YUEN KWOK LEUNG ERIC AND ANOTHER v. MING CHOR PAO, by her guardian ad litem CHU KWOK KEE KOOKIE AND ANOTHER

HCA 1637/2015

[2019] HKCFI 3145

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1637 OF 2015

______________

______________

(By Originating Writ)

AND BETWEEN

_______________

JUDGMENT

_______________

Background

1.  The claim in this Action arises out of the sale and purchase of a property at Flat C, 6^th Floor, No 14 Broadway, Mei Foo Sun Chuen, Kowloon, Hong Kong (“the Property”).  The Property was registered in the name of Madam Ming Chor Pao.

2.  Madam Ming had three children, namely, Mr Chu Kwok Kee Kookie (“KKK Chu”), Mr Chu Kwok Bing (“KB Chu”) and Miss Chu Kwok Mui Camay (the latter not being involved in this trial).  Madam Ming passed away on 21 November 2016.  By an Order granted by Master S Lo on 2 November 2017 (“Master Lo’s Order”), KKK Chu was appointed to represent Madam Ming’s estate (“Madam Ming’s Estate”) in these proceedings and that these proceedings be carried on by KKK Chu.

3.  The plaintiffs were the purchasers of the Property under a Preliminary Sale and Purchase Agreement dated 14 March 2015 (“the PSPA”).  The PSPA was later superseded by a formal Sale and Purchase Agreement dated 27 March 2015 (“the Agreement”). 

4.  The purchase price of the Property was agreed to be $9,800,000. The plaintiffs paid an initial deposit of $300,000 at the time of the PSPA. The sum was paid to the solicitors representing Madam Ming, Messrs Kenneth C C Man & Co (“KCCM”).  A further deposit and part payment in the sum of $680,000 was also paid to KCCM at the time of the Agreement. Receipt of both sums were acknowledged by KCCM.  The Agreement contained the usual provisions requiring the vendor (Madam Ming) to show and give a good title to the Property (clause 8(a)).  Completion was agreed to take place before 5:00 pm on 28 May 2015 (clause 3 and Part III of the Schedule).  It should be noted that the parties have specifically inserted a provision that Madam Ming must before completion cancel the proceedings HCMH 83/2013 (“HCMH 83”) (Memorial No 14010200780016), which at the time was shown on the Land Register as “Registration Withheld”.

5.  Madam Ming did not sign either the PSPA or the Agreement herself.  Both documents were executed by KB Chu on her behalf in exercise of an Enduring Power of Attorney dated 15 January 2014(“the EPA”).  According to the EPA, Madam Ming has authorised KB Chu to act on her behalf, among other things, in respect of the sale of the Property.  However, as will be discussed in more detail later, Madam Ming’s mental capacity in the execution of the EPA is subject to intense dispute between KKK Chu and KB Chu, which has resulted in multiple sets of legal proceedings.  The dispute between the two brothers has affected the present transaction, and in particular, the process of proving title in the conveyance of the Property.

6.  Before I set out the issues in more detail, I should mention that until very recently KKK Chu has been represented by solicitors in this Action.  His solicitors ceased to act for him a few days before the commencement of the trial and he has since acted in person herein.  KB Chu on the other hand has all along been acting in person without legal representation.  I mention this because, as already noted, Madam Ming’s mental capacity surrounding her execution of the EPA (and hence its validity)is the subject of intense dispute between the brothers.  That dispute has dominated much of KB Chu’s argument put forward at this trial and has become the cause of complaint against Master Lo’s Order for representation.  Even though this Court has already indicated that the medical evidence presented in this trial would not be sufficient to enable this Court to come to a definitive view on Madam Ming’s mental capacity at the relevant time, and in any event the resolution of the dispute with the plaintiffs in this Action does not require this Court to make a specific finding as to Madam Ming’s mental capacity, KB Chu has nevertheless persisted in his complaint.

The dispute as pleaded

7.  The plaintiffs contend that because the question over Madam Ming’s mental capacity and the litigations arising over that issue have come to light in the course of the exchange of correspondence between the parties,they have raised a number of requisitions concerning Madam Ming’s ability properly to convey a good title of the Property to them as purchasers.

8.  It is the plaintiffs’ case that their requisitions have not been satisfactorily answered.  Madam Ming has thus failed both to prove as well as to give a good title to the Property.  Such failure amounted to a breach and repudiation of the Agreement, entitling the plaintiffs to terminate the same.  The plaintiffs therefore claim against Madam Ming (now the Estate)for the return of the deposits and part payment in the total sum of $980,000,plus the wasted expenses attending the conveyancing in the sum of $19,903.60. The Plaintiffs claim also an indemnity from the Estate in respect of the estate agent’s commission.

9.  KKK Chu, as representative of the Estate for this Action,defended the plaintiffs’ claim by challenging the validity of the EPA.  He also pointed to the fact that HCMH 83 had already been disclosed on the Land Register although shown only as “Registration Withheld”.  It was pleaded that the plaintiffs should not have entered into the PSPA and the Agreement in the first place.  KKK Chu did not specifically deal with the plaintiffs’ complaint about the inadequacy of the answers to requisitions.  However, it soon became apparent after the commencement of the trial that KKK Chu did not really object to the transaction being rescinded on the basis that issues concerning Madam Ming’s mental capacity and the attending litigation remained outstanding at the time the sale and purchase was due for completion.  KKK Chu did not really take issue with the plaintiffs’ contention that their requisitions had not been satisfactorily answered.

10.  On the other hand, KB Chu was joined as an additional defendant in this Action on his own application.  As far as the plaintiffs’claim against KB Chu is concerned, it will arise only in the event of the Court finding that the PSPA or the Agreement was/were unenforceable.  In such event,the plaintiffs will seek damages against KB Chu for breach of his warranty that he had proper authority to enter into the respective agreements on Madam Ming’s behalf.

11.  KB Chu’s position is that the EPA was valid and he had validly exercised the power to sign the PSAP and the Agreement on Madam Ming’s behalf.  He counterclaims against the plaintiffs that the Agreement should be specifically performed.  He also claims forfeiture of the deposits and damages for loss arising from the plaintiffs’ repudiation of the Agreement.

Settlement between the plaintiffs and KKK Chu

12.  On the second day of the trial, the plaintiffs’ counsel (Miss Astina Au) submitted an application made jointly with KKK Chu seeking judgment to be entered by consent against Madam Ming’s Estate, among other things, for rescission of the Agreement, and that Madam Ming’s Estate should return the deposits and part payment to the plaintiffs, and reimburse the plaintiffs for the expenses incurred in the transaction with interest. 

13.  As a result of the agreement reached between the plaintiffs and KKK Chu, the plaintiffs formally withdrew their claim against KB Chu. However, KB Chu insisted that the transaction was validly entered into by use of the EPA.  He would pursue his counterclaim against the plaintiffs to enforce performance of the Agreement and to compel the plaintiffs to make payment of the balance of the purchase price.  He apparently did not realise that his claim for forfeiture of the deposits would be an impediment to specific performance.  Be that as it may, no issue was taken by the plaintiffs and the hearing proceeded to deal with the merits of his counterclaim for specific performance.  This Court also considers it more appropriate to hear KB Chu’s counterclaim before pronouncing judgment on the Consent Summons between the plaintiffs and KKK Chu in view of the fact certain declaratory reliefs are being sought therein.

14.  As a result of the agreement now having been reached between the plaintiffs and KKK Chu, the remaining issues for determination are as follows:

 (1) Whether KB Chu has any locus to pursue his counterclaim and seek specific performance of the Agreement (“Issue 1”);

 (2) In any event, regarding the substantive merits of KB Chu’s counterclaim, whether good title was shown and/or given by Madam Ming under the Agreement (“Issue 2”); and

 (3) Whether the reliefs, especially the declaratory reliefs in the Consent Summons between the plaintiffs and KKK Chu should be granted (“Issue 3”).

Locus standi

15.  As already noted, KKK Chu has consented to judgment being entered against the Estate, among other things, for rescission of the Agreement and return of the deposits and part payment to the plaintiffs. Effectively, KKK Chu (representing Madam Ming’s Estate) has agreed that the Agreement should not be enforced against the plaintiffs as purchasers. The parties to the Agreement having effectively come to terms as to rescission of the Agreement, I can see no basis for KB Chu (who acted merely as agent under the EPA) to have any locus to insist on the Agreement being performed. 

16.  KB Chu’s response can be summarised into three points:

 (1) Although KKK Chu was appointed to represent Madam Ming’s Estate for the purpose of this Action, his authority is limited to attending this trial and does not extend to binding the Estate in settling this Action in terms of the Consent Summons, which will have the effect of reducing the value of Madam Ming’s Estate.

 (2) KKK Chu is not an appropriate person to represent Madam Ming’s Estate in this Action because he is neither the executor nor beneficiary under Madam Ming’s last will.  In any event,there is also pending probate proceedings in HCAP 8/2018 (“the Probate Action”) in respect of the three wills made by Madam Ming between November 2010 and October 2013.  It is premature to appoint KKK Chu to represent Madam Ming’s Estate herein pending the determination of the Probate Action.  KKK Chu is in any event in a position of conflict.

 (3) KB Chu is the validly appointed attorney under the EPA and should therefore be entitled to insist on performance of the Agreement. 

17.  I agree with plaintiffs’ counsel that none of the three points has any merit.  The first two points essentially amount to an impermissible challenge of Master Lo’s Order and a misunderstanding of the Order.  It should be noted that Master Lo’s Order was in fact subject to an appeal brought by KB Chu but his appeal was rejected by Madam Justice B Chu on 20 March 2018.  There was no further appeal by KB Chu against the decision of the learned judge.

18.  KB Chu repeatedly emphasised his disagreement with the reasoning in §§32 and 33 of Madam Justice B Chu’s decision (the details of which I need not go into here).  He also argued that representation should not have been granted to KKK Chu in this Action because it would pre-empt the determination of the Probate Action.  However, as it has been made clear during the hearing, it is wholly impermissible for this Court to reopen arguments as to the appropriateness of the Order for representation.  Madam Justice B Chu was clearly aware of the pending Probate Action (see the learned judge’s Decision of 20 March 2018, §§25 – 28).  Her Ladyship’s decision must be final on the question of representation.

19.  KB Chu argued that despite his failure to further appeal against Madam Justice B Chu’s decision, he would be entitled to invite this Court to rectify “the error” because Order 14A empowers the Court to determine any question of law arising in any cause or matter at any stage of the proceedings.  KB Chu’s reliance on Order 14A is clearly misconceived.  Order 14A does not empower this Court to “rectify”, vary or revoke the representation order made by Master S Lo which has been affirmed on appeal by Madam Justice B Chu.

20.  Under Master Lo’s Order, KKK Chu was appointed to represent Madam Ming’s Estate for the purpose of these proceedings.  The Order was not a grant of probate in favour of KKK Chu in respect of Madam Ming’s Estate and does not have effect as such.  KKK Chu’s appointment is confined to representing Madam Ming’s Estate for the purpose of these proceedings, the Court no doubt having been satisfied that he was the appropriate person to be so appointed.

21.  On the other hand, I see no basis for reading into the Order the limitation as contended for by KB Chu, namely, that KKK Chu’s authority should be confined only to attending the trial.  The Order clearly confers on KKK Chu the authority to represent Madam Ming’s Estate in the conduct of the trial.  Such authority, in my view, must include the authority to settle the Action with the plaintiffs, as he considers appropriate.

22.  I therefore reject KB Chu’s first two arguments. 

23.  As for the third argument, I do not see the basis for an agent to assert any locus with a view to overriding an agreement reached between the principals (in this case, the settlement agreement as embodied in the Consent Summons).  I agree with the plaintiffs’ Counsel that KB Chu’s agency is in any event already terminated upon the death of Madam Ming: Bowstead & Reynolds on Agency (21^st ed), Article 119, §10-015.  It is clear that he cannot now claim to have any locus to pursue the counterclaim on behalf of Madam Ming’s Estate to insist on performance of the Agreement.

24.  My conclusion on the locus issue is sufficient to dispose of KB Chu’s counterclaim.  I will only briefly deal with Issue 2. 

Good title has not been shown or given

25.  The relevant principles on a vendor’s obligation to show and give good title are well-established. I would adopt the principles summarised by Madam Justice Au-Yeung in Asia Rich Incorporated Ltd v Chin Hung [2019] HKCFI 2187, at §19.   

26.  The conveyancing was handled by KCCM on behalf of Madam Ming and Messrs Wong, Hui & Co (“WH”) on behalf of the plaintiffs.  It will be noted that Messrs Charles Yeung Clement Lam Liu & Yip (“CYCLLY”), representing KKK Chu, have intervened in the course of correspondence in the transaction.  I shall set out below the more salient correspondence exchanged between the parties.

27.  On 20 March 2015, KCCM provided the title deeds and documents to WH for perusal. 

28.  On 21 March 2015, WH raised a number of requisitions, in particular, WH requested for a copy of the Power of Attorney Memorial No 14082600060010 (in item 1p.); the sealed copy of the ex parte Originating Summons in HCMH 83 (in item 1o.); and in §2 that the registration of the said ex parte OS be withdrawn and/or that the said OS be discharged seven working days before completion. 

29.  On 23 March 2015, KCCM provided WH with a copy of the EPA.

30.  On 8 April 2015, on discovering the registration in the Land Registry of another Originating Summons in HCMP 704/2015 (“HCMP 704”), WH requested KCCM to provide them with a sealed copy of the said OS, and also to provide them an Order to vacate and discharge the said OS in HCMP 704 seven days before completion. 

31.  On the same day, KB Chu issued proceedings by way of HCMP 799/2015 (“HCMP 799”) seeking an order to vacate the registration of the OS in HCMP 704 from the Land Registry.

32.  On 15 April 2015, CYCLLY wrote to WH informing the latter of the two sets of proceedings that had been issued by KKK Chu, namely:

 (1) HCMH 83 commenced on 31 December 2013, seeking an order that a committee be appointed for Madam Ming on the ground of her mental incapacity;

 (2) HCMP 704 commenced on 27 March 2015, seeking an order that the EPA be declared invalid; the vacation of the registration of the EPA on the Land Register; and the removal of KB Chu as an attorney for Madam Ming.

CYCLLY requested WH to confirm that the plaintiffs would not proceed with the purchase of the Property.

33.  On 16 April 2015, WH forwarded CYCLLY’s letter to KCCM, asking for their “immediate action” to deal with the matters therein raised.

34.  On 20 April 2015, CYCCLY further provided WH with Dr C K Wong’s Certificate (dated 28 July 2014) which stated that “judging from [Madam Ming’s] severe state of dementia, her mental incapacity should have lasted at least five years, probably even longer”.

35.  On 21 April 2015, WH forwarded Dr C K Wong’s Certificate to KCCM and requested for a draft Cancellation Agreement.

36.  There was no reply or clarification on the issue of the validity of the EPA from KCCM until 7 May 2915.  In the letter from KCCM, it was stated that the registration of HCMH 83 had been withdrawn, and that Dr C K Wong’s Certificate had “no relevance to our present case”.  With the same letter, KCCM provided WH with copies of the Originating Motion of HCMP 799 and two supporting affirmations from KB Chu.  Three medical certificates were provided with the affirmations, respectively from Dr Shirley Ip (dated 15 January 2014), Dr Chen (dated 10 April 2014) and a Medical Assessment Form from Princess Margaret Hospital (dated 11 October 2013), all opining that Madam Ming was mentally sound on the respective dates.  KCCM reiterated that KB Chu had acted with authority under the EPA and therefore the title of the Property was not affected by the registration of the lis pendens in HCMP 704. 

37.  On the same day, WH replied and requested proof that the proceedings of HCMH 83 had been withdrawn, rather than the mere withdrawal of its registration from the Land Register.  WH expressed concerns over the validity of the EPA given the competing medical evidence.  WH concluded by stating that the plaintiffs should not be forced to accept the title of the Property due to “uncertainty in litigation”.

38.  On 12 May 2015, WH replied to KCCM and raised a list of further requisitions on the issues concerning the mental state of Madam Ming at the time of the execution of the EPA and the suspected irregularity of the execution thereof.

39.  On 14 May 2015, WH made further inquiries on the status of the proceedings in HCMH 83 and HCMP 704:

“ 2. We have been informed by [CYCLLY] … that [HCMH 83] is an application to seek an Order that a Committee be appointed for Madam Ming to handle her estate on the ground that Madam Ming has become mentally incapable. … Please let us know the status of [HCMH 83] as well as the subsequent [HCMP 704] now registered in the Land Office. Are the two actions ongoing andis there a ruling by the Court that Madam Ming is mentally sound and the EPA is valid. If not, good title is not proved. …”

40.  In the letter to KCCM on 16 May 2015, WH again stated that due to the registration of HCMP 704 as lis pendens and the notice of the “mental incapacity” of Madam Ming, no clear title could be given to the plaintiffs.

41.  On 19 May 2015, KCCM responded simply by asserting that “[they] trust all of [WH’s] requisitions have been satisfactorily dealt with by [them]”.  There was no attempt to deal with the status of the proceedings in HCMH 83 and HCMP 704.

42.  On 22 May 2015, WH reiterated that KCCM had failed to answer their requisitions up to that time, including the absence of any response to their inquiry regarding the status of the proceedings in HCMH 83 and HCMP 704.

43.  On 26 May 2015, KCCM repeated their answers that the registration of HCMH 83 had been withdrawn and thus Dr C K Wong’s Certificate need not be considered, and that the EPA was validly executed.

44.  On 27 May 2015, WH restated that KCCM had failed to answer their requisitions and the plaintiffs could not accept a title that was dependent upon the outcome of litigation. 

45.  On 28 May 2015, KCCM again asserted that the EPA “should be taken as validly executed and registered” and that they had replied to the requisitions raised and proved a good title to the Property. 

46.  WH replied on the same day by stating that Madam Ming was in breach of the Agreement by failing to answer requisitions satisfactorily and to give a good title to the Property.  The plaintiffs demanded repayment of the deposits and claimed damages.

47.  From the above survey of the correspondence exchanged between WH and KCCM, this is a clear case that KCCM (representing Madam Ming) have failed to provide satisfactory answers to the requisitions,and in particular, the status regarding the ongoing proceedings relating to the mental capacity of Madam Ming surrounding her execution of the EPA. The repeated assertions by KCCM that Madam Ming had been certified by Dr Ip to have the requisite mental capacity at the relevant time did not remove the doubt arising from the competing medical evidence on the issue.  With the unresolved dispute in HCMP 704, KCCM clearly was unable to demonstrate that KKK Chu’s challenge to the validity of the EPA was doomed to fail.  In fact, KCCM’s 19 May letter was hardly an answer to the inquiry about the status of the proceedings, and their subsequent responses were little more than a re-assertion of the validity of the EPA.

48.  My view, therefore, is that Madam Ming was in breach of her obligation to show a good title, and she had certainly failed to do so within a reasonable time before completion.

49.  I am also of the view that Madam Ming was in breach of the obligation to give a good title at the time of completion.  As at the date of completion, the risk of the EPA being found to be invalid on the ground of want of mental capacity had not been removed. As title to the Property would depend on the validity of the EPA, the unresolved issue arising from the competing medical evidence had clearly given rise to much uncertainty over the title. If it transpired subsequently that the validity of the EPA was successfully challenged, the Agreement would be of no effect.  The plaintiffs would not have acquired any title to the Property at all.

50.  In the premises, as at the date of completion, all that Madam Ming could give was a doubtful title to the Property which carried with it a real risk of being challenged.  This is one of those cases where the Court would not compel the purchasers to complete the transaction which would in effect be forcing them “to buy a lawsuit to resolve the doubt”.

51.  In the course of his closing submissions, KB Chu drew my attention to a remark by Mr Justice L Chan made during the hearing in HCMH 83 on 15 January 2015 that counsel then acting for KB Chu “had all the merits” in his argument that the attempt to register HCMH 83 on the Land Register against the Property was misconceived.  However, even assuming that it was wrong to seek registration of the mental health proceedings against the Property, it would still not detract from my discussion regarding the uncertainty that had arisen from the competing medical evidence and the outstanding litigation which would impact upon the validity of the EPA.  The remark of the learned judge does not assist KB Chu over the issue of showing and giving good title to the Property.

52.  I would, therefore, hold that Madam Ming had failed both to show and give a good title.  The breach of either of those obligations entitled the plaintiffs to terminate the Agreement, demand repayment of moneys paid, and claim compensation for loss suffered.  Therefore, apart from KB Chu’s lack of locus, his counterclaim is also dismissed on its merits.

Consent Summons between the plaintiffs and KKK Chu

53.  As I have noted in paragraph 13 above, I have reserved consideration of the Consent Summon until after I have heard evidence and submissions on KB Chu’s counterclaim, which I have now done.

54.  I am satisfied that the declaratory reliefs sought in the Consent Summons are appropriate reliefs to be granted.  I am prepared to grant an order in terms of the Consent Summons.

Conclusion

55.  I would make the following orders as between the plaintiffs and KKK Chu:

“ BY CONSENT

Judgment be entered against the 1^st Defendant in the following terms:

1. The Agreement dated 27 March 2015 entered into between the Plaintiffs and the 1^st Defendant (‘Agreement’) in respect of the sale and purchase of the property known as Flat C, 6^th Floor, No. 14 Broadway, Mei Foo Sun Chuen, Kowloon, Hong Kong (‘Property’) be declared to have been effectively rescinded by the Plaintiffs;

2. The 1^st Defendant do return to the Plaintiffs:-

a. the deposit of HK$300,000.00 paid under the Preliminary Sale and Purchase Agreement dated 14 March 2015 entered into between the Plaintiffs and the 1^st Defendant; and

b. the further deposit and part payment of HK$680,000.00 paid under the Agreement;

3. The 1^st Defendant do reimburse and/or indemnify the Plaintiffs for the Plaintiffs’ conveyancing legal costs and expenses including the costs and expenses of investigating the 1^st Defendant’s title to the Property, and other expenses incurred by the Plaintiffs in or about the proposed purchase of the Property in the said total sum of HK$19,903.60;

4. The 1^st Defendant do reimburse and/or indemnify the Plaintiffs the estate agent’s commission that shall become payable by the Plaintiffs;

5. The Plaintiffs be entitled to a purchasers’ lien on the Property for the return of the deposit and part payments in the total sum of HK$980,000.00, the sum of HK$19,903.60, as well as interest and costs in favour of the Plaintiffs in this Action;

6. The 1^st Defendant do pay the Plaintiffs interest on the sums of HK$980,000.00 and HK$19,903.60 pursuant to s.48 of the High Court Ordinance (Cap. 4), agreed at HK$50,000.00;

7. The 1^st Defendant do pay the Plaintiffs’ costs of this Action to be taxed if not agreed.

8.   There be a stay of execution of paragraphs 2, 3, 4, 6 and 7 above for a period of 6 months from the date hereof, save that the Plaintiffs shall be entitled to proceed with taxation pursuant to paragraph 7 above forthwith.”

56.  As between the plaintiffs and KB Chu:

 (1) Leave be granted to the plaintiffs to discontinue its claim against the 2^nd defendant;

 (2) The 2^nd defendant’s counterclaim is dismissed:

 (3) An order nisi that there be no order as to costs in respect of the plaintiffs’ claim;

 (4) An order nisi that the plaintiffs’ costs in respect of the 2^nd defendant’s counterclaim be borne by the 2^nd defendant on a party-and-party basis.