WONG ANITA SHU TING (formerly known as Wong Shu Ting Anita) v. YUEN YIU CHUNG

HCMP 710/2021

[2022] HKCFI 209

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 710 OF 2021

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JUDGMENT

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Introduction

1.  There is before this court an application by the Plaintiff/Vendor under section 12 of the Conveyancing and Property Ordinance Cap 219 (“CPO”) by way of originating summons dated 21 May 2021 (“OS”) in connection with the property situated at Apartment No. 1 on 12th Floor of BLOCK A and Car Parking Space No. 27 on C2 Floor of BLOCK A, “ELM TREE TOWERS (愉富大廈)”, No. 8 Chun Fai Road, Hong Kong (“Property”).

2.  In the OS, the Plaintiff seeks the following reliefs:

(1)  A declaration that the title of the Plaintiff to the Property is good.

(2)  A declaration that the Plaintiff has proved good title to the Property in accordance with the Agreement for Sale and Purchase dated 14 April 2021 between the Plaintiff as vendor of the one part and the Defendant as purchaser of the other part (“Formal Agreement”) and has satisfactorily answered the requisition raised by the Defendant’s solicitors, Messrs Johnny KK Leung & Co, on the Plaintiff’s title to the Property.

(3)  An Order that the Defendant is obliged to complete the purchase of the Property pursuant to the terms and conditions of the Formal Agreement 14 days after handing down the decision in this application.

(4)  Alternatively, if the said requisition of the Defendant’s solicitors has not been answered satisfactorily and/or the Plaintiff has not shown good title, an Order that the parties shall after handing down of the decision in this application enter into a cancellation agreement in relation to the Formal Agreement whereupon the Plaintiff shall refund all deposits to the Defendant.

3.  At the hearing, upon enquiries from the bench, Mr Wong confirms that the Plaintiff will no longer pursue paragraph 2(1) above.  Nor will the Plaintiff press for paragraph 2(3) above.  As far as paragraph 2(4) above is concerned, Mr Wong also confirms to this court that he has instructions to agree to refund all deposits to the Defendant in the event that the court declares that the requisition of the Defendant’s solicitors has not been answered satisfactorily and/or the Plaintiff has not shown good title.[1]

Background

4.  On 20 August 1997, Hung See Hung (“Hung”) and Lee Pui Fun Stephanie (“Lee”) acquired the Property as Joint Tenants.

5.  In 2009, Lee, as Petitioner, commenced matrimonial proceedings under FCMC 13381/2009 vs Hung as Respondent.  On 8 January 2010, an Order by consent was granted by Deputy District Judge Tracy Chan (“2010 Order”). 

6.  According to paragraph 3 of the 2010 Order, Hung should within 2 months from the date of the grant of the Decree Absolute transfer inter alia all his interest in and shares of the Property to Lee free from encumbrances.  The said transfer was a lump sum settlement in full and final settlement of all claims that Lee and Hung might have against each other for ancillary relief under the Matrimonial Causes Ordinance, Matrimonial Proceedings and Property Ordinance, Married Status Ordinance and Inheritance (Provision of Family) Ordinance.

7.  By an Assignment dated 3 November 2010 and registered under memorial no. 10113001560284 (“2010 Assignment”), Hung as beneficial owner assigned to Lee absolutely all his shares rights title benefits and interest of and in the Property to the intent that Lee should henceforth be the Sole Owner of the Property.  Upon the registration of the 2010 Assignment on 30 November 2010, Lee became the sole registered owner of the Property. 

8.  On 4 November 2014, Lee assigned the Property to the Plaintiff.  Upon the registration of the assignment on 2 December 2014, the Plaintiff has been and is holding the Property as the sole registered owner. 

9.  By a preliminary sale and purchase agreement dated 19 March 2021, the Plaintiff as vendor agreed to sell and the Defendant as purchaser agreed to purchase the Property at the price of HK$44,180,000.  Pursuant to the said preliminary agreement, the Plaintiff and the Defendant executed the Formal Agreement.  The completion date was agreed to be on or before 18 May 2021.

10.  Under Clause 7(a) of the Formal Agreement, it was agreed that “[t]he Vendor shall give a good title to the Property in accordance with section 13A of the Conveyancing and Property Ordinance (Cap.219) (‘the Ordinance’).  The Vendor shall, in accordance with section 13 of that Ordinance, show and prove his title to the Property at his own expense and shall at the like expense make and furnish to the Purchaser such certified or attested copies of any deeds or documents of title wills and matters of public record (including the Occupation Permit) as may be necessary to prove such title.  ...”

11.  By letter dated 14 April 2021, the Plaintiff’s solicitors Kitty So and Tong Solicitors (“KST”) sent the title documents to the Defendant’s solicitors Johnny KK Leung & Co (“JL”). 

12.  By letter dated 23 April 2021, JL first raised a requisition in relation to the 2010 Assignment.  The relevant parts of the letter read:

“It is noted from Assignment Memorial No. 10113001560284 (the ‘2010 Assignment’) (copy herewith) that the Assignor, ie Hung See Hung, and the Assignee, ie Li Stephanie, therein named were joint tenants of the Property.

By the 2010 Assignment, the Assignor purported to ‘assign’ all his shares rights title benefits and interests of and in the Property to the Assignee to the intent that the Property should become the sole owner thereof so as to comply with the Order dated 8 January 2010 (the ‘Order’) under the Matrimonial Causes No. 13381 of 2009.

In this regard, it shall be noted that because the Assignor and the Assignee were the joint tenants of the Property, which means that each of them was already the owner of the Property and so the Assignor could not have any separate interest of his own which could be capable of being transferred to the Assignee and which the Assignee did not already own. Hence, the 2010 Assignment could not constitute a proper assignment, for the essence of an assignment is that it operates to transfer the subject matter from the ‘ownership’ of an assignor to that of the assignee.

Instead, what could be achieve to comply with the Order was either by both of the Assignor and the Assignee assigning the Property to the Assignee or by the Assignor ‘releasing’ his estate right title benefit share and interest of and in the Property to the Assignee. The latter would have the effect of extinguishing the Assignor’s interest in the Property.

Under the circumstances, by way of further requisition, a confirmatory deed is required to be executed by the Assignor to ‘confirm and release’ all his estate right title benefit share and interest of and in the Property to the Assignee. And please let us have the confirmatory deed to be duly executed by the Assignor and the Assignee for our perusal.” (emphasis added)

13.  KST disagreed.  By letter dated 4 May 2021, KST answered the requisition in these terms:

“From paragraph (2) of the recital of the Assignment and the Order made by Deputy District Judge Tracy Chan in FCMC13381 of 2009 on 8th January 20210 [sic], it was clearly stated that all the Assignor’s shares rights title benefits and interest of and in the Property shall be transferred to the Assignee. From paragraph 1 of the Assignment, the common intention of the Assignor and the Assignee is unambiguously stated that ‘TO THE INTENT that the Assignee shall henceforth be the Sole Owner absolutely’. It is no doubt that immediately after the Assignment, the Assignor retained no shares rights title benefits and interest of and in the Property. There is no real risk that the Assignor may claim any shares rights title benefits and interest of and in the Property after the Assignment.

By the reasons aforesaid, we opine that no confirmatory deed is required to be executed by the Assignor.”

14.  By letter also dated 4 May 2021, JL repeated the requisition and insisted that “the mode of assignment [from Hung to Lee] should be by way of release and that a confirmatory deed is required to be executed”. 

15.  Further correspondence was exchanged between KST and JL on 6 and 13 May 2021 but the issue raised by the requisition as to whether a confirmatory deed is required in light of the terms and legal effect of the 2010 Order and 2010 Assignment could not be resolved. 

16.  In KST’s letter dated 13 May 2021, it was stated that:

“It is undisputed that by the Order made by Deputy District Judge Tracy Chan in FCMC 13381/2009 dated 8th January 2010 (‘the said Order’), it was ordered that Hung See Hung, i.e. the then Assignor, shall transfer all his interest and shares of the Property and other property to Lee Pui Fun Stephanie, i.e. the then Assignee.

It is also undisputed that in pursuance of the Order, the then Assignor and the then Assignee executed the Assignment with the clear and express intent to put the Assignee as the sole owner of the Property.

Given the above undisputable factual backgrounds and by applying the principal set out in Jumbo King Ltd v Faithful Properties Ltd., the intention and practical object of the parties to the Assignment is obvious, i.e. they intended to assign or release (if you prefer to use this word) all the then Assignor’s shares, rights, title, benefits and interests of and in the Property to the then Assignee so that the Assignee became the sole owner of the Property after the Assignment. We stress that when construing the Assignment, you shall not merely look into the meaning of individual words they have used, but to the agreement as a whole. …

Further, by the Order and the Assignment, the joint tenancy of the then Assignor and the then Assignee in the Property had been severed and all the then Assignor’s shares rights title benefits and interest of and in the Property were assigned to the then Assignee by the Assignment so that the then Assignee became the sole owner of the Property.” (emphasis added)

17.  In JL’s letter dated 13 May 2021 in reply, it was said:

“Indeed, what we have been raising requisition on the Assignment is on whether the Assignment in the present form could effectively and validly transfer the interest of the Assignor in the Property to Assignee. This is a legal issue. And if the Assignment could not at law effectively and validly transfer the interest of the Assignor in the Property to the Assignee, the intention and practical object of the parties would not prevail. …

So the crux is whether the Assignment could at law effectively and validly transfer the interest of the Assignor in the Property to the Assignee. And if it could not, then there would be a break in the chain of title.

We have reasoned with you with supporting authorities that as a matter of law, it could not because, as we have said, each of Assignor and the Assignee was already the owner of the Property and so the Assignor could not have any separate interest of his own which could be capable of being assigned to the Assignee.

Indeed, as remarked by Lord Millett in Burton v Camden London Borough Council [2000] 1 All ER 943 at 950, the difference of an assignment and a release, insofar as the transfer of interest by a joint tenant to the other joint tenant is concerned, is ‘one of substance and not form’.

Hence, in the present case, it is really a non-issue that there is ‘clearly no risk that the then Assignor would still have retained any rights or interest in the Property’ as alleged. Nor do we share your view that the Assignment has the effect of severance of joint tenancy under section 8 of the Conveyancing and Property Ordinance (Cap. 219).” (emphasis added)

18.  On 21 May 2021, the Plaintiff issued the OS in this Action. 

Deliberation

19.  This court should first remind itself of some of the applicable principles.

20.  It is trite that a vendor generally is obliged to show good title before completion and to give (or make) good title on completion.  The first obligation is to show good title.  In Hong Kong, this is done by the vendor sending the relevant documents themselves to the purchaser’s solicitors for perusal:Au Wai Ming & Anor v Kam Tze Ming Alfred & Anor [2010] 1 HKLRD 198 at [32]. 

21.  The obligation to make a good title requires the vendor to show that he alone, or with the concurrence of some person or persons whose concurrence he can compel, can convey the whole legal estate and equitable interest in the land sold, free from encumbrances except for those disclosed by the contract.  This is an implication arising from the obligation to make a good title: Jumbo King Ltd v Faithful Properties Ltd [1999] 3 HKLRD 757, 771A-C.

22.  A good title is one which can at all times and in all circumstances be forced upon an unwilling purchaser in an action for specific performance, but the court will not force a doubtful title on a purchaser: Kan Wing Yau & Anor v Hong Kong Housing Society [1988] 2 HKLR 187 at 193G-H.

23.  A good title does not mean a perfect title, free from every possible blemish.  Whenever a question like this arises, it must be approached from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonable robust common sense, both intending to see the transaction through to completion in terms of their bargain: per Litton PJ in Mexon Holdings Ltd v Silver Bay International Ltd [2000] 1 HKLRD 935 at 942F-G.

24.  A doubtful title arises where there is some element of uncertainty whether the vendor can convey what he has contracted to convey or whether the title can be successfully challenged by some third party: Sihombing & Wilkinson’s Hong Kong Conveyancing, Vol 1 (Issue 88, June 2019) at para 199. 

25.  While the Court will not force a doubtful title on a purchaser, if the facts and circumstances of a case are so compelling to the mind of the Court that the Court concludes beyond reasonable doubt that the purchaser will not be at risk of a successful challenge, it should declare in favour of a good title shown: MEPC Ltd v Christian-Edwards & Ors [1981] AC 205 at 220C-D.

26.  The “no real risk” test is inapplicable where the title is obviously bad. A doubtful title is one where there is some uncertainty as to whether or not the title could be successfully challenged.  A bad title is one where there is no uncertainty - a challenge will most certainly be successful: Siu Wing Yee Angeline v Earning Yield Ltd [2013] 6 HKC 281 at [38].

27.  In the present case, Mr Wong submits that there has been severance at law and in equity of the Joint Tenancy of Lee and Hung so as to create a tenancy in common instead.  If so, the 2010 Assignment was effective in transferring Hung’s interest in the Property to Lee.  It follows that Lee would be able to transfer her entire interest in the Property to the Plaintiff.

28.  Mr Yim disputes there was a valid severance of the Joint Tenancy.  His submissions in gist are that, if the 2010 Assignment were to be recognised as a valid mode of transfer, all joint tenants viz Hung and Lee, must join in as assignors (which was not the case here).  Alternatively, a deed of release by Hung is required (which was also not forthcoming).  In support of his submissions, Mr Yim relies on Burton v Camden London Borough Council [2000] 2 AC 399, 404G-405C.  Since the entire interest in the Property had never been not vested in Lee, the Plaintiff has no interest to pass to the Defendant pursuant to the Formal Agreement.  Further, given the Plaintiff’s refusal to provide a confirmatory deed executed by Hung, the Plaintiff has failed to show good title.

29.  The starting point is section 8 of CPO which provides:

“(1) A joint tenancy of an estate or interest in land may be severed at law only by—

(a) a notice served by a joint tenant on the other joint tenants; or

(b) an instrument.

(2)  A joint tenancy of an estate or interest in land may be severed in equity by a notice served by a joint tenant on the other joint tenants or by any other method that is effective in equity or that would, but for subsection (1), be effective at law.”

30.  Under section 2 of CPO, “Instrument” means “any document having legal effect except a will”.

31.  In Chiu Kwai Ping v Yip Tse Tang (a firm) unrep, HCA 2159 of 2016, 11 May 2018, DHCJ Saunders, the brief facts are as follows.

(1)     The plaintiff, Madam Chiu Kwai Ping, was married to one So Wing Yu (“Mr So”).  In September 2007, she engaged the defendant firm to advise and act for her in relation to her petition for divorce and the related application for ancillary relief in FCMC 12909/2007.  The matrimonial home in Prime View Garden, Tuen Mun (“the matrimonial home”) was held by the couple as joint tenants. 

(2)     On 19 March 2008, an order written in Chinese (“the Order”) was made by consent by the Family Court upon the making of the decree nisi for divorce.  According to the certified English translation, the material part of the Order provided as follows:

“The [Husband] do transfer and assign all his rights, title and interests of and in [the matrimonial home] to the [Wife] at nil consideration and free from any other encumbrances except for the existing mortgage within 3 months from the date of granting the Decree Absolute. The [Husband] do execute all necessary documents in respect of the said transfer including Assignment, and the [Wife] shall be responsible for all related stamp duty, expenses and costs, failing which the [Wife] can make application to the Registrar of the High Court requesting that all documents in respect of the said transfer be executed by the Registrar on behalf of the [Husband].” (emphasis added)

32.  The Order was sealed on 26 May 2008.  On 6 June 2008, the decree absolute for divorce was granted.  But Mr So did not execute any document to transfer his rights, title and interests in the matrimonial home to the plaintiff.  On 8 October 2010, Mr So caused a notice of severance dated 22 September 2010 to be registered in the Land Registry purporting to sever the joint tenancy in the matrimonial home such that he and the plaintiff should thereafter hold the matrimonial home as tenants in common in equal shares. 

33.  One of the issues in that case was when did severance of the joint tenancy take place. At [25] to [26], the learned Deputy Judge observed:

“25. It is quite clear as a matter of law that severance of the joint tenancy took place on the date the Order was made. Section 8 of the Conveyancing and Property Ordinance, Cap 219 (‘CPO’) provides:

‘8. Severance of joint tenancy

(1) a joint tenancy of an estate or interest in land may be severed [at law] only by—

(a) a notice served by a joint tenant on the other joint tenants; or

(b) an instrument.’

An ‘instrument’ is defined in s 2 CPO as any document having legal effect except a will. There can be no doubt that the Order constitutes an instrument. Both counsel were in agreement, correctly in my view, that the severance of the joint tenancy occurred, at the latest, on the date on which the Order was made, namely 19 March 2008. In reality, the notice of severance served by Mr So was meaningless, as the severance had already taken place.

26. An example of the severance of a joint tenancy by an act of a joint tenant evidencing an intention contrary to the joint tenancy, may be seen in Re Draper’s Conveyance [1969] 1 Ch 486, decided under similar but slightly different English legislation.” (emphasis added)

34.  DHCJ Saunders’ view was approved on appeal: Chiu Kwai Ping v Yip Tse Tang (a firm) unrep, CACV 494 of 2019, 4 November 2020, Kwan VP and Cheung JA.  At [6], Kwan VP stated that:

“ … Severance of the joint tenancy had already taken place on 19 March 2008 when an instrument came into existence being the Order made by the Family Court requiring Mr So to transfer his rights and interest in the Property to the plaintiff within three months of the decree absolute. …”

35.  Chiu Kwai Ping v Yip Tse Tang (a firm) is on all four with the present case and there is no valid reason for this court to depart from the views expressed by DHCJ Saunders and confirmed by Kwan VP regarding the effect of a property transfer order in severing a joint tenancy in law. 

36.  Section 8(2) CPO covers severance of a joint tenancy in equity. 

37.  In the classic case of Williams v Hensman (1861) 1 J & H 546 at 557, 70 ER 862 at 867, Page Wood V-C (later Lord Hatherley LC) expressed the view that:

“ A joint tenancy may be severed in three ways: in the first place, an act of any one of the persons interested operating upon his own share may create a severance as to that share. … Secondly, a joint tenancy may be severed by mutual agreement. And, in the third place, there may be a severance by any course of dealing sufficient to intimate that the interests of all were mutually treated as constituting a tenancy in common. …”

38.  In Gray & Gray Elements of Land Law (5th ed) at paras 7.4.84 and 7.4.85, the learned editors observed:

“7.4.84 … Although it may sometimes be difficult to distinguish this form of severance [by mutual agreement] from the third method outlined by Page Wood V-C (‘mutual conduct’), it is clear that joint tenants by acting together may effectively agree inter se to sever their joint tenancy. Their agreement to do so may be either express or implied (ie such as can be inferred from conduct which necessarily involves severance). In the absence of any contrary intention or arrangement, severance by mutual agreement results in a tenancy in common in equal shares.

7.4.85 Mutual agreement provides a flexible and informal mode of severance. The agreement need not take the form of a specifically enforceable contract. … In all these respects the significance of the agreement is not that it binds the parties, but rather it ‘serves as an indication of a common intention to sever’. …” (emphasis added)

39.  Mr Wong submits the second and third ways of severance are applicable to the present case.  This court agrees. 

40.  The 2010 Order was made by consent of Lee and Hung.  There must therefore be an antecedent mutual agreement by the parties to put an end to the joint tenancy and to create a tenancy in common so that Hung’s half share in the Property could be disposed of and assigned to Lee.  As the passage in Gray & Gray Elements of Land Law quoted above suggests, mutual agreement provides a flexible and informal mode of severance.  The agreement need not take the form of a specifically enforceable contract -the significance of the agreement is that it serves as an indication of a common intention to sever. It is therefore not necessary for the 2010 Order to expressly spell out a severance of the Joint Tenancy - this can be inferred from the fact that severance by mutual agreement ie the second method, can be implied, such as can be inferred from conduct which necessarily involves severance, or simply by a course of dealing, ie the third method.

41.  As for severance by a course of dealing or mutual conduct, the learned editors of Gray & Gray Elements of Land Law suggest at para 7.4.90 that:

“‘Mutual conduct’ has been taken to comprise any conduct of the joint tenants which falls short of evidencing an express or implied agreement to sever but which nevertheless indicates an unambiguous common intention that the joint tenancy should be severed. Severance by ‘mutual conduct’ requires neither an express act of severance, nor a contract, nor a declaration of trust. It requires merely a consensus between the joint tenants, disclosed by a pattern of dealings with the co-owned property, which effectively excludes the future operation of the right of survivorship. …”

42.  In this court’s view, the fact that Lee and Hung consented to the 2010 Order and followed up by the execution of the 2010 Assignment can only mean that the right of survivorship under the previous Joint Tenancy would no longer operate.  There is after all no hard and fast rule as to how protracted the course of dealing must be in order to effect a severance.  The example given in Gray & Gray Elements of Land Law at para 7.4.92 concerning the execution of mutual wills as being sufficient to effect a severance is a case in point. 

43.  Mr Yim, at paragraph 13 of his skeleton, submits that, pursuant to the 2010 Order, no equitable interest would be conferred on Lee until the making of the decree absolute under section 25(1)(b) of the Matrimonial Proceedings and Property Ordinance, relying on a passage in Mountney v Treharne [2003] Ch 135 at [76] which reads:

“ 76 In my judgment, therefore, applying Maclurcan’s case, the order in the instant case had the effect of conferring on Mrs Mountney an equitable interest in the property at the moment when the order took effect (ie on the making of the decree absolute). On that basis Mrs Mountney is, if anything, in a better position than a purchaser of the property under a specifically enforceable contract in that … by making the order under section 24(1)(a) the court has in effect already made a decree of specific performance in her favour. All that remains is for her to enforce it.”

44.  Mr Yim further submits that in the present case, only a decree nisi had been made at the time of the 2010 Order and there is no evidence as to whether and when the relevant decree absolute was made.  There is no factual foundation for the Court to come to a conclusion that there was in fact any severance in equity. 

45.  With respect, this court does not agree.  The reference to decree absolute at paragraph 3 of the 2010 Order only dictated the time within which Hung must transfer his interests in the Property to Lee.  It did not dictate whether or when any severance in equity had taken place, which will remain to be governed by the 3 methods stated in Williams v Hensman.  Further, given the fact that Hung had in fact executed the 2010 Assignment in November 2010, it is unrealistic to doubt whether a decree absolute had in fact been made prior to November 2010 - in fact, there was no requisition from JL to KST seeking evidence on the existence of the decree absolute, if that were the genuine concern of JL.

46.  Mr Yim also has misgivings about Chiu Kwai Ping v Yip Tse Tang (a firm)in which DHCJ Saunders’ reliance at [26] on Plowman J’s judgment in Re Draper’s Conveyance [1969] 1 Ch 486 for the proposition that an act of a joint tenant evincing an intention contrary to the joint tenancy would effect severance as contrary to other authorities eg Berdal v Burns [1990] WAR 140 at 144-145; Mountney v Treharne at [76]. 

47.  But the real point of relevance of Chiu Kwai Ping v Yip Tse Tang (a firm) to the present case lies in DHCJ Saunders’ conclusion at [25] that as a matter of law, severance of the joint tenancy took place on the date when the Family Court Order in that case was made.  That was a conclusion endorsed by the Court of Appeal in that case.  Indeed, it has long been suggested that Re Draper’s Conveyance is explicable on the footing that it was the court order in that case, rather than the unilateral act of one joint tenant, which effected a severance: Gray & Gray Elements of Land Law at para 7.4.98 at footnote 1.

48.  Mr Yim has also given other reasons at paragraph 13 of his skeleton submissions for suggesting that there could be no severance in equity by mutual agreement or by course of dealing.  Suffice it to say that, for reasons already given above, this court does not find his submissions convincing and they are hereby rejected. 

49.  To conclude, for the above reasons, this court is of the view that the Plaintiff has shown a good title in accordance with the Formal Agreement and KST have sufficiently answered the requisition raised by JL aforesaid.  For completeness, this court is of the view that, on the facts and circumstances of this case, the Defendant will not be at risk of a successful challenge to the Plaintiff’s title by the only possible candidate viz Hung.

Disposition and costs

50.  In the premises, this court hereby grants a declaration that the Plaintiff has shown good title to the Property in accordance with the Agreement for Sale and Purchase dated 14 April 2021 between the Plaintiff as vendor of the one part and the Defendant as purchaser of the other part and has satisfactorily answered the requisition raised by the Defendant’s solicitors, Messrs Johnny KK Leung & Co, on the Plaintiff’s title to the Property. 

51.  There shall be an Order that the parties do bear their own costs, as sought in paragraph 6 of the OS.