SUN KAN BIU NINA and Others v. FOOK GEE TRADING CO. LTD.

1993, No.MP378

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 action concerns the development known as Hiu Kwong Court and Hiu Ming Court, Nos.26-38, Hiu Kwong Street, Kowloon, Hong Kong. The three named plaintiffs in the action are owners of flats in the development (they claim to sue on behalf of themselves and all the other present registered owners of such flats). The defendant is the developer.

2. The developer, when executing assignments of the flats in the development to the various purchasers, did so by affixing its seal to the assignments in the presence of one director only, whereas, at the material times, its Articles of Association required the seal of the developer to be affixed in the presence of two directors. The defective execution of the assignments has led to difficulties for the purchasers, and it is the purpose of these proceedings to get over those difficulties.

3. The remedy of a purchaser in this situation is an action on the covenant for further assurance contained in his assignment (if it were executed before the coming into operation of the Conveyancing and Property Ordinance, Cap.219) or implied in his assignment by virtue of s.35 of that Ordinance. In the case of an assignment executed before the coming into force of that Ordinance, the covenant for further assurance will have been set out in full in the assignment. One example which is in evidence contained the relevant covenant in the following form:-

"The vendor hereby covenants with the purchaser ... that the vendor and all persons lawfully or equitably claiming under or in trust for the vendor shall at all times hereafter at the request and cost of the purchaser do all acts and execute and sign all deeds and writing reasonably required for perfecting this Assignment."

The implied covenant, set out in Part II of the First Schedule to the Ordinance reads as follows:-

"That all such lawful acts assurances and things for further or more perfectly assuring the land and every part thereof to the purchaser and to those deriving title under the purchaser shall from time to time and at all times at the request and cost of the purchaser or any person deriving title under him be executed and done subject to the manner in which the assignment is expressed to be made as by the purchaser or any such person may be reasonably required."

4. The plaintiffs, and a number of other purchasers or their successors in title, have requested the developer to execute such further assurance as may be necessary to get in the legal estate which remains outstanding in the developer by reason of the defective execution of the various assignments. However, it appears that no offer was made to the developer to pay the costs of the exercise, and the developer has failed to comply with the request. Hence this action.

5. The developer has resisted the action on various grounds, none of which are of any substance. The developer claims to be an innocent victim of the negligence of the firm of solicitors instructed to act for it (who also acted for the various purchasers). It says that the claim against it is time-barred; and that the purchasers are estopped from pursuing their claim; and it says that the claim is premature on the ground that, as I understand it, no offer has been made to pay the costs of the further assurance required. With the exception of this last, there is no substance whatever in any of these defences.

6. As to the last, I am of the opinion that the purchasers ought not to be granted any relief unless they are prepared to undertake to bear the costs of the exercise. It may be true that the developer never asked them to do that but it is equally true that they never offered to do so. Be that as it may, it is plainly the obligation of a purchaser who seeks a further assurance to pay the costs.

7. The plaintiffs also claim to be entitled to damages. So far as this is a representative action, that claim is quite untenable. The court has no power to award damages in a representative action. The claim for damages, however, has not been pressed and I shall not investigate it further except to say that in any case it seems to me that the developer was right to point to the fact that there is in the evidence nothing which would justify the direction by the court of an enquiry as to damages. There is evidence that some of the purchasers have found it difficult to market their properties because of the defects in their title, but that is a far cry from evidence of damage such as would justify the ordering of an enquiry.

8. What then is the relief which ought to be granted? Seeing that I am satisfied that the purchasers are entitled to the further assurance for which they have asked, the remedy for breach of the covenant will be an order for specific performance. In this, I agree with the view expressed in Farrand, Contract & Conveyance, 4th Edition, 1983, at p.266. (It is worth adding that, as Professor Farrand points out : "It should be noted that the costs of any further assurance are expressly to be borne by the person making the request".)

9. The order I propose to make, therefore, will be a declaration that the covenant for title contained or implied in the conveyance or assignment to each of the plaintiffs ought to be specifically performed and carried into execution by the execution by the defendant of such further instruments as may reasonably be required by the plaintiffs for perfecting their title. It will be convenient for the plaintiffs to settle, in the first instance, the form of further assurance which they require and submit for the approval of the developer. There will be liberty to apply since if the plaintiffs and the defendant cannot come to agreement as to the form of the further assurance, the case will have to be restored to the list for argument as to the form that such a further assurance should take. It may also be convenient, though I apprehend I have no power to order this, that the further assurance should extend, not only to the claim of the plaintiffs, but to all the present registered owners of flats within the development whom the plaintiffs claim to represent, so that there will be no need for further unnecessary litigation.

10. As I have indicated, however, I shall make the proposed order only on an undertaking by the plaintiffs to indemnify the developer against the costs of preparation and execution of any necessary further assurance. If that undertaking is not forthcoming, I will dismiss this action. If it is forthcoming, I will grant the relief which I have already indicated, but no further or other relief. I will make no order as to the costs of the action.