JOVIAN CORPORATE COMMUNICATIONS LTD v. LINK WIDE INTERNATIONAL INVESTMENT (HONG KONG) LTD

HCA 1235/2014

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1235 OF 2014

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J U D G M E N T

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Introduction

1.  Before the court is an Order 14A application by the defendant essentially seeking determination of 3 questions of law, and an application by the plaintiff to strike out the defendant’s defence and counterclaim.

The background

2.  The parties’ dispute arose from a conveyancing transaction in which the defendant (“D”) was the purchaser and the plaintiff (“P”) was the vendor.

3.  The sale and purchase agreement (“Agreement”) was entered into on 6 December 2013.  The subject property was an office, together with lavatories, on the 24^th floor of a commercial building (“Building”)  on Des Voeux Road in Central (“Property”). 

4.  There were 4 developers of the Building (“Developers”). The Tung Wah Group of Hospitals (“Tung Wah”) was one of the Developers.

5.  By the Agreement, P agreed to sell and D agreed to buy the Property at a purchase price of HK$23,800,000.

6.  Pursuant to the Agreement, D had paid a deposit of HK$2,380,000 to P (“Deposit”).  Completion date was scheduled on 30 June 2014.

7.  As is usual in conveyancing transactions, letters were exchanged to raise and answer requisitions (“Requisitions”).

8.  Most of the Requisitions were answered and/or accepted by D as satisfactory except one outstanding requisition (“Outstanding Requisition”).

9.  The completion eventually did not take place on 30 June 2014. Each blamed the other for having repudiated the Agreement.

10.  P issued its writ on 2 July 2014.  It was P’s case in its statement of claim that the Outstanding Requisition was misconceived in law and that it used its best endeavours to allay or remove D’s concerns over its perceived defect in P’s title to the Property.  D insisted on and maintained its objections to P’s title to the Property based on the Outstanding Requisition.  It alleged that P failed to prove and give good title to the Property and thus P was in breach of express and/or implied terms of the Agreement, and D was entitled to, among other things, the return of the Deposit.  

11.  After pleadings closed, D issued a summons on 19 November 2014 under Order 14 rule 1 and Order 14A rule 1 of RHC seeking the court’s determination on 3 questions of law and if those questions were determined in its favour, then final judgment be entered in favour of the defendant for various amounts and declarations sought in the counterclaim and P’s claim be dismissed (“D’s Summons”).  I will set out these 3 questions later.

12.  P then issued its summons on 12 March 2015 under Order 14 rule 3, Order 14A, Order 18 rule 19 & Order 33 rule 7 of RHC or inherent jurisdiction to strike out D’s defence and counterclaim in that it did not disclose any reasonable cause of action/defence or that it was frivolous and vexatious or otherwise an abuse of the process of the court (“P’s Summons”).

The Outstanding Requisition

13.  The Outstanding Requisition was in connection with the written approval of the Governor which D alleged was necessary for the creation of the Deed of Mutual Covenant and Partition Memorial No UB 375988 (“DMC&P”), as set out in Clause 2(1)(b) of the Schedule to the Tung Wah Group of Hospitals Ordinance, Cap 1051(“Ordinance”).

14.  Tung Wah is a charitable organisation incorporated under the Ordinance and its objects are specifically set out in Clause 1 of the Schedule of the Ordinance. Clause 2(1)(b) of the Schedule of the present version of the Ordinance states as follows:

“(1) Without prejudice to any other Ordinance, the corporation shall have the following powers-

(a) …

(b) with the approval in writing of the Chief Executive, to grant, sell, convey, assign, surrender, exchange, partition, yield up, mortgage, transfer or otherwise dispose of, or let for any period exceeding 3 years, any immovable property;”

15.  At the time of the DMC&P, it was the “Governor” whose approval was required under Clause 2(1)(b) to “Chief Executive”.  Other than this, the wording of Clause 2(1)(b) of the then version of the Ordinance and the  current version are the same (“Statutory Provision”).

The background leading to the Outstanding Requisition

16.  The Developers respectively owned portions of land in certain sections of Inland Lot Nos 1556, 1557, 1864, 1865 and 1866 (“Lots”).  They first agreed to jointly develop and construct the Building pursuant to an agreement entered into on 13 March 1982, followed by a supplemental agreement dated 1 June 1988 (“Joint Development Agreements”)[1].

17.  In the meantime, the Developers had entered into an Agreement to Assign on 24 September 1986 with the then mortgagee Bank of East Asia and the then Financial Secretary Incorporated pursuant to which the Developers agreed to construct at their expense certain MTR Structures (as defined therein) and upon completion of the Building and when called upon by Financial Secretary Incorporated  to assign free of all costs and incumbrances, areas named MTR Areas  and , among other things, subject to and with the benefit of the deed of mutual covenant (“MTR Agreement”)[2]. Further, the deed of mutual covenant was to be submitted to the Registrar General (Land Office) for his written approval, and was to include certain terms set out in clause (1)(c) of the MTR Agreement[3].

18.  There was a memorandum endorsed on the back of the MTR Agreement, which stated “I HEREBY CONSENT to the within written Agreement under Clause 2(1)(b) of the Schedule to the Tung Wah Group of Hospitals Ordinance” (“Memorandum”).  The Memorandum was dated the same date as the MTR Agreement and signed by the Director of Buildings and Lands for and on behalf of the Governor.  This represented the approval under the Statutory Provision.

19.  The Lots were developed and the Building was constructed.

20.  There were then a number of documents executed on 1 June 1988, including it seemed the supplemental agreement referred earlier, which was one of the Joint Development Agreements but no copy had been produced.  Anyway, the following 3 documents were executed on 1 June 1988:

(i) A Deed of Exchange Memorial No UB3759586 on 1 June 1988 which the Developers entered into to exchange their rights title and interest of and in the portions of the land they respectively owned so that they became the co-owners of the Lots with their respective shares therein mentioned[4] (“Deed of Exchange”).

(ii) An Assignment Memorial No UB 3759587[5](“MTR Assignment”), by which the Developers jointly assigned 160,400 equal and undivided shares in the Building and the exclusive rights of the MTR Areas to the Mass Transit Rail Corporation (“MTRC”).

(iii) The DMC&P entered into by the Developers (as Registered Owners), with MTRC as first purchaser and Guardian Property Management Limited as manager.

21.  The MTR Assignment had a similar Memorandum endorsed on the back.  The Deed of Exchange did not. According to D’s Counsel, Mr Kenneth Chan, no requisition was raised by D in respect of the Deed of Exchange because it was considered to be a pre-intermediate root title document[6].

22.  The DMC&P did not have any similar Memorandum endorsed.

23.  After the MTR Assignment, the Units in the Building were then sold off to the public.  The Property was first assigned to a purchaser 14 June 1988, and since then, there had been a number of assignments over the years, and P became the 11^th purchaser of the Property on 16 December 2010[7].

Summary of letters between solicitors concerning the Outstanding Requisition

24.  The following is a brief summary of the letters of concerning the Outstanding Requisition exchanged between D’s solicitors Messrs Tang Tso & Lau (“TTL”) and P’s solicitors Messrs TC Foo & Co (“TCF”) :

“(1) TTL’s letter dated 31^st December 2013[8]-

(i) In paragraph 4, disagreed that section 23A(2) of Cap 219 was relevant, and referred to the Statutory Provision.

(2) TCF’s letter dated 17 April 2014[9]-

(i) In paragraph 4, replied that the DMC&P was more than 15 years ago and pursuant to section 23A(2) of the Conveyancing & Property Ordinance, Cap 219, it was for the purposes of any question as to the title of the Property to be conclusively presumed that the DMC&P was validly executed and thus the written approval was not relevant document necessary to be produced for proof of the title of the Property.

(3) TTL’s letter dated 22 April 2014[10]-

(i) In paragraph 4, disagreed that section 23A(2)of Cap 219 was relevant, and referred to the Statutory Provision.

(4) TCF’s letter dated 19 May 2014[11]-

(i) Paragraph 8 of the recital of the DMC&P stated that the Registered Owners had obtained the approval of the Registrar General (Land Office) to the form of the DMC&P, which was a government depart acting for the Governor and that the recital showed that approval of the Governor had been obtained.

(ii) Applied the Latin Maxim ‘ex diuturnitate temporis ominia presumuntur esse rite et solennitur acta’, namely from lapse of time, all things were presumed to have been done rightly and regularly, and there was no need for any further proof of the power of Tung Wah in the creation of the DMC&P.

(5) TTL’s letter dated 27 May 2014[12]-

(i) Disagreed that there had been the alleged approval and that the approval was only in relation to the fulfilment of the requirement in the MTR Agreement but not further or otherwise, and that the approval under the Statutory Provision was a separate and independent issue, and that a formal approval of the Governor to the DMC&P was required;

(ii) Failed to see how the Latin Maxim had any relevance.

(6) TCF’s letter dated 30 May 2014[13]-

(i) Maintained the relevance of the Latin Maxim, as DMC&P created more than 25 years ago.

(7) TTL’s letter dated 10 June 2014[14]-

(i) Disagreed the relevance of the Latin Maxim

(ii) Enclosed copy extract of Deed of Dedication dated 11 July 1986 entered into by the Developers and the mortgagee bank and Modification Letter dated 11 July 1986 addressed to Tung Wah which bore the Memorandum.

(8) TCF’s letter dated 14 June 2014[15]-

(i) Maintained that the approval of the Registrar General (Land Office) to the form of the DMC&P was sufficient;

(ii) Maintained that the Latin Maxim applied and there was no real risk of enforcement by the Government.

(9) TTL’s letter dated 23 June 2014[16]-

(i) Maintained that the Latin Maxim was irrelevant, and referred to the Deed of Dedication, Modification Letter, MTR Agreement, and the Assignment all bearing the Memorandum.

(10) TCF’s letter dated 25 June 2014[17]-

(i) Maintaining that the Registrar General (“Land Officer”) had given his approval to the DMC&P;

(ii) Pointing out that the Property had been enjoyed with the title of over 25 years without any problem, any risk of title being challenged was fanciful.

(11) TCF’s letter dated 27^th June 2014[18] -

(i) Pointing out that the name of a document was not conclusive, and that although the DMC& P was so named, the effect of the DMC&P was to allocate the respective self-contained units and undivided shares in the Building among the registered owners only.  Those self-contained units were already there prior to the DMC&P.  They were not brought about by the DMC&P.

(ii) Therefore, such allocation did not by its nature constitute a partition and no approval needed to be obtained pursuant to the Statutory Provision.

(12) TCF’s letter dated 28^th June 2014[19] -

(i) maintained the view that the approval required under clause 1(c) of the MTR Agreement and the approval required under the Statutory Provision are two separate and independent issues, separate approvals shall be given one by one;

(ii) suggested that the approval letters dated 29^th March 1988 and 14^th April 1988 only fulfilled the requirement under clause 1(c) of the MTR Agreement;

(iii) suggested that the consent given on the MTR Assignment only relates to the assignment of the MTR Areas;

(iv) maintained the view that since they were two different independent issues, separate approvals to the MTR Assignment and the DMC&P were required;

(v) repeated the view ‘the Latin Maxim has no relevance to answer the requisition’;

(vi) suggested that the rule in Turquand’s case had no relevance to answer the requisition.  Tung Wah was a charity incorporated under the Ordinance and it was clearly not subject to the Companies Ordinance Cap.622.  The failure to comply with the statutory requirement therefore renders any act that falls within the Statutory Provision ultra vires.  The DMC&P was void ab initio;

(vii) suggested that even if, which is not agreed, the Turquand’s rule applied, the principle of constructive notice also applied as the requirement of the written consent of the Governor is clearly stated in the Schedule to the TWGH Ordinance;

(viii) maintained the view that Jumbo Gold Investment Ltd v Warren Yuen Cheong Leung and Another FACV9/1999 had no relevance to answer the requisition;

(ix) suggested that Clause 3 of Section I of the DMC&P stated that the DMC&P[20] effected the partition of the subject land and building so that one or more parties thereto had absolute ownership, use, occupation and enjoyment of certain self-contained units to the exclusion of the other party or parties;

(13) TTL’s 1^st letter dated 30^th June 2014[21]-

(i) reminded P of the completion date and the obligation to answer satisfactorily all requisitions within a reasonable time prior to completion;

(14) TFC’s letter dated 30^th June 2014[22]-

(i) maintained the view that the DMC&P was not a document the execution of which required the approval of the Governor/Executive pursuant to the Statutory Provision;

(ii) Suggested that the DMC&P did not have the effect of the ‘partition’ of any of the immovable properties belonging to the Tung Wah;

(iii) suggested that such alienation or disposition of the Tung Wah’s immovable property requiring the approval or consent by the Governor/Chief Executive under the Statutory Provision had already taken place upon execution of the Deed of Exchange;

(15) TTL 2^nd letter dated 30^th June 2014 letter[23] suggested that-

(i) Recital (9) of the DMC&P stated that ‘Pursuant to the Joint Development Agreements, the Registered Owners have agreed to partition the Land and Building so that one or more parties shall have absolute ownership use occupation and enjoyment of certain self-contained Units to the exclusion of the other party or parties’;

(ii) Clause 3(a) of Section I of the DMC&P stated that ‘In pursuance of the said agreement and for the purpose of effecting the said partition the Second Owner (ie Tung Wah) the Third Owner and the Fourth Owner do and each of them doth hereby ASSIGN GRANT and RELEASE unto the First Owner its successors and assigns the full and exclusive right and privilege to hold use occupy and enjoy to the exclusion of the Second Owner the Third Owner and the Fourth Owner ALL THOSE the self-contained Units in the Building set out in Part B of the Second Schedule opposite to the name of the First Owner TO HOLD the same unto the First Owner for the respective residues now to come and unexpired of the said concurrent terms of 999 years created by the Crown Grant TO THE INTENT that the premises described in this Clause shall forthwith be held by the First Owner in severalty free from any interest of the Second Owner the Third Owner and the Fourth Owner and that the First Owner shall have in all respects the rights of an absolute owner thereof subject to the Deed of Dedication’;

(iii) similar assignments, grants and releases were stipulated in Clauses 3(b), 3(c), 3(d) and 3(e) of Section I of the DMC&P to the other owner/owners.  Obviously, the legal effect of the DMC&P was not only allocation of shares but to partition the subject land and building so that the individual registered owners shall have exclusive possession of their respective units;

(iv) the allegation that the DMC&P did not have the effect of the ‘partition’ of any of the immovable properties belonging to Tung Wah was absolutely wrong and misconceived;

(v) approval in writing to the partition under the DMC&P was required under the Statutory Provision;

(vi) the supplied Deed of Exchange had no relevance to answer the requisition;

(vii) there were three separate actions at the material time, namely, (i) the exchange of seven pieces or parcels amongst the four developers; (ii) the assignment of the MTR Areas to the MTR; and (iii) the partition of the subject land and building so that one or more parties to the DMC&P had absolute ownership, use, occupation and enjoyment of certain self-contained units to the exclusion of the other party or parties, which required consent or approval pursuant to the Ordinance;

(viii) the alleged estoppel from denying the validity of the Deed of Exchange had no relevance to the requisite consent or approval to the DMC&P.”

D’s Summons

The 3 questions of law

25.  The 3 questions of law set out in D’s Summons were:

(i) Whether the DMC&P amounted to a partition within the meaning of the Statutory Provision; (“1^st Question”)

(ii) Whether, if the answer to (a) hereinabove were to be affirmative, the absence of the written consent as required under the Statutory provision would render the title to the Property not a good title; (“2^nd Question”)

(iii) Whether, if the answers to (a) and (b) above were affirmative, D had validly accepted the repudiation of the Agreement by P. (“3^rd Question”)

Discussion on D’s Summons

The 1^st Question

26.  P’s Counsel Mr Michael Yin had referred the court to the CFA decision in Kung Ming Tak Tong v Park Solid Enterprise (2008) 11 HKCFAR 403, where Li CJ had distinguished two sets of rights enjoyed by an owner of a unit in a multi-story building under the Hong Kong’s system of conveyancing, and the effect of a deed of mutual covenant (“DMC”).

27.  It was held in Kung Ming Tak Tong that, among other things, as follows:

“(1) The Hong Kong system of dealing with multi-storey buildings in multi-occupation, under which (a) co-owners held the property as legal tenants in common, with each owner owning undivided shares in the whole property; and (b) a DMC regulated by contract rights between the owners regarding the exclusive use and occupation of units allotted to their respective parcels of undivided shares, did not permit the creation of easements as between co-owners. An owner could not have an easement over his own land. Further, units in a multi-storey building were not separate tenements legally in different occupation. …

(2) P’s argument that a DMC created separate tenements capable of supporting legal easements, in particular that exclusive possession was a feature of a legal estate in land and that the DMC took effect as a grant of such proprietary interest, was rejected. The DMC had always been understood as a secondary document and the apparent grant by the DMC of exclusive possession was properly regarded as a separate contractual undertaking by every other co-owner not to exercise the rights of occupation and enjoyment which he would otherwise be able to do as co-owner over units other than his own. It did not result in the creation of separate tenements capable of sustaining a legal easement[24]. …” (emphasis added)

28.  Li CJ had also pointed out in Kung Ming Tak Tong that :

“36. … The undivided shares in the property are the subject-matter of the assignment. Their assignment immediately results in the assignor and the assignee becoming co-owners of the property with unity of possession, subject to and with the benefit of the DMC which is executed at the same time. The apparent grant of exclusive possession is generally (and in our view correctly) read as a reference to the product – purely as a matter of contract – of the mutual covenants simultaneously being entered into, rather than of any proprietary grant under the deed of assignment. To read such language otherwise would produce an unresolved tension between granting undivided shares in the property carrying the right to possession over all the building in common with all other co-owners on the one hand, and granting exclusive possession over one unit as an interest in land on the other[25]…” (emphasis added)

29.  Mr Chan had, however, submitted that the present case should be distinguished from Kung Ming Tak Tong on the following grounds:

(i) The CFA’s decision was based on the particular wordings and effect of the particular DMC in that case, and that the case could only be of general application to that particular type of DMCs with substantially the same contents;

(ii) The salient difference between the DMC in that case, and the DMC&P in the present case was that there was only one developer in Kung Ming Tak Tong, in that a DMC with one developer would only have to deal with the rights of owners inter se whereas in the present case there are 4 developers  and each of the rights of the Developers had to be regulated before each of them could dispose of the units assigned, granted and released to them;

(iii) In a typical DMC with one developer, the developer could dispose of the units first by entering into the DMC with the first purchaser, followed by sale to the other purchasers which are subject to the DMC and that in theory, the developer could by himself alone dispose of the various units without a DMC, whereas in the present case, the Developers could not, in the absence of the DMC&P.

30.  A copy of the DMC in the Kung Ming Tak Tong had been obtained by D from the Land Registry and produced to the court for consideration. CJ Li had said:

“20. Over the years, the form of the DMC has increasingly become standardised. By the DMC in the present case each owner is granted ‘the exclusive use occupation and enjoyment and the rents and profits’ of his unit and the right ‘without reference to the other owners and without the necessity of making them parties thereto to sell mortgage or otherwise dispose of his part of the Building and his share in the premises … and to let or demise his part of the Building to any tenant or lessee’. For all practical purposes, therefore, the owner of undivided shares to which a unit has been allotted is able, by virtue of the DMC, to exercise rights in relation to the property as if he was its absolute owner[26].”

31.  Although the DMC in Kung Ming Tak Tong was a simpler version of a deed of mutual covenant involving only one developer/first owner, what Li CJ was explaining in detail in that case was the Hong Kong system of dealing with multi-storey buildings in multi-occupation and the effect of a DMC.  I do not think that his comments were confined to only the type of DMC in that case.

32.  Having said this, I accept the present DMC&P was of a more complicated form than the DMC in the Kung Ming Tak Tong, as there were 4 Developers/Registered Owners plus the MTRC, and the Building consisted of the Commercial Development and the MTR Areas.  However, this would not necessarily result in what Li CJ said in Kung Ming Tak Tong not being applicable to the DMC&P.  Further, like other DMCs where the developer and the first purchaser would execute the assignment and the DMC at the same time, here in the present case, the Developers/Registered Owners executed the MTR Assignment with the first “purchaser” MTRC at the same time of executing the DMC&P.

33.  The issue is really whether the DMC&P also amounted to a “partition” within the Statutory Provision.

34.  There were several firms of solicitors acting for different parties at the time of the DMC&P.  As can be seen from the signing page, one of the Developers/Registered Owners was represented by solicitor Mr SH Leung, Tung Wah was represented by solicitors Messrs Lo and Lo, the other Developers/Registered Owners were represented by Messrs PC Woo & Co, which also acted for the Manager. As MTRC signed in presence of its Chief Legal Clerk, it was not clear which firm of solicitors represented them but no doubt it also had received legal advice whether from its in house lawyer or external. 

35.  Paragraph (3) of the Recital of the DMC&P had set out the number of shares each of the Developers/Registered Owners respectively held out of the 133,739,600 Commercial Shares (as defined below) as co-owners immediately prior to the MTR Assignment.

36.  Paragraph (5) of the Recital had set out that the Land and the Building had been notionally divided into 133,900,000 equal undivided shares of which 160,400equal undivided shares were allocated to the MTR Area (“MTR Shares”) and 133,739,600 equal undivided shares were allocated to the Commercial Development (“Commercial Shares”) to be held by the Registered Owners as tenants-in-common in the proportions set out in Part B of the Second Schedule of the DMC&P.

37.  It was clearly set out in paragraph (8) of the Recital that pursuant to the MTR Agreement, the Registered Owners had obtained the approval of the Registrar General (Land Office) (“Registrar General”) to the DMC&P.

38.  Paragraph (9) of the Recital stated:

“Pursuant to the Joint Development Agreements, the Registered Owners have agreed to partition the Land and Building so that one or more parties shall have absolute ownership use occupation and enjoyment of certain self-contained Units to the exclusion of the other party or parties”.

39.  Paragraph (10) of the Recital then stated that the parties had also agreed to enter into the DMC&P for the purposes of making provisions for the management of the Land and the Building thereon and of defining and regulating the rights interests and obligations of themselves and all subsequent owners in respect of the Land and the Building[27].

40.  The DMC&P was divided into the following sections:

(i) Section I – Special Rights of the Registered Owners and Other Rights and Obligations of the Registered Owners and their Assignees

(ii) Section II- Easements, Rights and Privileges the Benefit of which is held with each (Commercial or MTR) equal undivided share of and in the Land and the Building

(iii) Section III- Easements, Rights and Privileges subject to which each (Commercial or MTR) equal undivided shares of any in the Land and the Building is held

(iv) Section IV- Covenants, Provisions and Restriction to be observed and performed by the Owner

(v) Section V – Management of the Building

(vi) Section VI – Miscellaneous

41.  There were two Schedules to the DMC&P-

(i) The First Schedule – which concerned the MTR Areas

(ii) The Second Schedule –

Part A – the agreed proportions of the Registered Owners, namely respectively 46.58%, 20.11 %, 19.44%, and 13.87% were set out

Part B – the detailed description of each Unit, ie the Basement/Shop/Office with the number of undivided Commercial Shares notionally allocated thereto, and name/s of each or more of the Registered Owners were set out

42.  D had relied heavily on paragraph (9) of the Recital and Clause 3(1) under Section I in submitting that the DMC&P amounted to a partition within the Statutory Provision.

43.  Paragraph (9) of the Recital had been set out earlier.  Clause 3(a) of Section I stated:

“In pursuance of the said agreement and for the purpose of effecting the said partition the Second Owner (ie Tung Wah) the Third Owner and the Fourth Owner do and each of them doth hereby ASSIGN GRANT and RELEASE unto the First Owner its successors and assigns the full and exclusive right and privilege to hold use occupy and enjoy to the exclusion of the Second Owner the Third Owner and the Fourth Owner ALL THOSE the self-contained Units in the Building set out in Part B of the Second Schedule opposite to the name of the First Owner TO HOLD the same unto the First Owner for the respective residues now to come and unexpired of the said concurrent terms of 999 years created by the Crown Grant TO THE INTENT that the premises described in this Clause shall forthwith be held by the First Owner in severalty free from any interest of the Second Owner the Third Owner and the Fourth Owner and that the First Owner shall have in all respects the rights of an absolute owner thereof subject to the Deed of Dedication.”

44.  Clause 3 (b), (c) and (d) contained reciprocal provisions from the other 3 Registered Owners to the Second owner, the Third Owner and the Fourth Owner respectively, whereas 3(e) contained provision in relation to jointly owned Units.

45.  The words heavily relied on by Mr Chan were those words at the end of Clause 3(a), namely “TO THE INTENT that the premises described in this Clause shall forthwith be held by the First Owner in severalty free from any interest of the Second Owner the Third Owner and the Fourth Owner and that the First Owner shall have in all respects the rights of an absolute owner thereof subject to the Deed of Dedication.” (“Intent Provision”).

46.  Mr Chan had argued that without the DMC&P, the Developers would have to be joined in any assignment when any of the Units of the Building was sold.  He had also posed the question: could any one of the Developers assign individually those Units without the others in the absence of the DMC&P.  As the answer must be no, then the DMC&P must be caught by the Statutory Provision.  Thus, the present situation was completely different form the situation in Kung Ming Tak Tong.

47.  In my view, the question posed by Mr Chan will not necessarily distinguish the DMC&P from the DMC in Kung Ming Tak Tong, or any DMCs in other multi-storey buildings, as the same question can be posed to other DMCs.  In the absence of a DMC, there would be no notional division of equal undivided shares assigned to each unit in the building, then how could the developer sell each unit. Otherwise, as Li CJ had said from the below passage, there could be the creation of a series of sub-leases, and the “purchaser” of each unit would not be allotted any shares, and would only end up, say a tenant. 

48.  What  Li CJ had said in Kung Ming Tak Tongwas-

“17. The conveyancing techniques adopted in the present case reflect the usual Hong Kong practice for dealing with the ownership of units in multi-storey buildings in multiple occupation. The system has been described in the textbooks and is unique in the common law world.

18. The first of the system’s main features is that persons owning interests in the property hold as legal tenants in common. All land in Hong Kong is held on a government lease (referred to as a Crown lease before 1 July 1997). The developer of the land, often the original government lessee, notionally divides such leasehold property into a specified number of equal undivided shares and allots exclusive rights of occupation over particular units or parts of the building to stated parcels of those undivided shares. Individual owners acquire their interest by taking an assignment of undivided shares, making them tenants in common with other owners who do likewise. It has been suggested that this approach – as opposed, for instance, to the creation of a series of sub-leases – was adopted to cater “for the desire of individuals to “own” their own property as opposed to merely being a tenant of a landlord…”[28]

49.  The words “ ASSIGN GRANT and  RELEASE” in Clause 3 (a) clearly referred to the assigning of the full and exclusive right and privilege to hold use occupy and enjoy those self-contained Units in the Building, as set out in Part B of the Second Schedule.

50.  I accept that Clause 3(a) with the Intent Provision was differently worded than, say clause 1 of the DMC in Kung Ming Tak Tong which stated “Each of the parties hereto … hereby grants … and assigns the full right and privilege to the exclusive use occupation and enjoyment and the rents and profits … of the part of the said Building … TO THE INTENT that each of the parties hereto shall be entitled to exclusive use occupation and enjoyment and the rents and profits … of the said part of the said Building…”

51.  However, according to my construction, the Intent Provision no more than reiterated what Li CJ had said, that for all practical purposes, the Owner of undivided shares to which a Unit had been allotted was able, by virtue of the DMC&P, to exercise rights in relation to that Unit as if it was its absolute owner.

52.  Mr Yin had submitted that “partition” was a legal term of art used to describe the process of putting an end to co-ownership by physical division of the co-owned land and allotment to each of the former co-owners a separate parcel of the land to be held in severalty. 

53.  Mr Chan had, however, argued that “partition” did not necessarily mean “partition of ownership”, and that the Statutory Provision included specifically “or otherwise dispose of”.

54.  The partition or disposal referred to in the Statutory Provision is of “any immovable property”.

55.  Looking at the effect of the entire DMC&P, the Developers/Registered Owners were co-owners prior to the DMC&P, and after executing the DMC&P, they were still co-owners save that their agreed percentages in Part A of the Second Schedule were represented by shares in each of the Units as set out in Part B of the Second Schedule.

56.  Further under Clause 9(I) of the DMC&P, the 4 Developers/Registered Owners had reserved exclusively unto themselves certain rights and privileges, of certain areas of the Commercial Development not intended for common use and the use of which had not specifically reserved to any particular Owner under the DMC&P, and further if there had been any Income from those reserved rights (as defined therein), such was to be divided in the agreed proportions set out in Part A of the Second Schedule until all the Registered Owners ceasing to hold any undivided share in the Land and Building. 

57.  The above clause in my view clearly made it clear that the Developers/Registered Owners had remained to be co-owners in the Building after the DMC&P.

58.  Thus, notwithstanding that the word “partition” was used in paragraph (9) of the Recital, or in the title, on my construction of Clause 3 (b), and the sub-clauses therein, and the rest of the DMC&P, there was in effect no assignment, nor partition, nor disposal of any immovable property or any of their respective interests in the Lots and the Building by the Registered Owners. 

59.  In fact, the effect of the DMC&P was no more than a ‘standard’ DMC, such as the DMC in Kung Ming Tak Tong, in that it was no more than a separate contractual undertaking by each of the co-owners not to exercise the rights of occupation and enjoyment which he would otherwise be able to do as co-owner over units other than his own[29].

60.  There was no alienation of any interest in the immovable property held by Tung Wah under the DMC&P and it was not a partition of any immovable property which fell within the Statutory Provision.

61.  In light of the above, my answer to the 1^st Question must be NO.  In my view, the DMC&P did not require the Governor’s approval in writing under the Statutory Provision.

The 2^nd Question and 3^rd Question

62.  As my answer to the 1^st Question is No, the 2^nd Question and the 3^rd Question will not arise.  Neither Counsel had really made submissions on the alternative position, and had concentrated their submissions on the 1^st Question.

63.  In any event, I will just add, even had the DMC&P amounted to a partition under the Statutory Provision, and the answer to the 1^st Question were in the affirmative, in my view, the absence of the written consent under the Statutory Provision would not have rendered the title to the Property not a good title.

64.  It is trite law that the duty of a vendor is to give and show good title, and the duty to give good title includes the duty to answer the requisitions satisfactorily.  

65.  So far as good title is concerned, Mr Chan referred the court to Kan Wing Yau v Hong Kong Housing Society [1988] 2 HKLR 187, where the Court of Appeal held[30] :

“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. A doubtful title includes not only a title on which the court entertains doubts, but also one in respect of which the court entertains a favourable opinion but may yet reasonably and fairly questioned by other competent persons. In this connection the court bears in mind that its decision binds the parties but not other adverse claimants who are not parties to the proceedings. A purchaser will not therefore be forced to take a title which will expose him to risk or hazard.”

66.  Mr Chan further referred to Sun Sek Haw & Au So Kum [1999] 3 HKLRD 12, where it was held (per Rogers JA) that in the field of conveyancing the law had historically set a very high standard; the standard of knowledge was that a man had constructive notice of matters which he would have discovered if he had made those enquiries which he ought reasonably to have made; taking that test as a guideline, in that case,  the relevant matters were matters which a hypothetical conveyancing solicitor would have discovered when acting property[31].  As summarised by Mr Chan, where there could be a subsequent successful challenge to the title of the vendor in an action, the court would not force the title upon the purchaser[32].

67.  Mr Yin, on the other hand, had referred the court to Active Keen Industries Ltd v Fok Chi-keong [1994] 1 HKLR 396 and submitted that the duty to show/prove good title by answering requisitions is predicated upon the purchaser having raised “a substantial objection as to the vendor’s title and there are facts within the vendor’s knowledge which, if revealed, might meet the objection[33]”. 

68.  In the present case, it had already been set out in the Clause 1(c) of the MTR Agreement that the deed of mutual covenant was to be submitted to the Registrar General for his written approval[34].  Clause 1(c) further stated that the deed of mutual covenant in respect of the Lots and the Building to be erected thereon had to be submitted to the Registrar General for his written approval and “shall contain such provisions as the Registrar General…shall approve or reasonably require and in particular shall contain….”  The MTR Agreement had borne the Memorandum, which meant it had the written approval of the Governor, and in my view, this would clearly indicate that the approval of the Registrar General to the deed would be sufficient.

69.  The DMC&P was submitted to the Registrar General, who did give his written approval.  In light of the above, I accept what P’s solicitors TCF had pointed out, that even if written approval were indeed required under the Statutory Provision, it should be presumed that it had been obtained.  In any event, the Registrar General did not see it necessary that the DMC&P would separately require the Governor’s written approval.

70.  D’s solicitors had written respectively to Messrs PC Woo & Co, solicitors for the Developers, Messrs SH Leung & Co, solicitors for the First Owner, Messrs Lo & Lo, solicitors for Tung Wah at the time to enquire about the Deed of Exchange and the DMC&P lacking written approval under the Statutory Provision.

71.  Both Messrs PC Woo & Co and Messrs SH Leung & Co had pointed out that title had been accepted by the subsequent purchasers, and they declined to answer TTL’s query.  Messrs Lo & Lo had pointed out on a courtesy basis, that the MTR Assignment was executed on the same day as the DMC&P, and as written consent from the Governor had been given to the MTR Assignment, one could safely presume that the Governor had given the consent for the DMC&P.

72.  As pointed out by Messrs Lo & Lo, the DMC&P was executed on the same day as the MTR Assignment, for which there was the Memorandum of written approval, and thus all the conveyancing solicitors involved would have been aware of the Statutory Provision, and it seemed that all of them had accepted the approval by the Registrar General to the DMC&P was sufficient. MTRC executed the MTR Assignment subject to the DMC&P, and there was no evidence of any query from them.

73.  The DMC&P was entered into 27 years ago in 1988.  There were 31 Units as seen from the Third Schedule.  Over all these years, there was no evidence of any challenge to title to the Property or other Units on the basis that the DMC&P did not have the necessary written approval of the Governor by any purchaser or mortgagee bank. In particular, there had been a number of mortgagee banks involved with the Property, eg, Hang Seng Bank, The China and South Sea Bank, DBS Bank, HSBC, ICBC over the years.  As pointed by TCF in their letter of 25 June 2014, any risk of title being challenged on this ground appeared to be ‘fanciful’ which I accept.  I further accept, that due to lapse of time, all things were presumed to have been done rightly and regularly.

74.  Having considered all the above, even if the answer to Question 1 were in the affirmative, my answer to Question 2 would have been NO, namely the absence of the written consent under the Statutory provision did not render the title to the Property not a good title.

75.  As for Question 3, no submissions had really been made thereon.  In any event, in my view, there had not been sufficient evidence of any repudiation of the Agreement on the part of P.

76.  In light of the above, D’s Summons is to be dismissed.

P’s Summons

77.  Mr Yin submitted that if the court came to the conclusion that the DMC&P was not a “partition” within the meaning of the Statutory Provision requiring the written consent of the Governor (under the then version of the Statutory Provision at the time of the DMC&P), then the court should also bring the proceedings herein to any early conclusion, by entering final judgment against D.

78.  Mr Chan had argued that even if P had good title to the Property, it had failed to show/prove good title by failing to answer proper requisitions before the deadline.

79.  As pointed out by Mr Yin, D’s focus was only on the DMC&P, and not the Deed of Exchange.  As I have mentioned earlier, Mr Chan had said that no requisition was raised by D in respect of the Deed of Exchange because it was a “pre-intermediate root title document”. In any event, in the letter dated 30 June 2014 from TCF, although not under any obligation, TCF had dealt with TTK’s further queries, and provided answers.

80.  In the present case, the Outstanding Requisition was clearly the only requisition that D had not accepted P’s answer, as can be seen in TTL’s letter of 28 June 2014.  It would appear that due to the intervening weekend, TCF was only to reply on 30 June 2014, the day of completion.  TCF maintained its position that the DMC&P did not require the Governor’s approval under the Statutory Provision, and offered to postpone the completion for one week to on or before 5 pm on 7 July 2014 for D to re-consider its position, and requesting for a response before 3 pm as to whether the postponement was acceptable to D.

81.  TTL claimed it only received TCF’s letter at 2:02 pm and was thus given only about one hour to reply.

82.  Mr Chan submitted that this was insufficient time, and that the offer to postpone the completion was only a conditional offer, that the condition being D would have to make a decision as to whether to accept the offer within a very short period of time.  He referred the court to Jasmin Enterprises Ltd v Chan Yuk Hon [1998] 4 HKC 224.

83.  As set out earlier, the correspondence on the Outstanding Requisition since TCF’s 1^st reply in April 2014 had by then gone on for 2 months. I am of the view, that had D indeed wanted to reconsider, there was ample time within that hour for TTL to send out a short reply accepting P’s offer to postpone completion for 7 days for time for D to re-consider.

84.  The general principle on striking out application is :

“It is only in plain and obvious case that the court should exercise its summary powers to strike out the indorsement on any writ or any pleading under this rule. There should be no trial upon affidavit. Disputed facts were to be taken in favour of the party sought to be struck out. Nor should the court decide difficult points of law in striking out proceedings. The claims must be obviously unsustainable, the pleadings unarguably bad and it must be impossible, not just improbable, for the claim to succeed before the court will strike it out[35].”

85.  I am of the view that TCF had dealt with all the requisitions , including the Outstanding Requisition satisfactorily, and that P had proved good title and was able to give good title to the Property

86.  D’s Defence and Counterclaim was based only on P’s failure to prove and give good title to the Property.  In light of my above view, D’s Defence and Counterclaim must obviously be unsustainable.  It should thus be struck out on grounds that it did not disclose any reasonable cause of action/defence or that it was frivolous and vexatious or otherwise an abuse of the process of the court.

Conclusion

87.  The effect of my order is as follows:

(i) D’s Summons be dismissed with costs.

(ii) P’s Summons be allowed, and that the Defence and Counterclaim be struck out on grounds that it did not disclose any reasonable cause of action/defence or that it was frivolous and vexatious or otherwise an abuse of the process of the court.

(iii) Final judgment be entered for P against D for relief (1), (2), (3) , (5) in the Statement of Claim.

(iv) D’s counterclaim be dismissed with costs.

88.  Finally, I express my gratitude to all Counsel for their submissions and assistance to the court.