CHAN CHU HANG ARDEN and Others v. MAN YUN SAU

1997, No.MP202

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H E A D N O T E

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VENDOR AND PURCHASER SUMMONS - WHETHER GOOD TITLE MAY BE PART DOCUMENTARY AND PART POSSESSORY - APPLICATION OF PRINCIPLE IN RE ATKINSON AND HORSELL'S CONTRACT - POSSESSORY PART OF TITLE BASED ON COURT ORDER OBTAINED IN EX PARTE PROCEEDINGS - EVIDENCE RELATING TO POSSESSION NOT ADDUCED - WHETHER GOOD TITLE SHOWN

1997, No.MP202

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This Vendor and Purchaser Summons was taken out by the Purchasers (the Plaintiffs) seeking inter alia a declaration that certain requisitions had not been sufficiently answered by the Vendor (the Defendant).

2. By an Agreement dated 16 September 1996, the Plaintiffs agreed to purchase and the Defendant agreed to sell the property known as Ping Tse Un Ha House Lot No.1 and Ping Tse Un Ha House Lot No.24 in Demarcation District No.77 ("the Properties") at the price of $960,000. A deposit of $192,000 was paid upon the signing of the Agreement. Under Clause 6(a) of the Agreement, the Vendor agreed to show and give good title to the Properties. The four requisitions which form the subject matter of the present application are set out in a letter dated 20 September 1996 from the Plaintiffs' solicitors.

The mortgage

3. The title deeds provided by the Vendor included an Order made by Master Woolley on 23 December 1993 and amended on 14 March 1994 ("the Order"). This Order was registered in the North District Land Registry by Memorial No.304924 on 22 March 1994. The Order was made in proceedings brought by Man Tim Fat against Man Ning Wan, deceased. Man Tim Fat is the Vendor's predecessor-in-title. The proceedings were, inter alia, intituled "IN THE MATTER of a Mortgage made in 1935 between Man Ning Wan as the mortgagor of the one part and Man Tim Fat as the mortgagee of the other part". Man Ning Wan became the registered owner of the Properties on 1 May 1930 as successor to the original Crown lessees. The recitals referred to the application having been made ex parte supported by an affirmation of Man Tim Fat dated 21 December 1993. The operative part for present purposes ordered and declared that :-

"(b) the Defendant or any person claiming through him cannot redeem the Properties of which the Plaintiff has been in possession for 58 years since 1935;"

4. Upon receipt of the Order Memorial No.304924, the Plaintiffs' solicitors made the following requisition in their letter of 20 September 1996 :

"We note from the Order that there is a mortgage made in 1935 between Man Ning Wan as the mortgagor of the one part and Man Tim Fat as the mortgagee of the other part. Please let us have certified copy of the said Mortgage before completion and in the meantime, supply us with a copy thereof for our perusal."

The Defendant's solicitors replied on 25 September 1996 in the following terms :

"Please note Order M/N 304924 is a document which gives our client legal title on the Property, the mortgage mentioned therein was part of the Vendor's grounds for obtaining the title and so far as we understand was not by deed which had been accepted by the court. The said mortgage is not part of the title documents which will not be provided." (emphasis added)

5. The following day, the Plaintiffs' solicitors wrote and asked for a statutory declaration relating to the loss of the title deed. This request was plainly a non sequitur having regard to the Defendant's solicitors' response of 25 September. But instead of putting the Plaintiffs right and advising them of the basis of the understanding that the mortgage was not by deed, the Defendant's solicitors unhelpfully replied as follows :

"Please refer to our previous answer that there is not any mortgage deed existed but such a mortgage mentioned (inter alia) the ground for the obtaining of the title and our client will not make any declaration for the same since the same has been accepted by the court."

6. The Plaintiffs' solicitors persisted and wrote on 8 October 1996 in the following terms :

"According to Clause 6(a) of the subject Agreement for sale and purchase your client is obliged to show and give good title in accordance with section 13 of the Conveyancing and Property Ordinance. Section 13 of the said Ordinance stipulates that the root of title shall commence with the Crown Lease and 'an assignment, a mortgage by assignment or a legal charge.' Therefore, the root of title in this case commences with the mortgage in question. We would repeat our requisition of this point."

7. The last letter in this series of exchanges was from the Defendant's solicitors :

"We disagree with your view that the title should commence with the said mortgage as we have informed you that the said mortgage had not been made by deed (thus never been registered) but the reason for obtaining the title of Man Tim Fat as approved by the court and the title of Man Tim Fat was derived from the Court Order M/N 304924 but never the said mortgage. With due respect, to ask for production of a mortgage deed which never existed but accepted by the court would be a challenge of the court's decision in granting the Order which will never be accepted unless you have higher authority to do so."

8. The Vendor accepts that it was perfectly legitimate for the Purchasers to have raised the requisition. The issue which arises is whether that requisition had been sufficiently answered by the Vendor's solicitors' bald assertion that no mortgage deed existed.

9. The title of the Vendor is based, inter alia, on the Order Memorial which on its face disclosed the existence of a mortgage to which the Properties had been subject. The response from the Vendor's solicitors was pure hearsay, whether contained in a letter or in a statutory declaration. The requisition could not have been sufficiently answered by the solicitors for the Vendor without, at a minimum, disclosing the basis of their assertion. In the present case, the Vendor's solicitors are likely to have based their assertion on evidence placed before the court in the 1993 proceedings : this would not be surprising since they acted for Man Tim Fat, the applicant in those proceedings who is the Vendor's predecessor-in-title. Moreover the application was made relatively recently, so no question of not having access to the information arises. If I am wrong and the assertion was based on "something else", then that "something else" should have been disclosed. The further question as to whether a statutory declaration ought to be procured would depend on the form of the information disclosed.

10. Accordingly, I hold that the Plaintiff's requisition relating to the mortgage was not sufficiently answered.

Good title

11. The Purchasers' contention is that a possessory title or a good holding title is not equivalent to good title which was what the Vendor had contracted to give by Clause 6(a) of the Agreement. The Vendor takes issue with this contention. The Vendor's position is that a possessory title is equivalent to good title. He further contended that, in any event, the requisition has been sufficiently answered because the requisition merely sought the Vendor's solicitors' proposal as to what action the Vendor would make to perfect the title and given their stance, no action was proposed.

12. As to this further contention, it is based on a reading of the requisition that is literal and wholly artificial. When read as a whole, it is clear beyond peradventure that the nub of the objection to the Vendor's title was that it was a mere possessory title. The inquiry as to the action proposed to be taken meant no more than that the objection would be maintained unless the Vendor could take steps to perfect his title.

13. As is stated in Barnsley's Conveyancing Law and Practice, 4^th Edn. at 269, over the years conveyancers and judges have employed various expressions indicating a hierarchy of titles ranging from good to bad, or from white to black through varying shades of grey. At the outset it is important to be clear about the gradations of title. But as will become apparent, the terminology used has not been consistent.

14. A good title is one which can at all times and in all circumstances be forced on an unwilling purchaser. See Pyrke v. Warrington (1852) 10 Hare 1; Jeakes v. White (1851) 6 Ex 873 and Williams on Title 4^th Edn. page 566. If the title is such that it can be sold without the necessity of making special conditions of sale restrictive of the purchaser's rights, it is said to be a "good marketable title". See per Luxmoore J. in Re Spollon and Long's Contract [1936] Ch.713 at 718. Thus a "good" title is sometimes used interchangeably with a "marketable" title : see 42 Halsbury's Laws of England, 4^thEd. at para.143; Williams on Title at 566, footnote 5. But this is not always the case : see Lai Chung Yue v. Chau Shing [1987] 3 HKC 406 at 409 where a marketable title was equivalent to a good holding title but was not a good title; BMC International v. Star Win Co. Ltd. [1996] 2 HKC 302 where it was held that a marketable title or a possessory title cannot be considered good in the conveyancing sense.

15. Good holding titles, namely those that present no probability of an adverse claim being made, include titles which can be forced on the purchaser under a special condition. See Re Scott and Alvarez's Contract (1895) 2 Ch.603 and Blaiberg v. Keeves [1906] 2 Ch.175.

16. It is stated in Sihombing and. Wilkinson : Hong Kong Conveyancing Vol. 1, V[176] that -

"Adverse possession does not vest in the person in possession of good title, but merely a good holding title."

In such cases, the contract should contain a special condition to make it clear that what is being sold is a possessory title. The vendor should supplement his title by a statutory declaration that he has been in undisturbed possession of the property for so many years without acknowledging the right of any person. Such a title, though not a good title, is readily saleable : see Sihombing and Wilkinson (supra); Barnsley at 331-332.

17. There would appear to be two qualifications to the general statement stated above. The first is where there has been such a long uninterrupted possession, enjoyment and dealing with the property as to afford a reasonable presumption that there is an absolute title in fee simple. See Cottrell v. Watkins (1839) 1 Beav.361 at 365. Thus, a purchaser can be forced to accept a title based on possession but in such a case, the vendor must not only prove possession, but also the origin of the possession so that allowance can be made for possession during a limited interest. Since under the Limitation Ordinance the longest period in the case of disability is 30 years, even if it can be shown that the period exceeds the maximum of 30 years in respect of a disability, the vendor must also show that the period has not been extended by the operation of s.9 of the Limitation Ordinance which deals with reversionary interests. See the discussion in Williams on Title (supra) at 570-571; Barnsley (supra) at 333. The second is that good title may be part documentary and part possessory. If good title could be traced down to the date of the defect, possession as from that date would cure the defect and the title could be forced on the purchaser : see Re Atkinson and Horsell's Contract [1912] 2 Ch.1; Barnsley (supra) at 332.

18. To the abstract question whether a possessory title is a good title, the answer must be no. In the present case, was what was offered purely a possessory title and nothing else? Although the Vendor did not refer to Re Atkinson and Horsell's Contract, its relevance is apparent in as much as apart from the Order Memorial, the Vendor has put in evidence the Block Crown Lease and Succession Memorials which trace the title from the original lessees to Man Ning Wan. The question therefore arises whether the present case falls within Re Atkinsons and Horsell's Contract and for this purpose, the effect of the Order must now be considered.

19. The Order is in the following terms :

"(a) the Defendant's title to and interests in the Properties known as Ping Tse Un Ha House Lot Nos.1 and 24 in Demarcation District No.77 (hereinafter 'the Properties') have been barred and/or extinguished by Section 14 of the Limitation Ordinance;

(b) the Defendant or any person claiming through him cannot redeem the Properties of which the Plaintiff has been in possession for 58 years since 1935;

(c) the Plaintiff has acquired a title to the Properties by possession free from any claims or interests of the Defendant and/or of any person claiming through him; and

(d) ..."

It is to be noted that the proceedings were brought against "Man Ning Wan deceased", the registered owner of the Properties but he had apparently died prior to the commencement of the proceedings. Where the cause of action survives against the estate, O.15, r.6A(3) requires that the action be treated as having been brought against the estate. Where there are no personal representatives, the only way the action could continue is by applying for an order to carry on under O.15, r.6A(4)(a) : see the Supreme Court Practice 1997 at 15/6A/2. In the absence of a properly constituted representative for the estate to acknowledge service, any judgment obtained in default of acknowledgment of service is a nullity : see Re Amirteymour (deceased) [1979] 1 WLR 63.

20. As the application in the present case was made ex parte without any person having been appointed to represent the deceased owner, it is plain that the estate of the registered owner is not bound by the Order. In these circumstances, the Purchasers should not be compelled to accept the Order as establishing a possessory title. Had the Defendant not sheltered behind the Order but instead adduced the necessary evidence upon which the Order was based to establish a possessory title, Re Atkinson and Horsell's Contract might well have applied.

21. Apart from this point, there is a further, seemingly insuperable objection to the Vendor's title and it is this. The Vendor agreed to deduce title in accordance with clause 6(a) of the Agreement which incorporated by reference s.13 of the Conveyancing and Property Ordinance. Neither the Block Crown Lease nor the Succession Memorials nor the Order Memorial is within any of the three categories of documents referred to in s.13(1)(a) of Cap.219. The Vendor has accordingly failed to deduce title in accordance with the Agreement.

Discrepancies in the description of the Properties

22. The first two requisitions deal with discrepancies in the description of the Properties. The relevant entries in the Schedule of Crown Lessees in the Block Crown Lease appear below :

SCHEDULE OF CROWN LESSEES

DISTRICT No.Village, Ping Tsia Un Ha

In D.D.77

23. In the two Succession Memorials dated 1 May 1930 whereby Man Ning Wan succeeded to the estates of the original lessees of House Nos.1 and 24, the land or premises affected was described as "Ping Tse Un Ha House No.1 and No.24" respectively. The Purchasers sought confirmation that Ping Tsia Un Ha Lot No.1 and Ping Tse Un Ha House No.1 refer to the same piece of land and a similar requisition was made in respect of House Lot No.24. The Vendor's response was that the discrepancy reflected a difference in the romanization of the Chinese name of the village.

24. In the land search records, the Properties are described as "Ping Tse Un Ha House Lot No.1" and "Ping Tse Un Ha House Lot No.24". Given that the particulars appearing in the Schedule to the Block Crown Lease correspond to the entries in the record of owners, in the circumstances, the Purchasers' doubts that the Block Crown Lease on the one hand and the Succession Memorial on the other relate to different properties can only be described as "fanciful". Accordingly, in my judgment, these two requisitions have been sufficiently answered.

Conclusion

25. In the circumstances, I make an order in terms of paras.2, 3, 4, 5, 6 and 7 of the originating summons. I also award interest on the deposit of $192,000 at the rate of 10% per annum from 16 September 1996 until payment. There is to be an order nisi for costs in favour of the Plaintiffs.