assign the equitable interests down a chain of assignments:

“4. What went wrong in the present case was that the wrong company seal was applied to the assignment when the confirmor purported to execute it. In those circumstances, execution of the deed by the confirmor was defective.

5. Title to the property has thereby been rendered defective or doubtful in this way: The company, as the purchaser under the head sale and purchase agreement had acquired, in equity, from the vendor/owner beneficial interest to the property. A substantial part of it had since been passed, in equity, to the plaintiffs as sub-purchasers under the sub-sale and purchase agreement, with the remainder to be passed upon completion. Having failed in the circumstances described to execute the assignment as confirmor in favour of the plaintiffs, the company still retained the remaining beneficial interest in the property, notwithstanding the execution of the assignment directly by the vendor in favour of the plaintiffs as purchasers. As no doubt the purchase price due to the company was fully paid by the purchasers upon completion, the company merely held the remaining beneficial interest as a bare trustee for the plaintiffs after completion.” (Emphasis added.)

(c)  Thus, I am satisfied that the Plaintiffs are the equitable/beneficial owners of the Properties.

22.  Secondly, prior to the issuance of these proceedings, no one has ever come forward to claim that the Plaintiffs’ interests in and/or titles of the Properties are subject to any other interests.

(a)  The Plaintiffs have adduced affirmation evidence showing that, with the further assignments executed quite some time ago, no one has ever come forward to claim that the Plaintiffs’ interests in and/or titles of the Properties are subject to any other interests.

(b)  Like most of the authorities cited herein, the “defects” in the titles were discovered after years, and all other relevant entities likely take the view that the assignments under the chains were all valid.

(c)  Against that background, it is likely that the entities in the chains would not come forward to claim that the Plaintiffs interests in and/or titles of the Properties are subject to any other interests.

23.  Thirdly, I notice that the Properties have also been the subject matters of application in the Lands Tribunal (on compulsory sale for redevelopment), yet notwithstanding that the Lands Tribunal application paper has been registered as lis pendens against the Properties, as at the date hereof, no one has indicated to the Plaintiffs that the Plaintiffs’ interests in the Properties are subject to any other interests.

24.  Mr Cheung for the Plaintiffs also pointed out that as a matter of law, all former owners in the conveyancing chains would be estopped from suggesting otherwise by reason of the doctrine of estoppel by deed: see Korea Trade Insurance Corp v Fortune Dragon Motors (International)  Co Ltd [2018] HKCFI 2701 at §13, decision affirmed by Mimmie Chan J on appeal in [2019] HKCFI 1824.

25.  For the reasons stated above, I am satisfied that a vesting order should be made.

26.  Mr Cheung also very fairly pointed out to this Court that even if this Court were wrong on the above analysis, the issue in this context is akin to the issue in a vendor-purchaser summons, under which this Court has to consider whether the Plaintiffs’ equitable/beneficial titles in the Properties are defective. Mr Cheung submitted that those trite principles in a vendor-purchaser summons can be applied at least analogously to the present scenario:

(a)  The test as to whether there is a “good title” boils down to whether there is a real risk that a third party might assert some right over the property.

(b)  A “good title” does not mean a “perfect title” free from every possible blemish. A question as to whether “good title” was given must be approached from the standpoint of a willing purchaser and a willing vendor, both possessed of reasonably robust common sense, both intending to see the transaction through to completion in terms of their own bargain.

(c)  The Court should be best guided by the commercial reality as to whether there is any real risk of problems in title. It is not to be troubled by the absence of an absolute risk-free assurance, nor unduly hampered by strict legal proof in matters requisitioned. Conveyancing practice must be geared to uphold bargains.

(d)  If there would be a real doubt arising about the title of a property, there should be satisfactory conveyancing evidence (such as a statutory declaration)  to remove the doubt.

(e)  What is required to prove title in a given case must depend on the specific facts and circumstances and one must apply common sense.

See:   Asia Rich Incorporation Limited v Chin Hung [2019] HKCFI 2187 at §19 per Au-Yeung J.

27.  Mr Cheung submitted that this Court can conclude that the equitable/beneficial interests in the Properties have been assigned by the respective 1^st purchasers under the 1^st Assignments through the conveyancing chains to the Plaintiffs.

28.  Mr Cheung further rightly submitted that:

(a)  Applying the common sense approach recently highlighted in Asia Rich(supra)  at §19 (which entails a lower threshold), there is clearly no real risk that a third party might assert some rights over the Properties.

(b)  Even if this Court is of the view that the approach in Asia Rich (supra) applies neither directly nor analogously to the present context, in view of the matters summarised above, there is adequate basis for this Court to conclude that, on the balance of probabilities, the Plaintiffs are the equitable/beneficial owners of the Properties.

(c)  In these circumstances, there is a sufficient foundation for this Court to exercise its broad discretion under section 45 of the Ordinance to grant vesting orders directly in favour of the Plaintiffs.

D.  DISPOSITION

29.  For all the reasons stated above, I made an order in terms of the OSs under the Plaintiffs’ primary position and directed the Plaintiffs to pay of the costs incurred by the SJ on this matter on the quantum as agreed by the Plaintiffs.

30.  Finally, it remains for this Court to thank Mr Cheung for his helpful assistance.