XCHRX CHAN SHING FAT HERON AND ANOTHER v. LAU YAT HUNG AND ANOTHER

1998, No. CA 3596 & 3655

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

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JUDGMENT

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1. By an agreement of 22 November 1997, Lau Yat Hung and Wong Tin Yu (the purchasers) agreed, in common parlance, to buy a flat and a carpark in Winner Court in Hospital Road (the property) and Chan Shing Fat Heron and Lau Sin Yee (the sellers) agreed to sell. A dispute has arisen between the parties, and I now have before me an application by the purchasers by which they seek judgment against the sellers under Order 86. The basis for this application is that "the requisition on title . . . relating to the production of a certified copy Consent given by the Land Officer dated 4 March 1987 to enter into Agreement for Sale and Purchase had not been sufficiently and satisfactorily answered . . ."

2. During the course of the conveyancing procedure, as is usual, the purchasers' solicitors raised a number of requisitions, but I am concerned only with the one mentioned above. The process commenced with a letter by the purchasers' solicitors dated 9 December 1997. In that letter, the solicitors described the Consent as one of a batch of "missing title deeds and documents", and asked for the original or a certified true copy of the Consent. An exchange of letters then followed -

1. The sellers' solicitors said that Consent was not part of the title deeds.

2. The purchasers' solicitors said that the Consent had been duly registered, form part of the title deeds and affect the title.

3. The sellers' solicitors said not all documents registered would affect title, consent was not required by the government lease and production of the Consent was not necessary.

4. The purchasers' solicitors said the Consent had been duly registered and prima facie affected the title.

5. The sellers' solicitors repeated that not all documents registered are title deeds.

6. The purchasers' solicitors repeated the Consent was duly registered and prima facie affected title.

7. The sellers' solicitors repeated that a registered document does not necessarily affect title and is not necessarily a title document.

8. The purchaser's solicitors said the seller must produce the Consent to prove title.

9. The sellers' solicitors then changed their tune, saying that the Consent had not been registered, that the note on the Land Register of the Consent having been given was a positive assurance that consent had been so given and that the Consent was not part of the title deeds. They send to the purchaser's solicitors a copy of a letter from the Lands Department which said that the Consent was issued on "a personal basis only" and was not a public document. A uncertified copy of the Consent was supplied.

10. The purchasers' solicitors, however, insisted on a certified copy, saying that, in the absence of this, there was "a prima facie doubt that the execution of the first agreement . . . is not duly authorized and thereby render the title thereof defective."

11. The sellers' solicitors then denied there was any such prima facie doubt, pointing to the fact that the Consent was noted in the Land Register and the Lands Officer had supplied a copy.

3. That was pretty well the end of the exchange. The purchasers said that the sellers had repudiated, accepted that repudiation, and asked for the return of the deposit.

4. Before me, Mr Li accepted that the Consent was not registered, but insisted that the Consent was part of the "chain of title", and that the sellers were obliged to produce it, or a certified copy.

5. Initially, the basis on which the purchasers made the requisition, and the basis on which Mr Li argued the matter before me, was that the Consent was part of the chain of title. This is clearly not so. It is indisputable, and expressly conceded by Mr Li, that the sellers had full legal and equitable title to the property, even without the Consent. The Consent is not a necessary part of showing that the purchasers had that title. With or without the Consent, the sellers were able to show, and did show, that they had full title to the property. The relevance of the Consent is that, there being an exclusion order under the Landlord and Tenant (Consolidation) Ordinance (Cap. 7) registered against the property, any assignment or agreement to assign without that consent would be a breach of the lease, and the government might exercise a right to re-enter. So, the sellers' title was not in any doubt and was not defective in any way; if, however, there had been a breach of the exclusion order, that title might have been defeasible.

6. This is not the type of case, such as that in Chen Paul & Anor v Lord Energy Ltd. [1999] 1 HKC 1 and Liu Tak Kin & Anor v Chan Yiu Kai & Anor [1998] 4 HKC 362, where the Consent was a certificate issued by government without which legal title could not exist, and, therefore, the document was an essential part of the chain of title.

7. In support of his contention that the Consent was a title deed, Mr Li cited Wong Bik Ching v Yu Hon Chung & Anor [1997] 4 HKC 38, in which Recorder Edward Chan, SC, said that, where an instrument is registered against the property, prima facie it ought to be treated as part of the title. Here, the Consent was not registered against the property. He also cited the dicta by Barnett, J in Tang Wing Lam David and Sum Ching Man v Chung Chi Keung Frederick (unreported; MP 2766/1998) that "Documents such as occupation permits or consents of public officials are crucial to title in Hong Kong". If this statement is to be taken to mean that this is always the case, I cannot agree. Whether or not such a document is "crucial to title" depends, to state the obvious, on whether it is crucial to title. It may be so, but it may not be so.

8. Mr Li argued that the Consent in this case was analogous to the consent that featured in Chan Chi Hung v Tse Ying Pui [1996] 4 HKC 763, but, in that case, the absence of the consent rendered the conveyance void. That is not so in the case before me. Mr Li said several times that, without the Consent, no sale was possible. But it was. In Chan Chi Hung v Tse Ying Pui, it was not possible, but in the case before me, without the Consent, a sale was perfectly possible, although it might render the title defeasible.

9. Mr Li also produced and cited Law Society Circular 98-178(PA) in support of the proposition that a "consent letter is one of the title deeds and documents usually asked for by the conveyancing lawyer". In fact, the government document annexed to that circular says quite clearly that, where the "Remarks" column of the Land Register shows that a Consent has been issued, as here, the government "will accept it as conclusive evidence that the conditions have been complied with . . . and the interest concerned may then be treated for all purposes as a legal estate." So far from saying that the practice is to ask for such Consents, these papers say, in essence, in clear terms that it is not necessary to do so.

10. The purchasers were not entitled, as of right, to demand the original, or a certified copy, of the Consent because it was not a document falling within section 13 of the Conveyancing and Property Ordinance (Cap. 219) and it was not a document of title within clause 8 of the agreement. What they were entitled to do, if there was any reasonable basis for doing so, was to raise a requisition, pointing to the exclusion order, citing its requirement for the Consent and requiring to be satisfied that the Consent had been granted. They could have done this if they had some reasonable basis for thinking that such a Consent had not been granted. In fact, towards the end of the exchanges between solicitors, the purchasers' solicitors did say that there was "a prima facie doubt that the execution of the first agreement . . . is not duly authorized and thereby render the title thereof defective." There was, of course, no such "prima facie doubt", and, in any event, absence of the Consent would not make the title defective; it raised only the possibly that the title was defeasible.

11. There could have been no reasonable basis for believing that it was possible that the Consent had not been granted. The Land Register told the purchasers that it had been given, and the attitude of the government as stated in the document that Mr Li himself produced was that it would accept such a note on the Land Register "as conclusive evidence that the conditions have been complied with . . . and the interest concerned may then be treated for all purposes as a legal estate." The sellers also produced a copy of the Consent from the Lands Office itself; a source that one would have thought was impeccable - certainly sufficient to satisfy any reasonable person, who was not entitled to demand the original or a certified copy, that the Consent had, as a matter of fact, been given.

12. Mr Li said before me that, if the sellers had produced the Consent, or a certified copy of it, that would have been the end of the matter. But, as I said to Mr Li, the production of the Consent would not have taken the matter any further. The purchasers already knew that the Consent had been given.

13. Even if one were to treat the requisition in this case as one requiring the sellers to satisfy the purchasers that there was no risk that the sellers' title was defeasible, as it should have been, and that there was some reasonable suspicion that this might be the case, the situation is that the sellers showed just that, no only beyond a reasonable doubt, but beyond any doubt whatsoever. Mr Li did not seek to argue otherwise; when I put it to him that there was no problem at all in the sellers giving to the purchasers an indefeasible title, he did not challenge this. That is why, I suspect, that he adhered so persistently, in spite of my expressed doubts, to the "chain of title" argument; he knew that, once one saw the situation as one concerned with whether or not the sellers had shown an indefeasible title, there was no reason in the purchasers requisition.

14. I believe the courts should not pander to unreasonable and purposeless requisitions in conveyancing matters. There are far too many of these. Conveyancers should apply reason and common-sense to the need for requisitions. They should not raise requisitions that head nowhere, or seek satisfaction on some point about which no reasonable person could have any suspicion that anything was amiss. Here, the purchasers could have entertained no doubt at all that the Consent had been given. There was absolutely no need to explore the matter.

15. Accordingly, I hold that the requisition concerned, as raised, was not a reasonable or proper one, and, if one construes it as a requirement to show that the sellers had indefeasible title, this was satisfactorily answered. I dismiss the application. The sellers are entitled to unconditional leave to defend.

16. The matter of costs has not been argued. The usual order would be that the costs of the application be costs in the cause, but I am not sure that this is the appropriate order here. The purchasers have sought a definitive ruling on the point raised by them. I have found against them, not just that the sellers have an arguable case. In these circumstances, it seems to me that the appropriate order is that the purchasers pay the sellers costs of the application. I make an order nisi accordingly.