LIBRA SUMMER LTD v. DERECHO LTD

HCMP 275/2020

[2021] HKCFI 702

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 275 OF 2020

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BETWEEN

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JUDGMENT

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INTRODUCTION

1.  The plaintiff/purchaser (“P”) entered into a provisional agreement (“Provisional Agreement”) with the defendant/vendor (“D”) for the purchase of a shop on the ground floor and a store on the mezzanine floor in a building on Hillier Street (collectively “Shop Space”).  Completion did not take place as it was alleged by P that D had failed to show or give good title to the Shop Space.  D refused to return the initial deposit (“Initial Deposit”).  P then issued the originating summons herein, namely a vendor and purchaser summons under section 12 of the Conveyancing and Property Ordinance, Cap 219 (“CPO”).

BACKGROUND

2.  The Provisional Agreement was entered into on 21 November 2019.  The purchase price for the Shop Space was HKD 20,000,000 and the Initial Deposit was HKD 600,000, which was paid upon the signing of the Provisional Agreement.  The formal agreement for sale and purchase (“SPA”) was to be signed before 12 December 2019 with completion to take place on or before 5 March 2020 (“Completion”). 

3.  D’s solicitors sent the draft SPA to P’s solicitors on 3 December 2019.  P sent D’s solicitors the further deposit of HKD 3,400,000 on 12 December 2019 for them to hold as stakeholders. There were negotiations on the terms of the draft SPA which were later agreed, and D’s solicitors sent over an execution copy of the SPA on 2 January 2020 together with the title deeds set out in a schedule (totalling 18 items)(“Title Documents”)[1]. The SPA was eventually not signed by P.  The further deposit of HKD 3,400,000 was later returned to P by D’s solicitors on 6 March 2020, but not the Initial Deposit.

4.  As the SPA was not executed, the Provisional Agreement governed the parties’ relationship.  The English versions of the relevant standard clauses in the Provisional Agreement were as follows, the Shop Space being referred to as “the said premises”:

Clause 3 – “The said premises is to be sold to the Purchaser or its nominee(s), sub-purchaser(s) free from encumbrances.”

Clause 4 – “Upon completion, the Purchaser agrees to purchase the said premises subject to the existing tenancy”.

Clause 7 – “Should the Purchaser fail to complete the purchase in the manner herein contained, the initial deposit shall be forfeited by the Vendor and the Vendor shall then be entitled at his absolute discretion to sell the said premises to anyone he thinks fit and the Vendor shall not sue the Purchaser for any liabilities and/or damages or to enforce specific performance.”

Clause 8 – “Should the Vendor after receiving the initial deposit paid hereunder fail to complete the sale in the manner herein contained, the Vendor shall immediately compensate the Purchaser with a refund of the initial deposit together with a sum equivalent to the amount of the initial deposit as liquidated damages and the reimbursement/payment (as the case may be ) of stamp duty of the said premises and the Purchaser shall not take any further action to claim for damages or to enforce specific performance.”

5.  Clause 16 provided that the Provisional Agreement should be interpreted in its Chinese version in case of ambiguities.

6.  There were also additional Clauses 17 – 21 in Chinese, of which Clause 18 provided as follows:

“買賣雙方聲明此為必買必賣合約，但必須基於業權妥當”

7.  There was no dispute as to the effect of the above clauses.  The Title Documents include a certified copy of a Crown lease of Marine Lot 139 (“ML 139”), Assignments in respect of the Shop Space extending to no less than 15 years before the Provisional Agreement and other documents which will be set out later in this judgment.  In particular, item 18 of the Title Documents consists of (i) a certified copy of a letter dated 16 December 2019 from the Legal advisory and Conveyancing Office (“LACO”) of the Hong Kong Lands Department LACO^[2] (“1^st LACO Letter”), and (ii) a certified copy of a letter dated 24 December 2019 from LACO enclosing therewith a plain copy of a letter dated 26 February 1941 issued by the then Land Officer (“2^nd LACO Letter”).  The letter dated 26 February 1941 stated, amongst other things, that the Government was giving final notice for the offer of a new Crown lease with terms and conditions as set out in a printed letter of 23 December 1937 (“Offer Letter”) failing which the Government would effect re-entry.  The letter dated 26 February 1941 of final notice of the offer bore a caption of “Sec D of ML 139 (now known as IL 5735)” (emphasis added), and handwritten words indicating acceptance but with the name/s and address/es of the signor/s redacted^[3] (the letter dated 26 February 1941 giving final notice of the offer with the hand written acceptance thereon will be referred hereinafter as “Acceptance Letter”) .

8.  On 10 January 2020, P raised its first requisitions on the title of the Shop Space (“Requisitions”). Requisitions 3, 4 and 7 are germane[4], and they will be set out later.  It is P’s case that these 3 Requisitions had not been answered satisfactorily and as said earlier, Completion did not take place.

9.  In P’s originating summons issued on 13 March 2020, P sought, amongst other things, (i) a declaration that the Requisitions had not been satisfactorily answered by D; (ii) a declaration that D had failed to show or give good title to the Shop Space; a declaration that the Provisional Agreement was repudiated by D and accepted by P; (iv) return of the Initial Deposit by D; (v) payment of HKD 600,000 by D as liquidated damages; (vi) a declaration that D is liable to reimburse P for the stamp duty in the sum of HKD 1,500,000; (vii) interests; (viii) a declaration that P is entitled to a lien on the Shop Space for the sums claimed, interests and/or costs. Subsequently, P had received the refund of the stamp duty in the sum of HKD 1,500,000 from the Inland Revenue Department, and by the time of the hearing, P was no long pursuing this part of his claim.

10.  Counsel Mr Lau Ka Kin appeared at the hearing for P and Counsel Ms Carol Wong appeared for D.

INFORMATION ON THE REGISTRATION RECORD OF THE LAND REGISTRY IN RELATION TO THE SHOP SPACE

11.  The address of the Shop Space is “Ground Floor including Mezzanine Floor, No. 14 Hillier Street, Hong Kong”.

12.  The registration record of the Shop Space at the Land Registry produced by D (“Registration Record”) was of a search conducted on 24 March 2020 with the history from the date of the Memorial UB105957 of the 1927 Assignment referred to below[5].  The Registration Record indicates as follow[6]:

(1) The lot number of the Shop Space is “The Remaining Portion of Section D of ML 139” (“ML 139 Sec D(RP)”), held under Government Lease, Lease Term: 981 years, Commencement of Lease Term: 26/12/1860, Rent Per Annum:- (left blank).

(2) The Share of the Lot is 2/7 with “Remarks: Vide Deed Poll With Plan (Mem No 599358)” (“Deed Poll”).

(3) On 8 July 1927, one Wu Sze Sum (“Wu”) became registered owner of ML 139 Sec D(RP) at a consideration of HKD 23,000 (“1927 Assignment”). 

(4) On 24 December 1937, a Memorial UB156301 dated 22 December 1937 was registered by the Crown/Government with the Remarks “Deed of Re-Entry” (“Re-entry Memorial”)[7]. On the Re-entry Memorial it was stated “BE IT REMEMBERED that on the twenty second day of December 1937, the Crown re-enter upon the lands tenements and premises above described for breach of Covenant in the Crown Lease thereof” and on the back of the Re-entry Memorial, the affected portions of ML 139 were set out, namely The Remaining Portion, Sections A-D, The R.P. of Section E, Subsection 1 of Sec E and Section F[8].

(5) On 25 October 1966, a Memorial UB 554589 was registered of a letter relating to building plans approval permit dated 8 October 1966 (“Building Approval”).

(6) On 13 July 1967, 3 documents were executed as seen in the following Memorials:

(a) Memorial UB 591024 registered on 1 August 1967 of a Deed of Mutual Grant of Right of Way for use of staircase and landings erected on the owners’ respective building & Right to Use Drain & Sewer between Leung Tuen Hing and Yee Chou Quan[9] (as owners of No 16 Hillier Street)(“Leung & Quan”), the mortgagee bank and Wu (as owner of No 14 Hillier Street)(“Deed of Mutual Grant”)

(b) Memorial UB 599361 registered on 17 October 1967 of an assignment by Wu of her estate right title and interest of the Shop Space at a consideration of HKD 40,300 to Leung & Quan, as assignees holding as tenants in common (“1967 Assignment”)

(c) Memorial UB 599362 registered on 17 October 1967 of the Deed of Mutual Covenants (“DMC”) executed by Wu (and other parties) and Leung & Chuan

13.  Pausing here, what can be summarised from the Registration Record and the above documents is as follows:

(1) Only one Government lease was registered in the Land Registry for a term of 981 years commencing from 26 December 1860 and there was no amount stated for the annual rent;

(2) On 22 December 1937, the Crown appeared to have re-entered ML 139 according to the Re-entry Memorial; 

(3) Shop Space is on the ground floor and mezzanine floor in a new building erected on No 14 Hillier Street sometime after 8 October 1966, ie the date of the Building Approval;

(4) As at the date of search of the Registration Record, the lot number of the Shop Space remained ML 139 Sec D(RP) and the Shop Space was allocated 2/7 share thereof.

14.  As seen on the Registration Record, after the 1967 Assignment, there have been various assignment/deed of gifts and also mortgages and tenancy agreements registered against the Shop Space.  D acquired the Shop Space on 20 June 2008 at a consideration of HKD 11,880,000 under the 2008 Assignment referred to below. 

INFORMATION FROM THE TITLE DOCUMENTS

15.  Item 1 of the Title Documents provided by D is a certified copy of a Crown lease[10]. The copy of the Crown lease in the hearing bundles is a poor copy, but the relevant details (of which there were no dispute) appeared in the recitals of the 1967 Assignment.  The Crown lease was dated 18 June 1862 and was made between the Crown and one Loo Shing in respect of ML 139, for a term of 981 years commencing from 26 December 1860[11] (“1862 Crown Lease”).

16.  Item 2 of the Title Documents is a certified copy of the Occupation Permit and copies of two letters in 2007 from the Building Department in response to a solicitors firm’s application for the same[12].  The Occupation Permit was dated 22 June 1967 and issued to “Mr Y. C. Quan”, in respect of “the new building” at 14-16 Hillier Street on Lot IL: 5735 & 5734 for the following purposes, namely Ground Floor: 2 shops for non-domestic use; Mezzanine Floor: 2 stores for non-domestic use; 1^st to 5^th Floors (inclusive): 2 offices per floor for non-domestic use[13].  There was no reference to the lot number ML 139.  Mr Y. C. Quan appeared to be the same person as Yee Chou (or Chou) Quan, one of the owners of No 16 Hillier Street stated in the Deed of Mutual Grant and one of the assignees in the 1967 Assignment and a party in the DMC as set out below.

17.  Further, the Occupation Permit issued by the Building Authority referred to “the new building at 14-16 Hillier Street on Lot no ILs 5735&5734” and appeared to refer to one building erected on 14-16 Hillier Street, and from the plans attached to the Deed of Mutual Grant, there is a common staircase between two adjoining blocks, one on No 14 Hillier Street (ML 139 Sec D(RP)) and one on No 16 Hillier Street (IL5734 RP).  Whether one or two blocks/buildings, they appeared to be part of the same development erected at the same time and as seen in the Deed of Mutual Grant there was a right of way in respect of the common staircases.

18.  Item 7 is a certified copy of the Deed Poll mentioned earlier. Prior to the new building being completed in 1967, Wu was the registered owner of the entire Section D of ML 139.  The Deed Poll was executed on 13 June 1967 by an attorney on behalf of Wu^[14].  The effect of the Deed Poll was that on 13 June 1967, Section D of ML 139 was sub-divided by Wu into 2 portions, (i) Subsection 1 which comprised of a scavenging lane, and (ii) the Remaining Portion, namely ML 139 Sec D(RP), where the building of which the Shop Space is part of, now stands.

19.  Items 3, 4 and 5 of the Title Documents are certified copies of the Deed of Mutual Grant, the 1967 Assignment and the DMC and as said earlier, all were executed on 13 July 1967 on the same day as the Deed Poll, although they were registered in the Land Registry on different dates. 

20.  As seen in the Deed of Mutual Grant, the parties thereof were Leung & Quan as first owners of No 16 Hillier Street (Inland Lot No 5754) (Inland Lot No 5754 will be referred to simply as “IL 5754”), Kincheng Banking Corporation as mortgagee, and Wu as the second owner holding No 14 Hillier Street (ML 139 Sec D (RP) to be known as Inland Lot No 5735)(Inland Lot No 5735 will be referred to simply as “IL 5735”). 

21.  Then Wu and two other parties on one part and Leung & Quan as the party on the other part entered into the DMC.  It was stated in the recital of the DMC that all of them were in possession of ML 139 Sec D(RP) and were entitled to a Crown Lease thereof subject to and with the benefit of certain terms and conditions contained in the Offer Letter.  It was further stated in clause 18 thereof that they “shall jointly take up the Crown Lease of [ML 139 Sec D(RP)] when called upon by the Land Officer to do so ….. It is hereby agreed and declared that the covenants or conditions herein contained shall be applicable to [ML 139 Sec D(RP)] notwithstanding that the [ML 139 Sec D(RP)] may after the taking up of the Crown Lease thereof be known and registered by another number or description[15].” (emphasis added)

22.  As further seen in the recitals of the 1967 Assignment, there was a building agreement entered into on 1 December 1964 between Wu and Leung & Chuan for the construction of a new building comprising of 6 storeys.  The recitals in the 1967 Assignment contained other references to the “terms and conditions” in the Offer Letter including that “rent reserved by and the terms and conditions contained in the [Offer Letter] have been paid performed and observed up to the date [of the 1967 Assignment]”.^[16]

23.  Further, one of the covenants in the 1967 Assignment by the “Assignees” was that “ …. the Assignees will at any time hereafter take up the Crown Lease of [ML 139 Sec D(RP)] jointly with the other co-owners thereof when called upon by the Land Officer so to do and will indemnify the Assignor from and against all costs and expenses which may be incurred by the Assignor on account of the default of the Assignees in taking up such Crown Lease as aforesaid”^[17] (“Covenant”).

24.  It thus appears from the 1967 Assignment and the DMC, that as at 13 July 1967, the “Assignees” had not been called upon by the Land Officer to take up any new Government lease in respect of ML 139 Sec D(RP).  This was in fact further reflected in the Deed Poll of the same date^[18] where it was stated in the recital that Section D of ML 139 together with the messuage and buildings thereon known as No 14 Hillier Street was held by [Wu] from the Crown by virtue of certain terms and conditions contained in the [Offer Letter] offering the grant of a new Crown lease of Section D of ML 139 (to be known as IL 5735) which terms and conditions had been duly accepted by [Wu] by [the Acceptance Letter].  Further, the lot number in the Deed of Mutual Grant^[19] and the DMC^[20] was also referred to as [ML 139 Sec D(RP)](to be known as IL 5735).  In fact, clause 18 of the DMC seemed to have provided for the possibility of a new lot number for ML 139 Sec D(RP) and it seems clear that at that time, there was no new lot number nor new Crown lease.

25.  Item 6 of the Title Documents are certified copies of a Deed of Gift memorial no UB 2532846 and re-registered by memorial no UB 2649366 (“Deed of Gift”) together with a No Objection Letter from the Registrar General’s Department of the Land Office to the proposed Deed of Gift dated 8 February 1984 in respect of the Shop Space[21] (“No Objection Letter”). The caption of the No Objection Letter was ML 139 Sec D (RP).

26.  Although the Land Office could have simply followed the same caption used in the solicitors’ letter[22], the lot number of the Shop Space in the recital of the stamped Deed of Gift was described to be “[ML 139 Sec D(RP)](which said piece or parcel of ground is to be known as IL 5735)” or “[ML 139 Sec D(RP)](to be known as IL 5735)”.[23]

27.  The Deed of Gift contained the same covenant as the Covenant in the 1967 Assignment[24], namely that the “Donee” will at any time thereafter when called upon by the Land Officer so to do take up the Crown Lease of the said [ML 139 Sec D(RP)] jointly with the other co-owners thereof.

28.  Items 8 & 9 of the Title Documents are certified copies of (i) a Building Order registered on 28 November 2000 in respect of the common areas of the building on No 14 &16 Hiller Street (“Building Order”)[25]; and (ii) Letter of Compliance dated 20 June 2001 relating to the compliance of the Building Order (“Letter of Compliance”)[26].  

29.  The Building Order and the Letter of Compliance were sent by the Building Authority to the co-owners of Nos 14-16 Hillier Street in relation to unauthorised building works in the common areas[27]. The lot numbers stated in the Memorial for the Building Order, the Building Order itself and the Memorial for the Letter of Compliance for No 14 and No 16 Hillier Street were respectively ML 139 Sec D(RP) and IL 5734 RP.  There was no mention of IL 5735.  The Memorial for the Letter of Compliance was registered on 17 October 2002.

30.  The above again would seem to indicate that as at 7 October 2002, the lot number of No 14 Hillier Street had remained ML 139 Sec D (RP).

31.  The next group of documents in the Title Documents, namely items 10-13 concerned the acquisition and mortgage by D’s predecessor in title, Gain Beauty Limited, of the Shop Space in 2007.

32.  There were 6 recitals of the assignment dated 21 March 2007 (“2007 Assignment”).  The 1^st referred to the 1862 Crown Lease.  The 2^nd and the 3^rd were in relation to the re-entry by the Government and the 4^th referred to the Offer Letter of 23 December 1937 and the Acceptance Letter on 10 March 1941.  The 5^th stated that the “Vendor” of the 2007 Assignment was the registered owner of the Shop Space and 2/7^th shares of the ML 139, Sec D(RP), and the 6^th set out the consideration.  The purchase of Gain Beauty Limited of the Shop Space was subject to a number of conditions, one of which was to the payment of 2/7^th shares of the rent and the observance and performance of the terms and conditions in the Offer Letter and that the rent reserved by and the terms and conditions contained in the Offer Letter had been performed and observed up to the date of those presents.

33.  Further, there was again in the 2007 Assignment a covenant similar to the Covenant that the “Purchaser” will at any time hereafter take up the Government Lease for the said ML 139 Sec D (RP) jointly with the other co-owners[28]. The “Purchaser” of the Shop Space, ie Gain Beauty Limited had further entered into a mortgage of the Shop Space to Hang Seng Bank Limited.

34.  Suffice to say, in all those documents relating to the 2007 Assignment including the mortgage, the lot number of the Shop Space was stated to be “[ML 139 Sec D (RP)](to be known as IL 5735)”. 

35.  Items 14 and 15 of the Title Documents concerned the acquisition by D of the Shop Space from Gain Beauty Limited (“2008 Assignment”) and item 16 was a certified copy of the Directors’ minutes dated 19 June 2008 authorising Gain Beauty Limited to sell the Shop Space and item 17 was a certified copy of the Memorandum and Articles of Gain Beauty Limited.  In the 2008 Assignment, the lot number of the Shop Space was simply ML 139 Sec D (RP) and there was no longer any description “to be known as IL 5735”.

36.  Item 18, as mentioned earlier, contains a certified copy of the 2^nd LACO Letter enclosing a copy of the Acceptance Letter, and a certified copy of the 1^st LACO Letter.

THE 3 REQUISITIONS

37.  As set out earlier, there were 3 Requisitions raised by P which P alleged had not been answered satisfactorily by D.  The 3 Requisitions were:

(1) Requisition 3:   D as vendor should provide a certified copy of the Acceptance Letter without redactment

(2) Requisition 4:   D as vendor should rectify the discrepancy between the lot numbers on the relevant Title Documents, namely the description of ML 139 Sec D (RP) to IL 5735

(3) Requisition 7:   D as vendor should provide a certified copy of (i) the Re-entry Memorial; (ii) a certified copy of the 1^st Offer Letter and (iii) a certified copy of the Acceptance Letter

38.  The relevant parts of the correspondence between P’s solicitors and D’s solicitors are set out briefly hereinafter.  For easy reference, those correspondence from P’s solicitors will simply be referred to as from P and those from D’s solicitors to be from D. 

Requisition 3

39.  In P’s letter of 10 January 2020, under Requisition 3, P sought a certified copy of the unredacted Acceptance Letter.  D’s response on 14 January 2020 was asking P to refer to the 1^st LACO Letter, that D was only provided with a plain copy of the redacted Acceptance Letter by LACO.  P in its letter of 22 January 2020 complained that was not a proper/satisfactory reply as the Acceptance Letter was a title document for proving title, and insisted on a certified copy of the unredacted Acceptance Letter.  On 23 January 2020, D responded to say that Acceptance Letter was not a document for proof of title as the recital of the assignment of the Shop Space was sufficient evidence of its truth by virtue of section 13 (4) of CPO.

40.  P then replied on 31 January 2020 that they did not agree, and maintained that the Acceptance Letter formed part of the ultimate root of the new Government lease of IL 5735 and must be produced for proof of title, and that section 13(4) had no application.  D then asked P on 5 February 2020 to return the letter which P did in the letter of 13 February 2020 and P repeated the requisition for a certified unredacted copy of the Acceptance Letter.  In D’s letter of 17 February 2020, D stated that they had answered the requisition satisfactorily and that production of the letter was not necessary in proving title.  P again stated on 21 February 2020 that they did not agree with D and sought a certified unredacted copy of the Acceptance Letter.

41.  In P’s letter of 28 February 2020 (“P’s Final Requisition Letter”)[29], P repeated their requisition saying the Accepted Letter formed part of the new Crown lease. 

42.  On 2 March 2020, D gave their last answer[30] (“D’s Final Reply”), namely (i) the Acceptance Letter was a copy provided to D by the Director of Lands under the 2^nd LACO Letter; (ii) In the 1^st LACO Letter, according to the Director of Lands, the Acceptance Letter was signed by the representative of the then owner on 10 March 1941; (iii) D had provided P with a certified copy of the 1^st LACO Letter, and also a certified copy of the 2^nd LACO Letter enclosing a plain copy of the Acceptance Letter.  D stated that they were not in a position to supply a certified copy of the Acceptance Letter.  D then referred P to the case of Kingdom Miles Limited v Ever Crystal Limited [2019] HKLRD 643, (CACV 89/2017) and stated that the lack of a certified copy of the Acceptance Letter did not affect the proof of title.

Requisition 4

43.  Requisition 4 was in relation to items 6-11 of the Title Documents[31]. In P’s letter of 10 January 2020, P pointed out the Title Documents indicated that the building where the Shop Space is situate was erected and standing on ML 139 Sec D(RP), but according to the Acceptance Letter and the Occupation Permit, the building was erected on IL 5735.  P pointed out the lot numbers on the Title Documents were wrong and that D should clarify.  D’s reply dated 14 January 2020 merely drew P’s notice to the recital of the Deed of Gift which referred to ML 139 was to be known as IL 5735.

44.  P then sent a letter on 22 January 2020 to point out, amongst other things, that after the commencement of the CPO in 1984, a new Government lease of IL 5735 was deemed to have been granted to Wu subject to the terms and conditions contained in the Offer Letter and thus the lot number in each of items 6-11 of the Title Documents should be described as IL 5735 instead of ML 139 Sec D (RP) or ML 139 Sec D (RP)(to be known as IL 5735). P then returned those Title Documents to D for rectification.  P further reiterated that D should let P have a certified copy of the Offer Letter and a certified copy of the Acceptance Letter.

45.  In their reply of 23 January 2020, D simply stated that the offer to grant a new Crown lease of Section D of Marine Lot 139 was accepted and there was no agreement for a new government lease of a non-existent IL 5735 and that P’s requisition was invalid.

46.  In their letter of 31 January 2020, P said D’s above response was a misconception and that the Offer Letter for a new Crown lease was of IL 5735 and not Section D of ML 139.  D then replied on 5 February 2020 that the Offer Letter was merely an offer and not taken up.

47.  On 13 February 2020, P reiterated that they did not agree.  P stated amongst other things that (i) upon re-entry by the Government on 22 December 1937, the Crown Lease of ML 139 (ie the 1862 Crown Lease) had been forfeited and no longer existed; (ii) the Offer Letter and the Acceptance Letter constituted an agreement for a new Government lease of IL 5735; (iii) a new Government lease of IL 5735 was deemed to have been granted to Wu.  P insisted on rectification of the lot numbers.

48.  On 17 February 2020, D pointed out amongst other things that (i) P’s contention that the 1862 Crown Lease was forfeited and no longer existed was incorrect and referred P to section 4(2) of the Government Rights (Re-entry and Vesting Remedies) Ordinance, Cap 128 (“GRRVRO”); (ii) there was no government lease of IL 5735; (iii) there was no IL 5735; (iv) the Shop Space remained under ML 139 Sec D (RP); (iv) there was no basis for P to seek the revival of IL 5735 which government had abandoned to become the title of the Shop Space.

49.  In P’s reply of 21 February 2020, P did not agree and pointed out amongst other things that section 4 of GRRVRO provided that upon a memorial of re-entry, and lands re-vested in the government as fully as the government lease thereof had determined, and there was no evidence that the Re-entry Memorial had been cancelled as set out in section 11 of GRRVRO and based on this the 1862 Crown Lease had been forfeited and determined unless D could prove to the contrary.  D was asked to substantiate its assertion that the Government had abandoned IL 5735.

50.  In D’s letter of 24 February 2020, D then pointed out that section 4(2) of GRRVRO did not provide the government lease had determined but only as if the government lease had determined and reiterated that there was no government lease of IL 5735 and the lot had continued to be known as ML 139 and so registered in the Land Registry.

51.  In P’s Final Requisition Letter, P totally disagreed with D.  P maintained that: (i) the Offer Letter contained terms and conditions in the new Crown Lease of IL 5735 and there was an agreement concluded for a new Crown Lease of IL 5735 upon the Acceptance Letter; (ii) the Offer Letter and the Acceptance Letter constituted the ultimate root of the new Crown Lease of IL 5735 and that certified copies thereof must be produce and that the Title Documents should be rectified.

52.  In D’s Final Reply, in relation to the Offer Letter, D stated as the Lands Department did not have the original or certified copy of the Offer Letter, D was not in a position to supply P with a certified copy of the Offer Letter.  D then relied on (i) Government had not given effect to re-entry by entering into possession and collecting the rents and profits (“Not Given Effect to Re-entry Point”); (ii) the subsequent owner had expended substantial money in redeveloping the land and erected the existing building and the Government had abandoned its right of re-entry under the Re-entry Memorial (“Abandonment Point”); (iii) even if the Government had not abandoned its right of re-entry, there was no real risk of successful assertion adverse claims by the Government under the Re-entry Memorial (“No Real Risk Point”).

Requisition 7

53.  Requisition 7 is in relation to items 4, 6, and 11 of the Title Documents, namely the 1967 Assignment, the Deed of Gift and the 2007 Assignment. 

54.  On 10 January 2020, P referred to the recitals in the above 3 Title Documents and sought (i) a certified copy of the Re-entry Memorial; (ii) a certified copy of the Offer Letter; (iii) a certified copy of the Acceptance Letter.

55.  D’s reply on 14 January 2020 was simply that the recitals were sufficient evidence of their truth under section 13 (4) of the CPO.

56.  P replied on 22 January 2020 that they did not agree and that under section 13(1)(b) of CPO, D was obliged to produce the certified copies of the requested documents.  P further pointed out that the Offer Letter and the Acceptance Letter were the ultimate title documents and reiterated that certified copies thereof should be produced by D.

57.  D maintained in their letter of 23 January 2020 that the recitals in the assignments were sufficient evidence of the truth of the matters by virtue of section 13(4) of CPO.

58.  P repeated their Requisition 7 in their letter of 31 January 2020.  In the letter of 5 February 2020, D maintained that the documents subject to which the Shop Space was disposed of under section 13(1)(b) as there was no new government lease of IL 5735 and that P’s Requisition 7 was invalid.

59.  P however repeated in their letter of 13 February 2020 that the Acceptance Letter and the Acceptance Letter were ultimate root title documents in respect of IL 5735.

60.  There followed further correspondence between the parties in which they each maintained their respective positions.  As pointed out by Ms Wong on behalf of D, in P’s Final Requisition Letter, P seemed only to be requesting for certified copies of the Offer Letter and the Acceptance Letter and no longer insisting on a certified copy of the Re-entry Memorial and that this request was abandoned or waived by P.

61.  Suffice to say, by D’s Final Reply, D referred to their reply in relation to Requisition 3 and the case of Kingdom Miles.

Outstanding Requisitions

62.  To summarise, as P no longer seemed to be insisting on a certified copy of the Re-entry Memorial in P’s Final Requisition Letter, P’s final position appeared to be:

(1) D should rectify the lot numbers on the relevant Title Documents, and

(2) D should provide certified copies of the Offer Letter and the redacted Acceptance Letter as proof of title.

THE ISSUES

63.  P contends that[32]:

(1) The offer of a new Crown lease and the acceptance thereof plainly came within the definition of Government lease under the CPO and also the Interpretation and General Clauses Ordinance, Cap 1 (“IGCO”);

(2) P as purchaser was entitled to know the terms and conditions of the new Crown lease and that D failed to provide any information about the contents of the new Crown lease;

(3) Further or alternatively, P was entitled to require from D, as proof of title to the land, production of the new Crown lease under section 13(1) of the CPO, and D failed to produce the new Crown lease;

(4) Thus, D failed to prove good title and answer the Requisitions before Completion.

64.  D did not have any dispute on (1), (2) or (3) above but the issue is whether there was a new Crown lease.  D further relied on the Kingdom Miles case, in particular in relation to the No Real Risk Point.

DISCUSSION

Whether the Offer Letter and the Acceptance Letter are within the definition of “Government lease” under the CPO

65.  Under section 3 of the IGCO,

“Crown lease (官契) means any lease granted by the Crown before 1 July 1997, any instrument whereby the term of a Crown lease may have been extended or the provisions thereof varied and any agreement for a Crown lease;

(Added 26 of 1998 s 4)

Government lease (政府租契) means a lease of land granted by or on behalf of the Government, and includes —

(a) an instrument whereby —

(i) the term of the lease has been extended; or

(ii) the provisions of the lease have been varied;

(b) an agreement for such a lease; and

(c) a Crown lease;”

(Added 26 of 1998 s 4)

66.  In the Kingdom Miles case, a certified copy of the relevant Conditions of Grant of the land of which the disputed property was a part had been produced by the defendant vendor.  It was clear from the documents in the Conditions of Grant that no formal Government lease or formal memorandum of agreement had been executed in respect of the Grant.  The sale by the Government of the land was by private treaty and the transaction was evidenced by correspondence instead of being embodied in one single instrument and in subsequent title deeds, the recitals alluded to the terms and conditions of the Grant deposited in the Land Office as the terms of the agreement between the Government and the grantees, and the recitals had referred to 2 letters which were lost (one of 1923 and one of 1924 from the Director of Public Works). 

67.  The outstanding requisitions raised by the plaintiff purchaser were in relation to the two lost letters, which contained the terms and conditions of the sale of the land of the Government to the 1^st owner.  The purchaser took the view that the lost letters formed part of the title to the property but the defendant vendor had not produced original or certified true copies of the letters, nor explained their absence nor adduced satisfactory secondary evidence of their contents.  The vendor’s counter argument involved reliance on the recital in a 1956 assignment which referred to the lost letters and sections 13(3)(b) and 13(4) of the CPO.

68.  In the lower court, Recorder Whitehead SC held that the lost letters formed part of the “Government lease” which was the ultimate root of the title to the property[33]. The Recorder then held amongst other things, that the purchaser’s requisitions had not been sufficiently answered by the vendor and granted a declaration to the purchaser that good title to the property concerned had not been shown or given by the vendor.

69.  The vendor’s subsequent appeal was allowed by the Court of Appeal and it was held that the vendor had adequately answered the requisitions.  The judgment will be considered further later but suffice to say at this stage, the Court of Appeal held that the lost letters could not be the agreement itself but were letters in a series of correspondence evidencing the agreement to grant a lease[34]. The Court of Appeal then held that the definition under section 3 of IGCO had to be applied broadly in a transaction evidenced in writing as opposed to being made in writing and that the lost letters were part of the series of written instruments evidencing the Grant, and the Recorder was correct in holding that they came within the meaning of “Government lease” for the purpose of section 13(1) [of the CPO][35].

70.  As said earlier and set out in the 1^st LACO Letter, the Acceptance Letter was signed by the representative of the then owner on 10 March 1941, which meant the acceptance therein was before the 14 day deadline imposed in that letter.  The 1^st LACO Letter and the Acceptance Letter showed that there was an offer by the Government of grant of a new Government lease with terms and conditions set out in the Offer Letter, which was then accepted in the Acceptance Letter.  I therefore accept that the Offer Letter and the Acceptance Letter formed an agreement for a new Government lease and would fall within the meaning of “Government Lease” for the purpose of section 13 (1) of the CPO. 

71.  In light of the above, in my view P was prima facie entitled to require from D production of those two letters (being Government lease) under section 13 (1) of CPO, either the originals or certified true copies. 

Whether P was entitled to know the terms and conditions of the new Crown lease or alternatively, whether P was entitled to require from D production of the new Crown lease

72.  The question is whether there was a new Crown lease actually or formally granted to Wu after the Acceptance Letter.

73.  In the present case, a partner of D’s solicitors Luk Wai Kei (“Mr Luk”) had made an affirmation on behalf of D to oppose P’s present application.  Mr Luk had stated that although the offer of a new Crown lease was accepted by Wu, the new Crown lease had not been granted because^[36]:

(1) there was no information as to the grant of a new Crown lease for almost 80 years;

(2) the 1^st LACO Letter stated that LACO did not have the original or certified copy of the Offer Letter;

(3) It was therefore fair to say that (a) the Government had no information of the terms and conditions under which the Government were to issue the new Crown lease (b) because the Government had no such information concerning the new Crown lease, such new Crown lease had not been granted.

74.  It was also Mr Luk’s evidence that he had caused a search to be made in the land Registry in respect of IL 5735, but no such search could be carried out because there was no such lot number in the Land Registry.

75.  Mr Lau submitted that D’s above arguments were “contrived and devoid of merits” for reasons including the following[37]:

(1) The Title Documents between the Acceptance Letter in 1941 and the 2007 Assignment had time and again pointed to the same direction, namely that the offer of the grant of a new Crown lease was accepted by Wu.

(2) Further, as D had repeatedly referred to section 13 (4) of CPO and stressed that the recitals in the various Title Documents were sufficient evidence of their truth, all those recitals repeatedly recited that the offer was accepted by Wu. 

(3) Although the 1^st LACO Letter stated that the office did not have the original or certified copy of the Offer Letter, there was no information as to whether any records were kept by the other offices of the Lands Department or the other departments of the Government.

(4) D should and could have directed a specific question to the Government as to whether the Government has any information of the terms and conditions contained in the Offer Letter.

(5) Even if the D proves that the Government does not now have information of the terms and conditions, it remains possible that a new Crown lease had been granted to Wu in 1941 upon the acceptance and that it was possible that the predecessor-in-title had a copy of the Offer Letter or information of the terms and conditions.

76.  In relation to (i) and (ii) above, as Mr Lau himself had pointed out, what was stated in the recitals in the Title Documents between the Acceptance Letter in 1941 and the 2007 Assignment was only that there had been an offer and acceptance by Wu of a new Crown lease.  It was in fact never stated or mentioned in any of the Title Documents that a new Crown lease was ever actually or formally granted or issued by the Crown to Wu and/or Wu or any of her successors in title had taken up a new Crown lease.  On the contrary, as set out earlier, and as late as in the 2007 Assignment, there was still a covenant by the purchaser of the Shop Space to take up the Government lease for the ML 139 Sec D (RP) jointly with the co-owners of the lot.

77.  As said earlier, the Occupation Permit had referred to one building on No 14-16 Hillier Street, and from the plans in the Deed of Mutual Grant, there was a common staircase for both No 14-16 Hillier Street.  Mr Luk had produced a copy of the Crown lease dated 5 September 1941 in respect of No 16 Hillier Street (“1941 Crown Lease”) and this 1941 Crown Lease refers to the lot number of No 16 Hillier Street to be IL 5734 with a term of 981 years as from 26 December 1860.  Mr Luk had produced a copy of the 1941 Crown Lease and the Land Registry search record of No 16 Hillier Street as part of his evidence to demonstrate that although there was a new Crown lease granted in respect of No 16 Hillier Street in 1941, there was none granted in respect of ML 139 Sec D (RP) after the Acceptance Letter.

78.  Mr Lau argued that what was put forward by D was premised upon the incorrect assumption that the land search records were conclusive evidence as to the title and that the absence of a land registration record of IL 5735 was not to the point as the grant of a new Crown lease would not necessarily result in a new lot number.  

79.  What is not disputed is that the Acceptance Letter of 26 February 1941 had referred to Section D of Marine Lot 139 as “now known as IL 5735” and in fact, the 1941 Crown Lease in respect of No 16 Hillier Street had also referred to Inland Lot 5734 being bounded on or towards the North East by IL 5735[38] and in the plan attached to the 1941 Crown lease in respect of IL 5734, the adjoining IL 5735 ( which appeared to be the site of ML 139 Section D) was clearly indicated thereon[39].  Both these documents would seem to indicate that the lot number of IL 5735 was adopted for Marine Lot 139 Section D in 1941.  However, thereafter, apart from the Occupation Permit bearing IL 5735, there was no other Title Documents indicating that ML 139 Section D had been formally replaced by IL 5735.  The most those Title Documents showed was that ML 139 Sec D(RP) was to be known as IL 5735.  In particular, the No Objection Letter was issued by the then Land Office and further the Building Order was issued by the Building Authority.  Further, Mr Luk’s evidence that there was no registration in the Land Registry of any land or lot known as IL 5735 was not challenged by P.  In my view, this would at least prima facie indicate that the lot number IL 5735 had not been used since latest by 1967 and was no longer in existence as at the date of the Registration Record.  

80.  Further, as mentioned earlier, it seems from Mr Lau’s own submission at the hearing that a new Crown/Government lease does not necessarily result in a new lot number and Mr Lau had pointed out that in the case of Lin Wai Lai v Hung Mei Lai HCMP 1310/2017, 28 December 2017, there was no new lot number but there was a new Crown lease. 

81.  I agree with Mr Lau that a new Crown lease does not necessarily result in a new lot number and that they are two different matters. 

82.  Anyway, having considered the Registration Record and the Title Documents, I have come to the view that even though there was an offer by the Government to grant a new lease, and such offer was accepted by Wu, there was no sufficient evidence that any actual or formal grant for a new lease was ever issued by the Government to, or taken up by, Wu or her successors in title in respect of No 14 Hillier Street (ML 139 Sec D (RP)) notwithstanding the granting of the 1941 Crown Lease in respect of No 16 Hillier Street.  There was also no sufficient evidence that Section D of ML 139 had ever been formally replaced by IL 5735.

83.  As said earlier, I have found the Offer Letter and the Acceptance Letter formed an agreement for a new Crown lease and they fall within the definition of “Government lease”.  As seen in the Acceptance Letter, there were terms and conditions set out in the Offer Letter upon which the grant of a new Crown Lease was offered and which were accepted by Wu.

84.  Further as seen in the 1967 Assignment, the assignment of the Shop Space was stated to be together with such right of way granted under the Deed of Mutual Grant and all other rights of way (if any) etc …… and “all the estate right interest property claim and demand of the Assignor in and to the said hereby assigned premises and every part thereof  Except and reserved as in the [Offer Letter] is excepted and reserved …… and to Hold the premises hereby assigned …… Subject to the payment of two seventh shares of the proportion hereinafter mentioned of the rent and the observance and performance of the terms and conditions in the [Offer Letter] reserved and contained so far as they relate to the said hereby assigned premises ……”[40].  In the recital of the DMC, it was further stated that the parties therein are entitled to a Crown Lease thereof subject to and with the benefit of certain terms and conditions contained in the  Offer Letter[41].

85.  In short, the recitals in various Title Documents prior to the 2008 transaction had alluded to the “terms and conditions” in the Offer Letter having been accepted by Wu.  There was however no clear evidence as to what those terms and conditions were.

86.  Mr Lau had referred the Court to Wong Wai Ming v Tang Tat Chi [1993] 1 HKC 341 and as said by Patrick Chan J, as he then was, the purchaser was entitled to know the terms of the Crown lease in order to see whether all the covenants have been complied in deciding the ultimate question whether a good title had been shown[42].  

87.  This can also be seen in paragraph 105 of the Court of Appeal’s judgment in Kingdom Miles, where Lam VP stated that “…… one has to assess if there is sufficient evidence for the issue of the grant by the Government, the subject matter of the grant, the rent and other terms and conditions for the grant.  These are the matters that a person deriving title from the Government Lease would need to prove his title.”[43]

88.  Insofar as the 1862 Crown Lease is concerned, although the copy is not a clear copy, it is a certified copy by the Land Registrar and as seen in the Wong Wai Ming case, D’s duty under section 13(1) in producing the 1862 Crown Lease has been discharged.  However, the Offer Letter and the Acceptance Letter also form part of the “Government lease”, and no certified copies have been produced by D.  Unlike the case of Kingdom Miles, there was no other evidence as to the terms and conditions in the Offer Letter, save that the amount of Crown rent was stated in the recitals of the 1967 Assignment.

89.  Having considered the authorities, I am of the view that P was entitled to know the terms and conditions of the Offer Letter and was prima facie entitled to seek a certified true copy of the Offer Letter.  

THE RELEVANT LEGAL PRINCIPLES IN RELATION TO MISSING TITLE DOCUMENTS

90.  Cheung CJHC, as he then was, had in Zhang Xueshuai and Lai Chan Wing [2015] 2 HKLRD 246, explained the clarification of the law in De Monsa Investment v Whole Win Management Fund (2013) 16 HKCFAR 419, and on missing title documents, he stated as follows:

“30. …… The real significance of missing title documents, assuming that contents and due execution are not in issue, only lies in the fact that it may, depending on the facts of each case, give rise to a real risk of a successful assertion of an encumbrance against the property after completion, thereby rending the title of the vendor defective or doubtful…..

31. A statutory declaration to explain why the relevant title documents are missing is only relevant in the above context if and when it is required to remove a doubt which would otherwise arise by reason of the missing title documents.  In other words, if, without the statutory declaration, there would be a real doubt arising, a statutory declaration would be required.  But, in such a case, a statutory declaration, although a most common means relied on, is not the only possible means that can be resorted to.  Depending on the facts, if there are other evidences which can remove the doubt and render the risk fanciful or even non-existent, they can be relied on, either in addition to or in lieu of the statutory declaration.  There is no magic to a statutory declaration as such.  What is required is satisfactory conveyancing evidence to remove the doubt and render the risk unreal or nonexistent altogether.

32. However, as the Court of Final Appeal decided in De Monsa, where there is no real risk arising, there is no place for a statutory declaration or any other conveyancing evidence.  It is not required for the showing/proving of a good title.”[44]

91.  The above was also pointed out by Lam VP in the Kingdom Miles case and as said by Lam VP, the crucial issue is whether there is any real risk of a successful assertion of an encumbrance on the title, and that this issue should be the ultimate test, be it at the stage of showing of title or making of title[45].

92.  As further pointed out by Lam VP, that although the showing and the giving of title are two stages in the conveyancing process, as observed by Ribeiro PJ and Gleeson NPJ, in the De Monsa case, they are related and that in the context of missing documents, the Court of Final Appeal in the De Monsa case clearly rejected the proposition that in order to give a good title, every missing document had to be accounted for by secondary evidence.  Further, all members of the Court of Final Appeal clearly expounded the view that one cannot automatically concluded that a title is not good whenever a title deed is missing and no satisfactory secondary evidence is available, and that a conveyancer has to examine the significance of the fact that such document is missing and any potential blot that the loss of that document may occasion to the title.[46]

93.  On the test for a good title in a conveyancing transaction, as said by Lam VP, a good title needs not be a perfect title.  As further said by Lam VP, citing Litton PJ in Mexxon Holdings Ltd v Silvery Bay International Ltd (2000) 3 HKCFAR 109 at 117 D-E, that in the assessment as to whether there is any real problem in the title the matter should be approached from the stand-point of a willing purchaser and a willing vendor with reasonably robust common sense[47].

IS THERE A GOOD TITLE TO THE SHOP SPACE

94.  In light of what has been stated in the above authorities, the lack of certified true copies of the Offer Letter and the Acceptance Letter should be examined by the question as to whether there is any risk of successful assertion of adverse claims or encumbrances upon the Shop Space.

The Not Given Effect to Re-entry Point

95.  As set out earlier, in D’s Final Letter, it was stated that the lack of a certified copy of the Offer Letter did not affect the title based on 3 points set out therein, namely the (i) Not Given Effect to Re-entry Point, (ii) Abandonment Point; and (iii) No Real Risk Point.

96.  In relation to (i), it was D’s case that the Government had never given effect to re-entry under the Re-entry Memorial by entering into possession and collecting the rents and profits[48]. 

97.  On the other hand Mr Lau had referred the Court to the Crown Rights (Re-entry) Ordinance 1870, namely Ordinance No 4 of 1870, as amended in 1936[49] (“1936 CRRO”).

98.  As seen on the Re-entry Memorial, it was registered according to the provisions of Ordinance No 4 of 1870 as amended by Ordinance No 11 of (illegible).  It was not disputed that the 1936 CRRO appeared to be the Ordinance referred to in the Re-entry Memorial.  In any event, the Re-entry Memorial was in the same statutory form as set out in the “Schedule” of the 1936 CRRO.  Sections 2 and 3 thereof provided as follows:

“2. Where a right of re-entry upon lands or tenements has accrued to His Majesty, such right may be exercised or enforced without any inquisition being taken, or office being found, or any actual re-entry being made on the premises.

3. Whenever it is necessary to enforce a right of re-entry by the Crown upon any such lands or tenements for the breach of any covenant in the Crown lease thereof, or for the breach of any condition or stipulation of any tenancy thereof, a memorial of such re-entry…. may be registered in the Land Office, and, immediately on the registration of such memorial, the Crown shall be deemed to have re-entered upon the lands or tenements …. and the said lands and tenements shall ipso facto become thereby re-vested  in the Crown as fully as if the Crown lease thereof had determined, or a surrender to His Majesty of such Crown lease had been executed by the lessee, his executors, administrators, or assigns, or, as the case may be, as fully as if the tenancy had absolutely determined: Provided always ……”

(emphasis added)

99.  Mr Lau pointed out that pursuant to section 3, immediately on the registration of the Re-entry Memorial, the Crown was deemed to have re-entered upon the affected portions of Marine Lot 139 including Section D, and that the land was re-vested in the Crown as if the Crown lease thereof had determined.  Mr Lau thus submitted that re-entry did not turn on the Crown’s actual repossession.

100.  In the present case, it appears from the Re-entry Memorial, there had been a breach of the covenant in the 1862 Crown Lease and that a right of re-entry had accrued to the Crown and on 22 December 1937, the then Assistant Colonial Secretary had caused to be registered the Re-entry Memorial.  As provided in section 3 of the 1936 CRRO, upon registration, the Crown was deemed to have re-entered ML 139 and MP 139 was re-vested in the Crown as if the 1862 Crown Lease had determined.

101.  However, as seen in the Acceptance Letter, almost immediately, ie on the following day 23 December 1937, the Land Officer had sent out the printed Offer Letter to Wu to offer Wu a new Crown lease.  In the 2^nd paragraph of the Acceptance Letter, the Land Officer had stated that: “I hereby further give you notice that failing compliance with this notice I shall advise the Crown to give effect to such re-entry by entering into possession of the said premises, and collecting the rents and profits thereof.”

102.  Having considered the plain meaning of the above words in the Acceptance Letter, although the Crown had registered the Re-entry Memorial and was deemed to have re-entered ML 139, the Crown clearly did not proceed to immediately repossess the land, and the Crown had not yet collected the rents and profits of the land.  Instead, the Land Officer sent out the Offer Letter.  It is thus not a question of whether re-entry would depend on actual possession, and it is simply a matter of fact that although the Crown had re-entered Section D of Marine Lot 139 under section 3 of the 1936 CRRO, the Crown did not enter into possession immediately.  As it was clearly reflected in the Acceptance Letter, the Crown did not immediately give effect to such re-entry and in fact had not given effect or the re-entry or entered into possession up to the date of the Acceptance Letter.  There was further no evidence that after the Acceptance Letter, the Government had ever given effect to the re-entry by entering into possession of ML 139 Sec D (RP) or had demanded or collected rents and profits from Wu or any of her successors in title.  As I said earlier, there was an agreement for a new grant.

103.  In light of the above, I agree with Mr Wong that the Government has never given effect to the re-entry of Section D of ML 139.

The Abandonment Point

104.  In D’s Final Reply, it was pointed out by D that Wu and/or Leung & Quan and/or others had expended substantial money in redeveloping the land and erected the existing building, and that the Government had abandoned its right of re-entry under the Re-entry Memorial.

105.  By the time of the redevelopment in 1966, some 25 years had passed since the Acceptance Letter, and since the Occupation Permit until the Provisional Agreement, another 52 years had gone by.  By now, it is some 80 years.  As said earlier, there was no evidence that the Government had given effect to the re-entry and as set out below, a new lease was deemed to have been granted.  I therefore find the evidence showed that the Government had indeed abandoned the re-entry.

No Real Risk Point

106.  As held in Kingdoms Miles, and as set out earlier, whether there is a good title depends on whether there is any risk of successful assertion of adverse claims or encumbrance upon the property.

107.  P had argued that it was entitled to know the terms and conditions set out in the Offer Letter and/or in the new Crown lease.  As said, there was no sufficient evidence that any actual or formal grant of a new Crown lease had been issued or taken up.

108.  Further, it seems that sections 14(1) and (2) of CPO may also apply in the present case.

109.  Sections 14(1) and (2) provide as follows:

“14. Conversion of equitable interest to legal estate where right to Government lease

(1) Where a person has a right to a Government lease of any land upon compliance with any conditions precedent, then, upon compliance with those conditions—

(a) the equitable interest under that right shall become a legal estate in that land as if held under a Government lease issued in accordance with that right; and

(Amended 31 of 1988 s 7)

(b) for the purposes of section 42 and any other law, such a Government lease shall be deemed to have been issued upon compliance with those conditions.

(2)  Where, under an agreement for a Government lease entered into before 1 January 1970, a person has a right to a Government lease upon compliance with any conditions precedent he shall be deemed, for the purposes of this section, to have complied with those conditions on the commencement of this section.”

110.  The commencement date of section 14(2) was 1 November 1984.  Although P had in the letter dated 13 February 2020 referred to there being a new Government lease being deemed to have been granted after the commencement of the CPO in 1984[50], no further submissions were made in relation to the deeming provisions in sections 14 (1) and (2) at the hearing.  There were also no submissions from D on those deeming provisions in section 14 (1) and (2). 

111.  As said earlier, the offer from the Government and the acceptance by Wu formed an agreement between the Government and Wu for the grant of a new lease upon the terms and conditions set out in the Offer Letter.  The terms and conditions in the Offer Letter are unknown but insofar as there being any conditions precedent therein, Wu would have a right to a new lease upon compliance of such conditions precedent.  Upon the coming into effect of section 14(2) in 1984, Wu was deemed to have complied with those conditions precedent and was thus a person who had a right to a new lease pursuant to the agreement.  Under section 14(1), a new Crown lease was deemed to have been issued to Wu.

112.  Insofar as the terms and conditions in the Offer Letter consisted of ongoing obligations of a grantee, in the 1967 Assignment, the “Assignors” had covenanted that the rent reserved by and the terms and conditions contained in the Offer Letter had been paid performed and observed up to the date of that assignment and further the “Assignees” covenanted that they would at all times pay 2/7^th of the annual sum of HKD 10.58 being a proportion of the rent reserved by the Offer Letter and observe and perform the terms and conditions and covenants in the Offer Letter.  Further, 30 years later, in the 2007 Assignment, the “Vendor” also covenanted with the “Purchaser” that the rent reserved by and the terms and conditions contained in the Offer Letter had been paid performed and observed up to the date of that assignment and the “Purchaser” had also covenanted with the “Vendor” that to at all times thereafter pay 2/7^th share of the proportion of the rent reserved by the Offer Letter and observe and perform the terms and conditions and the covenants in the Offer Letter.

113.  Then in the Agreement for Sale and Purchase dated 10 April 2008 (“2008 SPA”), it was stated that the Shop Space was sold absolutely subject to the provisions in the “Government Grant” and that notwithstanding anything therein contained, in the event that a letter/certificate of compliance in respect of the Government Grant had not been issued or the conditions precedent of the Government Grant had not been deemed to have been complied with under section 14 of CPO the parties hereto agreed that only equitable estate of the Shop Space would be sold and purchased thereunder[51]. It was also stated that the Shop Space was sold subject to and with the benefit of amongst others, the DMC and the Deed of Mutual Grant as set out.

114.  In fact, if any ongoing obligations under the terms and conditions in the Offer Letter had not been complied, this would then give rise to a right of re-entry being accrued to the Government again.  There had been no further re-entry memorial registered in the Land Registry by the Government in the past 83 years, ie between the Re-entry Memorial of 1937 and the date of the Registration Record.

115.  Having considered all the above, I have come to the view that there is no risk of successful assertion of adverse claims or encumbrances by the Government upon the Shop Space or ML 139 Sec D(RP) pursuant to the Re-entry Memorial or otherwise, by reason of the absence of the original and/or certified true copies of the Offer Letter and the unredacted Acceptance Letter.

WHETHER D HAD FAILED TO ANSWER THE REQUISITIONS SATISFACTORILY

116.  In his judgment in Active Keen Industries Ltd v Fok Chi Keong [1994] 1 HKLR 396, Litton JA, as he then was, had held that even if the contract itself was silent on the matter, the law had developed in such a way so as to impose an obligation on the vendor to answer requisitions and objections: that was to say, to bring forward facts and circumstances known to him which might be material to the title which he had contracted to pass to the purchaser on completion[52]. The then Justice of Appeal had further said that:

“Obviously, if a purchaser raises 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, and the vendor chooses to withhold that from the purchase, the vendor clearly cannot, on the day fixed for completion, turn round and say to the purchaser: “Now I will both show you a good title and make you good title; you pay the balance of the purchase price today or I will rescind.” The purchaser must be given reasonable time to consider the title of the vendor and his own position; the implied obligation of showing a good title would not have been discharged by disclosure on the day fixed for completion.”[53]

117.  The then Justice of Appeal had endorsed the lower judge’s approach that if there was nothing the vendor could usefully add, he would hold that that was enough, and that if the matter was self-evident, the purchaser’s solicitor could not insist upon a fuller reply but the vendor’s solicitor must act with total candour, so that the purchaser could be reasonably certain that there were no facts and material relevant to the requisition known to the vendor which had not been disclosed.[54].

118.  Mr Lau had referred the Court to the judgment of Mimmie Chan J in the case Lin Wai Lai and Hung Mei Lai HCMP 1210/2017, 28 December 2017.  The requisition in question in the Lin Wai Lai case concerned a letter dated 8 February 1957 from the Land Officer to a person “Fong” with regard to a new Crown lease in respect of the subject lot on which the subject property was situated.  The requisition was raised by the plaintiff/purchaser to the vendor/defendant pursuant to an agreement of sale and purchase of the subject property.  The defendant had disputed that the 1957 letter formed part of the root documents of title but by the time of the trial before the Judge, the vendor no longer so disputed and one of the disputed issues was whether the requisition had been satisfactorily answered.

119.  As seen in the judgment, the facts of that case were quite similar to the present one in that in 1954, the Government re-entered the subject lot due to default in payment of the Crown rent but offered a new Crown lease to Fong who agreed to accept the terms and conditions of the new Crown lease, and that schedule to the 1957 letter containing the terms and conditions was duly stamped and signed by Fong to acknowledge acceptance.  As in the present case, the subject lot in the Lin Wai Lai case was then redeveloped.  The 1^st assignment from Fong as vendor to a purchaser also contained recitals stating that the terms and conditions in the 1957 letter had been accepted by the vendor.

120.  In the Lian Wai Lai case, a plain copy of the 1957 letter was provided by the defendant, but the plaintiff had sought a certified copy of the 1957 letter.  

121.  It appeared that when the requisition for a certified copy of the 1957 letter was first raised, the defendant only claimed that the letter was “a pre-root document” and a certified copy was unnecessary and then in a later letter, the defendant stated that they had tried their best to obtain certified copies from relevant government departments and that there was no record of the letter[55]. In what appeared to be the defendant’s last letter on the requisition, the defendant had suggested that the recitals in the 1^st assignment constituted the necessary secondary evidence of the new Crown lease.  This was not accepted by P and it appeared that P claimed on the day of the completion before the scheduled time for completion P had sent a letter seeking secondary evidence by way of a statutory declaration by an appropriate person in respect of the loss of the letter, and to produce evidence of the enquiries made with former solicitors handling transactions in the property but there was no reply from the defendant by the deadline.  The defendant on the other hand claimed that the plaintiff’s last letter was received after the scheduled completion time.

122.  The Judge found that the defendant vendor had failed to produce sufficient evidence to explain the loss of the 1957 letter or that reasonable efforts had been made by the appropriate parties to locate the letter.  She found there was no clear and cogent secondary evidence of the letter and its contents, produced prior to the scheduled completion for the purpose of showing and proving good title, and that the requisition in question had not been answered sufficiently.  The Judge found that the vendor/defendant had not shown and proved good title[56].

123.  As seen in her judgment, the Judge opined that as there was no statutory declaration from any relevant party, whether relating to the results of the enquiries made with solicitors who had previously handled the 1^st assignment or relating to the circumstances of the loss of the letter, nor did the 1^st assignment referred to or identified the contents of the 1957 letter and schedule, namely the terms and conditions of the re-grant of the Crown lease.[57]

124.  The judgment in the Lin Wai Lin case was handed down almost a year prior to the Court of Appeal judgment in the Kingdom Miles case.  There was also no reference or discussion in the judgment in the Lin Wai Lin case to the Court of Final Appeal’s judgment in the De Monsa case, or the then CJHC’s judgment in the Zhang Xueshuai case. It thus appeared that the arguments of the parties in the Lin Wai Lin case had only concentrated on whether the requisition had been answered satisfactorily.  Thus, the judgment in the Lin Wai Lin case has to be read in the circumstances of that case.

125.  I now come to the Requisitions in the present case.

Requisition 4 - rectification of the lot numbers

126.  As seen in those letters between P and D, P had maintained that there had been a new Crown lease or an agreement for a new Crown lease of lot number IL 5735.  As conceded by Mr Lau at the hearing and as mentioned earlier, a new Government lease may not result in a new lot number.  Mr Lau had further submitted that whether old or new lot number was a “red herring” and that the crux of the matter was whether there was a new Crown lease in respect of the lot where the building of the Shop Space is.  Mr Lau himself had also said that the Requisition 4 was less important than Requisition 7.  However, as seen in the exchanges between the parties, P’s then position was quite different and P had maintained there was a new Crown lease in respect of IL 5735.  This thus led to D maintaining there was no new Crown lease and/or no new agreement for a new lease of a non-existent IL 5735.

127.  Further, as said earlier, the Title Documents have shown that the last “use” of IL 5735 for the lot without any reference to Section D of ML 139 was in the Occupation Permit, which was some 52 years prior to the Provisional Agreement.  As I have found earlier, there was no sufficient evidence that Section D ML 139 was formally replaced by IL 5735.

128.  In the above circumstances, in my view, D had adequately answered Requisition 4.

Requisitions 3 and 7 – certified copies of the Re-entry Memorial, Offer Letter and the unredacted Acceptance Letter

129.  As seen in P’s 1^st substantive letter of 22 January 2020, P stated that D was obliged to produce certified copies of the Re-entry Memorial, the Offer Letter and the unredacted Acceptance Letter under section 13(1)(b) of CPO essentially because (i) the Offer Letter and the Acceptance Letter were ultimate root title documents for proving title and (ii) there was clearly an agreement for a new Government lease of Inland Lot No 5735.

130.  As said earlier, by the time P’s Final Requisition Letter on 28 February 2020, P was no longer pressing for a certified true copy of the Re-entry Memorial which was registered by the then Crown.

131.  As for the other two documents, as set out earlier in D’s reply of 23 January 2020, D’s response for Requisition 3 in which P sought a certified unredacted copy of the Acceptance Letter was that it was not a document for proof of title as the recital of the assignment was sufficient evidence of its truth by virtue of section 13(4) of CPO.  As for P’s requests under Requisition 4 for certified true copies of the Re-entry Memorial and the Offer Letter, D again referred to the recitals in the assignments.

132.  P replied in their letter of 31 January 2020 claiming that the Acceptance Letter formed part of the ultimate root of the “New Government Lease of IL 5735” and insisted on the production thereof for proof of title that they repeated their requests under Requisition 7.  What P said then led to D replying that there was no new Government lease of IL 5735.  As mentioned earlier, P then maintained there was an agreement for a new Government lease of IL 5735.  This then led D to reply that there was no Government lease of IL 5735 and D repeated this in their letter of 24 February 2020. In P’s Final Requisition Letter, P’s position was still there was a new Crown lease or an agreement for a new Crown lease of IL No 5735.

133.  Although in P’s Final Requisition Letter, P had stated that “Up to [now], [D] has failed to produce the same nor has he provided us with any clear and cogent secondary evidence to prove its contents”[58], unlike the purchaser in the Lin Wai Lai, P never indicated what clear and cogent secondary evidence would be acceptable to P. 

134.  In any event, as said earlier and as seen in the Zhang Xueshuai case, the real significance of missing title documents, assuming that contents and due execution are not in issue, only lies in the fact that it may, depending on the facts of each case, give rise to real risk of a successful assertion of an encumbrance against the property after completion, thereby rendering the title of the vendor defective or doubtful.  Cheung CJHC then went on to give a situation of a typical doubt and said that a statutory declaration to explain why the relevant title documents are missing is only relevant in the context if and when it is required to remove a doubt which would otherwise arise by reason of the missing title documents.[59]

135.  Firstly, as stated in the 1^st LACO Letter, LACO had stated that they had “retrieved” a copy of the Acceptance Letter signed by the representative of the then owner on 10 March 1941.  LACO did not state in the 1^st LACO Letter that they did not have the original or certified copy of the Acceptance Letter, and the reason why LACO only provided a plain copy of the redacted Acceptance Letter was due to privacy reason.  According to LACO, what were redacted were the names and addresses appearing thereon.  Although the names and addresses were redacted, it was not disputed by P that the Government’s offer in the Offer Letter was accepted pursuant to the Acceptance Letter, or that there was due execution of the Acceptance Letter.  In fact, it was on the basis that there had been acceptance to the offer that P had argued that there was a new Crown lease or an agreement for a new Crown lease.  There was no evidence that the redacted information was within D’s knowledge. 

136.  Secondly, there was also no dispute as to the contents of the Acceptance Letter as clearly the contents were reflected in the copy provided by LACO. 

137.  Thirdly, even though there was no certified copy of the Acceptance Letter, D had provided certified true copies of the 1^st LACO Letter and also the 2^nd LACO Letter enclosing a plain copy of the redacted Acceptance Letter.

138.  In the above circumstances, I do not see how the absence of a certified unredacted copy of the Acceptance Letter will give rise to a real risk of a successful assertion of an encumbrance against the Shop Space after completion thereby rendering D’s title to the Shop Space defective or doubtful and I also cannot see what purpose can be served by a statutory declaration by a Land Officer to state why the 1^st LACO Letter was redacted.  

139.  As for the Offer Letter, I accept that there was no other evidence as to the terms and conditions in the Offer Letter save the payment of Crown rent in the recital of the 1967 Assignment.

140.  The Provisional Agreement was signed on 21 November 2019, and D sent the draft SPA to P on 3 December 2019.  It would appear that it was at about this time that D wrote to the LACO/Hong Kong Lands Department.  LACO had referred to their earlier letter dated 10 December 2019 which appeared to be a holding reply.  Although the letters from P were not produced nor was LACO’s letter of 10 December 2019, from the 1^st LACO Letter, it would appear therein that P had sought the original or certified copy of the Offer Letter and the Acceptance Letter.

141.  In the 1^st LACO letter, LACO stated that they did not have the original or certified copy of the Offer Letter from the then Land Officer to Wu. 

142.  Mr Lau had argued as what LACO said was only that the LACO office did not have the original or certified copy of the Offer Letter, the original or certified copy could be kept in other offices of the Lands Department, such as the archives, or warehouse or other departments and that D should have followed up further in their enquiry. 

143.  The LACO office is as its full name indicates, the Legal Advisory and Conveyancing Office.  In fact, those LACO Letters showed they were from “Legal Advisory and Conveyancing Office/Hong Kong Lands Department”, which means LACO or the Hong Kong Lands Department.  The letters from LACO were signed by a Miss Sabrina Chan and below her signature were the words “Solicitor for the Director of Lands”.  This would in my view mean that the letters were sent on behalf of the Lands Department.  What LACO had said in the 1^st LACO Letter clearly indicated that they had reviewed their file record.  There was no evidence that LACO would keep all the documents in the files in relation to each property physically in their office on the 18 floor, Southorn Centre in Wanchai.  Indeed, LACO had stated that a copy of the Acceptance Letter was “retrieved”.  In any event, in my view, if LACO had stated that they did not have the original or certified copy of the Offer Letter, the statement would have been made on behalf of the Lands Department and not merely confined to only the office of LACO as contended by Mr Lau.

144.  Anyway, in light of what I had said earlier in this judgment, and in light of those deeming provisions in section 14 of CPO, I do not see how the absence of the original or a certified copy or any copy of the Offer Letter will give rise to a real risk of a successful assertion of an encumbrance against the Shop Space after completion thereby rendering D’s title to the Shop Space defective or doubtful and I do not see how a statutory declaration would be relevant.  

145.  Further, in D’s Final Letter, D gave a substantive reply explaining why they were not in a position to supply certified true copies of the Offer Letter and the unredacted Acceptance Letter and had referred P to the Kingdom Miles case.  D’s Final Reply was on 2 March 2020, which was 3 days before the Completion.  There being no evidence to the contrary, I am of the view that P had had sufficient time to consider the contents of D’s Final Reply but on 4 March 2020, P replied merely to state that D had failed to prove good title and failed to satisfactorily answer P’s Requisitions.  P did not respond to D’s points with reference to the Kingdom Miles case.

146.  Having considered all those letters, I have come to the view that D had adequately answered Requisitions 3 and 7.

CONCLUSION 

147.  As have been said, a good title needs not be a perfect title.  Having considered all the circumstances of this case, I am of the view that D was able to show and give a good title.  I thus decline to grant the declarations and orders sought by P.  P’s claims in the original summons are dismissed.

148.  There were no counterclaims by D.  In Mr Luk’s affirmation, he only sought the dismissal of P’s claims.

149.  Costs normally follow the event.  I therefore order P to pay D’s costs of and incidental to these proceedings, to be taxed if not agreed, on party and party basis.  This is an order nisi which will be made final after 14 days.