WONG MEI SIN v. NG WAI KIN AND ANOTHER

HCMP 2/2011

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2 OF 2011

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BETWEEN

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J U D G M E N T

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The Application

1.  This is a Vendor and Purchaser Summons, taken out by the Plaintiff as vendor against the Defendants as purchaser in relation to a property known as Unit D, 20th Floor, Block 4 (Hong Shing Court), Sun Hing Garden, Tai Po, New Territories (“Property”).

2.  The Property was initially sold under the Home Ownership Scheme and was subject to the provisions of the Housing Ordinance Cap. 283.

3.  By a formal Agreement for Sale and Purchase between the Plaintiff and Defendants dated 2 September 2010, the Plaintiff agreed to sell and the Defendants agreed to purchase the Property at a purchase price of HK$1,750,000.00.  Completion was scheduled to take place on 22 October 2010.

4.  By a letter dated 16 September 2010, solicitors for the Defendants, Messrs. Au, Thong & Tsang (“ATT”) raised requisitions on the title of the Property.  Solicitors for the Plaintiff, Messrs. Tam & Partners (“TP”) answered the requisitions on 19 October 2010.  ATT was of the view that one of the requisitions, namely requisition no. 2(a), had not been answered satisfactorily. 

5.  The parties agreed to resolve the matter by way of this Summons.

Background Facts

6.  By an assignment dated 24 July 1986, the Property was vested in a Mr Kwok Chee, subject to the terms, covenants and conditions mentioned in the Schedule to the Housing Ordinance.

7.  Section 17B(1) of the Housing Ordinance renders void any mortgage, charge, assignment and other alienation in breach of the said terms, covenants and conditions.

8.  Mr Kwok died intestate on 4 November 1995.  By letters of administration dated 23 July 1996, a Ms Cheung Fung Ping became the administratrix of the estate of Mr Kwok.  Ms Cheung was also the sole beneficiary of Mr Kwok’s estate.

9.  By an assent dated 14 December 1996 (“1996 Assent”), Ms Cheung as administratrix purported to assent the Property to herself as beneficiary.   Prior to the execution of the 1996 Assent, no premium was paid to and no approval / consent had been obtained from the Housing Authority to remove the restrictions against alienation under the Housing Ordinance.

10.  It is common ground that the 1996 Assent, by purporting to vest the legal estate of the Property from Ms Cheung as administratrix to herself as beneficiary, falls within the meaning of “alienation” for the purpose of section 17B(1) of the Housing Ordinance.  It is also common ground that since Ms Cheung had not paid the requisite premium when the 1996 Assent was executed, the transfer of ownership was rendered void under section 17B(1).

11.  By a mortgage dated 30 December 1999 (“1999 Mortgage”), Ms Cheung purported to mortgage and charge the Property in favour of Hang Seng Bank Limited.  Payment of premium to remove restrictions against alienation under the Housing Ordinance was made before the execution of the 1999 Mortgage.

12.  Ms Cheung was declared bankrupt on 30 September 2003.  The bankruptcy order was discharged on 29 September 2007.

13.  By an agreement for sale and purchase dated 2 November 2006 (“2006 ASP”), Hang Seng Bank exercised its power of sale under the 1999 Mortgage and sold by auction the Property to the Plaintiff.  By an assignment dated 4 December 2006 (“2006 Assignment”), Hang Seng Bank assigned the Property to the Plaintiff.

14.  Subsequently, doubts arose as to the validity of the 1996 Assent, which cast doubt on the validity of the 1999 Mortgage and 2006 Assignment.  A confirmatory assent and a confirmatory mortgage and assignment were contemplated to remove the doubts.

15.  Views from the Official Receiver and the Housing Authority were sought on the proposed confirmatory assent and confirmatory mortgage and assignment.  Despite repeated requests to join in as a party to the confirmatory assent / confirmatory mortgage and assignment, the Official Receiver maintained that they would not be involved in or comment on the matter. 

16.  In response to TP’s letter dated 24 June 2009 for its consent to Ms Cheung executing a further Assent to rectify the title problem created by the invalid 1996 Assent, the Housing Authority stated in its letter of 14 September 2009 that it has no objection to the assignment of the interest in the Property from Mr Kwok to Ms Cheung, subject to the terms as stipulated in the letter, including the execution of a Deed of Assent to effect the change of ownership.  The Housing Authority specifically pointed out that the consent given in the letter to the assignment of the interest in the Property by the Deed of Assent to be executed will not be treated as a retrospective consent for any previous assent. 

17.  Pursuant to the consent given above, TP appeared to have set about preparing a draft Assent for the approval of the Housing Authority.  The document was apparently given the title of “Deed of Confirmatory Assent”.  In its letter of 20 October 2009, the Housing Authority gave its approval to the form of Deed of Confirmatory Assent submitted in draft by TP. 

18.  On 18 December 2009, Ms Cheung executed the Deed of Confirmatory Assent (“Confirmatory Assent”).  On 29 January 2010, Ms Cheung executed the confirmatory mortgage and assignment (“Confirmatory Mortgage and Assignment”).

19.  It is not disputed that the Deed of Confirmatory Assent executed by Ms Cheung complied with the terms and conditions set out in the Housing Authority’s letter dated 14 September 2009.  It is the effect of this Deed of Confirmatory Assent which is in issue.

20.  Requisition no. 2(a) raised by ATT relates to the effect of the Confirmatory Assent and Confirmatory Mortgage and Assignment.  It goes as follows:-

“At the time of the execution of the Assent M/N TP511467 (note: the 1996 Assent), the premium for removal of the alienation restriction regarding the Property had not been paid and no consent of the HKHA (note: the Housing Authority) for the Assent had been obtained. Therefore the Assent was null and void and did not operate to transfer any interest in the Property to Cheung as the beneficiary to the estate of the deceased. As such, Cheung obtained no interest to the Property under the Assent and did not have any interest in the Property to be charged to the bank under the Mortgage M/N TPTP621426 (sic) (note: the 1999 Mortgage). As a result, the bank acquired no interest in the Property under the Mortgage. It follows naturally that the bank could not assign any interest in the Property to your client in its purported sale of the Property to your client (note: the Plaintiff).

It is noted that the Official Receiver has not joined in and executed the said Confirmatory Assent and Confirmatory Mortgage and Assignment. It is noted that, before the said two deeds were made, Cheung was adjudged bankrupt. Therefore, by virtue of her bankruptcy, all the interest of Cheung in the Property and/or in the estate of the deceased (of which the Property formed part) was vested in the Official Receiver as the trustee of the property of the bankrupt. The subsequent discharge of the bankruptcy order for Cheung does not affect the interest of the Official Receiver herein. Therefore, it is necessary for the Official Receiver as such trustee to join in and execute the said two and deeds. Please clarify.

Further, it is noted that the bank, Hang Seng Bank Limited, has not joined in and executed the said Confirmatory Mortgage and Assignment.  Given that the bank is a party to the Mortgage M/N TP621426 and a party to the Assignment M/N 06122201520041 (being the two subject documents to which the said Confirmatory Mortgage and Assignment relates) and that Cheung is not a part (sic) to the said Assignment M/N 06122201520041, it is necessary for the bank to join in and execute the said Confirmatory Mortgage and Assignment.  Please clarify.”

21.  TP was of the view that even if the 1996 Assent was null and void (which was denied), it and the transfer of the Property between the parties therein has been subsequently rectified and rendered valid and effective.  ATT disagreed.

Issues

22.  For the purpose of this Summons, the Plaintiff’s case can be outlined as follows:-

(1)   The 1996 Assent, though invalid, was not necessary to vest the legal title of the Property in Ms Cheung.  While it is desirable for a personal representative who is entitled beneficially to make an assent in his own favour, a written assent is not strictly necessary despite the provisions of section 66(3) of the Probate and Administration Ordinance Cap. 10 as there is no passing of the legal estate but merely a change in the character in which it was held.  An implied assent is sufficient.   In this regard, the Plaintiff relies on the commentary in paragraph 78-15 of Williams, Mortimer and Sunnucks on Executors, Administrators and Probate (19^th Ed).

(2)   If the legal title was vested in Ms Cheung even without an assent in writing, it would follow that the 1999 Mortgage was valid and Hang Seng Bank was entitled to convey the Property to the Plaintiff by the 2006 ASP and 2006 Assignment.

(3)   In the event that legal title failed to pass from Mr Kwok to Ms Cheung by the implied assent, the subsequent Confirmatory Assent served to vest the legal estate in Ms Cheung.  It was argued that the Confirmatory Assent was a fresh assent and was not intended to retrospectively give effect to the 1996 Assent.

(4)   By virtue of the doctrine of estoppel by deed, upon execution of the Confirmatory Assent, Ms Cheung would be estopped from denying that she had the legal title to the Property at the time to create a legal charge in favour of Hang Seng Bank (First National Bank plc. V Thompson [1996] Ch 231).  Likewise, by purporting to grant the legal estate of the Property to the Plaintiff, Hang Seng Bank was estopped from denying that it had validly granted legal estate of the Property to the Plaintiff once the Confirmatory Assent was executed.  This was so despite that Hang Seng Bank was not a party to the Confirmatory Mortgage and Assignment.

23.  Ms Ng, counsel for the Defendants, argued that a written assent is necessary to vest legal title of the Property in Ms Cheung. In this regard, she relied on Kleinwort Benson (Hong Kong) Trustees Ltd v Wong Foon Hang & Ors [1993] 1 HKC 649. 

24.  She argued that the Confirmatory Assent could not operate retrospectively to validate the 1996 Assent.  Since it could not be construed as a fresh assent, it was invalid and failed to vest the legal title of the Property in Ms Cheung.  The legal title of the Property therefore remained in the estate of Mr Kwok, unadministered. 

25.  Ms Ng agreed, however, that if the Confirmatory Assent was a fresh assent, the transfers of the legal title of the Property from Mr Kwok to Ms Cheung, and from Hang Seng Bank to the Plaintiff would be valid, subject to the Official Receiver being made a party to the Confirmatory Assent, for the reasons below.

26.  Given that the 1996 Assent was void, the Property had remained unadministered throughout the relevant years, during which ownership of the Property was vested in Ms Cheung in her capacity as administratrix.  While the legal title of the Property would not have passed to the Official Receiver despite her bankruptcy, she had a chose in action, being the right to require Mr Kwok’s estate to be duly administered.  It follows that during Ms Cheung’s bankruptcy, the said chose in action was vested in the Official Receiver as the trustee of Ms Cheung’s property, which interest did not automatically revert to Ms Cheung upon the discharge of the bankruptcy order against her, but had remained with the Official Receiver.

27.  There are accordingly the following three issues to be decided:-

(1)   Whether the 1996 Assent was necessary to vest the legal title of the Property in Ms Cheung;

(2)   Whether the Confirmatory Assent is a fresh assent; and

(3)   Whether the Vendor had failed to show a good title in the Property by reason of the Official Receiver refusing to be made a party to the Confirmatory Assent.

Whether Assent in Writing is Necessary to Vest Legal Title in the Property

28.  Mr Leung, counsel for the Plaintiff, finds support in the proposition that, despite the provisions of section 66(3) of the Probate and Administration Ordinance, a written assent to effect the passing of legal estate was not strictly necessary in the aforesaid passage in Williams, Mortimer and Sunnucks on Executors, Administrators and Probate, citing Re Hodge, Hodge v Griffiths [1940] 1 Ch 260 and Re Cockburn’s Will Trusts [1957] Ch 438.  The learned authors were also conscious of the fact that this view had been held incorrect in Re King’s Will Trust, Assheton v Boyne [1964] Ch 542, a decision where the relevant authorities were not all cited.  The learned authors also have this to say about the future approach on this issue:-

“In future a representative will never safely be able to terminate his character of representative in his own favour otherwise than by a written assent and if the chain of representation has been broken without assent being made, it will be necessary, although the administration is at an end, to obtain a grant of administration of unadministered assets (de bonis non) to put the title in order.”

29.  Section 66(3) of the Probate and Administration Ordinance provides that:-

“An assent to the vesting of a legal estate shall be in writing, signed by the personal representative, and shall name the person in whose favour it is given, and shall operate to vest in that person the legal estate to which it relates; and an assent not in writing or not in favour of a named person shall not be effectual to pass the legal estate.”

30.  The above provision was considered in Kleinwort Benson (Hong Kong) Trustees v Wong Foon Hang & Ors.  In that case, there was the issue of whether the plaintiff had completed the administration of the testator’s estate and become a trustee holding the estate for the beneficiaries under the terms of a will trust.  Rhind J held that as a matter of law, the plaintiff could not have become a trustee of a piece of land of the testator’s estate under a will trust because it had never made a written assent to itself in respect of that land.

31.  In coming to the conclusion that a written assent was required in the situation, Rhind J pointed out that the proposition that a written assent is not necessary to bring about the situation of someone who has held land as a personal representative being able to show good legal title to it as trustee was rejected in Re King’s Will Trusts.  An opportunity arose for challenging Re King’s Will Trusts in the English Court of Appeal in Re Edwards Will Trusts[1964] Ch 542. It was not taken up and the Court of Appeal proceeded on the assumption that Re King’s Will Trusts had been correctly decided.  The reasoning of Pennycuick J in Re King’s Will Trusts that there had to be a divesting of title from the personal representative in that capacity and a revesting in the same person but in the different capacity of trustee cannot be faulted.  He therefore came to the conclusion that on both a literal and purposive interpretation of section 66(3) of the Probate and Administration Ordinance, a written assent is required.

32.  In light of the above, Kleinwort Benson (Hong Kong) Trustees v Wong Foon Hang & Ors is clear authority that a written assent is required to effect the passing of legal estate even if the personal representative and the beneficiary are the same person.  I am compelled to follow this decision.  Accordingly, for issue (1), I hold that a written assent was required to vest the legal title of the Property in Ms Cheung.

33.  It is common ground that the 1996 Assent was void, and it failed to vest the legal title in Ms Cheung.  It would follow that the 1999 Mortgage was invalid, and that Hang Seng Bank was not entitled to convey the Property to the Plaintiff by the 2006 ASP and 2006 Assignment, subject to the effect of the Confirmatory Assent and Confirmatory Mortgage.

34.  It is common ground that by virtue of the doctrine of estoppel by deed, if the Confirmatory Assent was a fresh assent, the transfers of the Property from Mr Kwok to Ms Cheung, and subsequently from Hang Seng Bank to the Plaintiff would be valid, subject to the Official Receiver being made a party thereto.  There remain to be decided issues (2) and (3).

Whether the Confirmatory Assent is a Fresh Assent

35.  It is the Plaintiff’s case that the Confirmatory Assent was a fresh assent and was not intended to retrospectively give effect to the 1996 Assent.  

36.  Ms Ng, for the Defendants, argued that the Confirmatory Assent could not be so construed.  She relied on point 9 of the recital of the Confirmatory Assent, which stated as follows:-

“In order to remove the doubt on the validity of the Assent (note: the 1996 Assent) and to rectify the irregularity as mentioned hereinabove, the parties hereto have agreed to execute this Deed in the manner hereinafter appearing.”

37.  Ms Ng also placed reliance on point 11 of the recital of the Confirmatory Mortgage and Assignment, which stated that:-

“In order to remove the doubt as to the validity of the Assent (note: the 1996 Assent), the Mortgagor applied to the Housing Authority to rectify the Assent and by a letter dated 14^th September 2009, the Housing Authority confirmed that it had no objection to a Confirmatory Assent being executed. The Confirmatory Assent was executed on and dated 18^th December 2009 and registered in the Land Registry by Memorial No. 10011102790053.”

38.  It was submitted on behalf of the Defendants that against the above recitals, the Confirmatory Assent should be interpreted as an instrument that was intended to rectify the 1996 Assent.  I find myself unable to agree to such an interpretation. 

39.  In my view the clear words in the operative part of the Confirmatory Assent was not displaced by any reasonable interpretation of the part of the recital set out above.

40.  It is clear from the operative part of the Confirmatory Assent that it is a fresh assent.  Clause (1), an operative clause, provides that:-

“In consideration of the premises, the Administratrix as personal representative and in the course of administration of the estate of the Deceased HEREBY ASSENTS to the vesting in and CONFIRMS and ASSIGNS unto the Beneficiary the Property TO HOLD the same unto the Beneficiary…”

41.  In other words, the parties intended the Confirmatory Assent to vest the legal title of the Property in Ms Cheung as of the date of the instrument.  It was therefore intended to be a fresh assent, although the intention of the parties in the previous assent, namely to assign the Property to Ms Cheung, was confirmed.

42.  Further, the background giving rise to the Confirmatory Assent must be taken into account to ascertain the intention of the parties.

43.  Having noted that no premium was paid by Ms Cheung by the time the 1996 Assent was executed, TP on behalf of the Plaintiff wrote a letter dated 30 January 2007 to the Housing Authority to seek its views on the validity of the 1996 Assent.  TP wrote a further letter dated 18 April 2007 to the Housing Authority to seek its consent in respect of the 1996 Assent.

44.  The Housing Authority responded to TP by letter dated 18 May 2007, in which it stated that as a general policy, it would not grant retrospective consent in respect of an executed assent.  Nevertheless, “for the sake of rectification”, fresh application may be submitted for its consideration for granting a fresh consent for the execution of a fresh assent.  The “rectification” referred to in the context of the letter had to mean rectification of the defect in title arising from an invalid assent.

45.  Having reviewed the correspondence between TP and the Housing Authority between 24 June 2009 to 20 October 2009, as recited above, and the Confirmatory Assent executed thereafter, I am satisfied that the instrument was in fact a fresh Assent as was required to pass legal title, although not retrospectively. This was despite the title of the instrument being a “Deed of Confirmatory Assent”. The purpose of the instrument was to rectify the defect in titlearising from the 1996 Assent, not the 1996 Assent itself.

46.  In the circumstances, I hold that the Confirmatory Assent was a fresh assent and was not intended to rectify the 1996 Assent.

Whether the Plaintiff has a Good Title despite the Official Receiver Refusing to be a Party to the Confirmatory Assent

47.  Ms Ng argued that since the right of Ms Cheung to require Mr Kwok’s estate to be duly administered, being a chose in action, was vested in the Official Receiver, there was some residual right remaining with the Official Receiver despite Ms Cheung having been discharged from the bankruptcy order. It was submitted that there might be potential third party claims against the Official Receiver.  Unless the Official Receiver were made a party to the Confirmatory Assent, the title is still at risk.

48.  In this regard, I agree with the submission of Mr Leung for the Plaintiff that if the Confirmatory Assent is valid, the administration of Mr Kwok’s estate is complete upon the vesting of the legal and beneficiary title of the Property in Hang Seng Bank, and there would be nothing left in the estate for the Official Receiver to administer.  The chose in action therefore vanishes. 

49.  Further, there is no dispute that Ms Cheung is the sole administratrix and beneficiary of Mr Kwok’s estate.  Any potential claim from any third party is far-fetched to say the least.

50.  I therefore hold that it is not necessary for the Official Receiver to be a party to the Confirmatory Assent and the Confirmatory Mortgage and Assignment.

Conclusion

51.  I rule issue (1) against the Plaintiff, and issues (2) and (3) in favour of the Plaintiff. Given the parties’ agreement as to the effect of a valid fresh assent, I hold that by virtue of the doctrine of estoppel by deed, upon execution of the Confirmatory Assent, Ms Cheung would be estopped from denying that she had the legal title to the Property at the time she executed the 1999 Mortgage.  Likewise, by purporting to grant the legal estate of the Property to the Plaintiff, Hang Seng Bank was estopped from denying that it had validly granted legal estate of the Property to the Plaintiff once the Confirmatory Assent was executed. 

52.  The parties have indicated to me that they have agreed that there be no order as to costs whichever way my decision goes.

53.  I accordingly grant the following orders:-

(1)   A declaration that the requisitions of the Defendants in respect of the title to the Property comprised in the Agreement for Sale and Purchase dated 2 September 2010 raised in the letter by the Defendants’ Solicitors dated 16 September 2010 have been satisfactorily answered;

(2)   A declaration that a good title to the Property has been shown in accordance with the Agreement for Sale and Purchase; and

(3)   No order as to cost.

54.  It remains for me to thank both counsel for their helpful research and submissions.