KO LAN v. HOO MAN KUEN MARTIN AND ANOTHER

HCMP 4416/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CIVIL JURISDICTION

MISCELLANEOUS PROCEEDINGS NO. 4416 OF 1998

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J U D G M E N T

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1. This action arose out of a sale and purchase agreement dated 25th May 1998 in respect of the property known as Flat D, 14th floor, Block 11 Whampoa Garden Site 11, No. 6 Tak Hong "Street, Kowloon, Hong Kong (hereinafter called the "property"). The Plaintiff was the purchaser and the Defendants were the vendor. The date of completion under the agreement was 31st August 1998. The purchase price was $3,288,000. A deposit of $50,000.00 was paid before the signing of the agreement. A further deposit in the sum of $278,800.00 was paid to the vendor's solicitors to hold as stake holder and under clause 4(2) of the agreement, this sum was to be released to the Vendor when the solicitors confirmed in writing that the balance of purchase price was sufficient to discharge all monies payable on completion for the redemption of the Mortgage Memorial No. 7167791.

2. For the purpose of this hearing, the material clauses in the agreement were clauses 9 and 10(1). They were in the following terms:

"9. (1) The Vendor shall give and shows a good title to the Property at his own expense in accordance with section 13 of the Conveyancing and Property Ordinance (cap 219).

(2) Such of the documents of title as relate exclusively to the Property shall be delivered to the Purchaser on completion.

(3) The costs of verifying the title by inspection and examination, including search fees, shall be borne by the Purchaser who shall also, if he requires certified or attested copies of any documents in the Vendor's possession relating to other premises retained by the Vendor as well as to the Property, pay the cost of such certified or attested copies.

(4) If the Vendor is required to furnish before completion any title deeds documents which the Vendor is obliged to supply under clause 9(1) hereof to the Purchaser but not in his possession, the Purchaser shall accept copies of such title documents coupled with an undertaking from the Vendor's solicitors to furnish certified copies of such title deed documents from the relevant office, department or authority or the relevant solicitor's firm(s) within 30 days after completion.

10. (1) Any requisition or objection in respect of the title or otherwise arising out of this Agreement shall be delivered in writing to the Vendor's solicitors within seven(7) working days after receipt of the title deeds and documents by the Purchaser's solicitors and every requisition or objection not so delivered shall be deemed to be waived the Purchaser shall be deemed to have accepted the Vendor's title. Any further requisitions to follow from a reply of the Vendor to the requisitions so raised shall be made by the Purchaser with seven (7) working days from the said reply failing which the said reply shall be deemed to have been accepted and no further requisitions shall be raised, time being in this respect of the essence of this Agreement. Notwithstanding anything contained to the contrary, if such title deeds and documents shall not have been delivered to the Purchaser's solicitors seven (7) working days before the date of completion, either party may by giving written notice to the other postpone the date of completion to a date upon the expiration of seven (7) working days from the date of receipt of such title deeds by the Purchaser's solicitors."

3. Under cover of a letter dated 28th May 1998, the vendor's solicitors sent to the Purchaser's solicitors the title deeds listed out in a schedule annexed to the letter. The letter however specifically said that "We are retaining Charge Memorial No. 7167791 for the purpose of preparing the necessary Release/Discharge upon completion". I would pause here to note that this Charge was the Charge executed by the Defendants in favour of the Po Sang Bank Ltd. on the day when they acquired the Property on 22nd April 1997. It is common ground that this Charge would have to be released on completion of the sale and purchase.

4. By a letter dated 1st June 1998, the purchaser's solicitors raised 2 requisitions. The first one related to the supply of an assignment memorial no. 6984863 and a mortgage memorial no. 6984864. This request was duly complied with. The second requisition was in the following terms:

"Deed of Release Memorial no. 7167789

In the above Deed it was only signed by a Mr. Raymond Yee Shin Lyn for and on behalf of the Hong Kong and Shanghai Banking Corporation Limited. As the Release is a deed, please kindly have it rectified to the effect that the same be executed under the seal of the bank. The above original Deed of Release is returned herewith for your rectification and re-registration."

5. The Release enclosed was one which on its face was a release by the Hong Kong and Shanghai Banking Corporation Limited dated 22nd April 1997. It was purported to be a release of a mortgage dated 28th February 1997 registered in the Land Office by memorial no. 6984684. What transpired was that after receiving the requisition, the vendor's solicitor sent the same to the previous solicitors for their comment and action. By a letter dated 3rd July 1998, the vendor's solicitors sent to the purchaser's solicitors (1) Release memorial no. 7167789 with certain amendments thereon initialed by one Tam Chan Lai Han Annie, (2) an explanatory letter to the land registry by Messrs. Liu Chan & Lam dated 25th June 1998, (3) a certified copy of a power of attorney dated 21st August 1997, and (4) a cheque for the sum of $450.00 in favour of the Government being the re-registration fee of the "rectified" Release. In the letter of 3rd July 1998, the vendor's solicitors also said that the documents were sent to the purchaser's solicitors for their further action. Presumably, they meant to ask the purchaser's solicitors to cause the "rectified" release to be re-registered.

6. The purchaser's solicitors were not satisfied with the answer. By a letter dated 3rd July 1998 they returned the document making specific comment that the release was dated 22nd April 1997 whilst the power of attorney enclosed was dated 21st August 1997 and that the same was given in favour of Mrs. Tam Chan Lai Han Annie. The letter further said that the documents were returned to the vendor's solicitors for clarification. Precisely what objection was taken by the purchaser and what clarification was sought were not spelt out in the letter. However it is fair to say that from the terms of the letter, the purchaser was saying that the rectification was not effective because it was done by Mrs. Tam Chan Lai Han Annie and not Raymond Yee Shin Lyn and that the power of attorney in favour of Madam Tam was executed after the execution of the Release by Raymond Yee Shin Lyn.

7. By a letter dated 19th August 1998, the purchaser's solicitors raised 4 further requisitions. First, they asked for the certificate of compliance in respect of Conditions of Exchange No. 11766 to prove that the grantee was entitled to a grant of Government Lease in pursuance of section 14(3) of the Conveyancing and Property Ordinance. Secondly, the purchaser asked for the whereabouts of Charge Memorial no. 7167791 and also for a copy of that charge. The purchaser asked that the Charge be released on or before completion and that the original Charge Memorial No. 7167791 together with the relevant discharge or release should be handed over to the purchaser on completion. Thirdly the purchaser asked for the amount still due and owing under the Charge Memorial no. 7167791. Fourthly, the purchaser asked for evidence to prove that all Government rent in respect of the property had been paid up to date.

8. By a letter dated 21st August 1998, the vendor's solicitors again sent to the purchaser's solicitors the same documents sent earlier and returned by the purchaser's solicitors on 3rd July 1998 but this time, instead of sending only one copy of certified power of attorney, the vendor's solicitors enclosed 2 certified copy of power of attorney. It is now common ground that the 2 power of attorney enclosed were the power of attorney in favour of Madam Tam and Raymond Yee respectively. They were in identical terms except the date. Plainly the vendor made no attempt to answer the requisitions raised in the purchaser's solicitor's letter of 19th August 1998.

9. The purchaser's solicitors did not accept the documents sent was a sufficient answer to their requisitions. They wrote on 22nd August 1998 saying inter alia that "we consider that the interest of the property has never been vested in the Borrowers Leung Kit Ming Stella and Leung Kit Ting Kitty at the relevant date of the said Deed when the attestation clause was made in the manner as such". They also took the point that the errors of the deed of release was material and would affect the title to the property.

10. In relation to the requisitions raised in the letter of 19th August 1998, the vendor's solicitors responded to the same on 22nd August 1998. The point taken by the vendor's solicitors was that the requisitions were raised out of time and they were not prepared to answer them. This was the stance of the vendor's solicitors through out in relation to these 4 requisitions raised in the letter of 19th August 1998. The purchaser's solicitors in their letter dated 24th August 1998, took the point that the 7 working days period for the raising of requisitions under clause 10 would not run until all the title documents were delivered and as the documents requested for were title documents which ought to have been delivered and were not yet delivered, time did not start to run at all. Although there were some without prejudice discussions between the solicitors on these requisitions, I was told by the parties that I should ignore them for the purpose of this hearing.

11. There were further exchanges of correspondence between the solicitors on the requisition relating to the Release. By their letter of 24th August 1998, the vendor's solicitors asked the purchaser's solicitors to explain the basis of their contention that the property were not properly vested on the mortgagors, Leung Kit Ming Stella and Leung Kit Ting Kitty and had also requested for an explanation for their contention that the rectified Release did not serve its purpose. The vendor's solicitors also said that it was beyond doubt that the relevant mortgage was duly discharged and/or released. They also asserted that the Release was rectified in the manner as suggested by the purchaser's solicitors in their letter of 1st June 1998. In reply, the purchaser's solicitors expressed the view that the release was not validly executed and hence the interest of the property has never been vested in the mortgagors at the relevant date of the release and the subsequent rectification did not cure the defect or operate to vest "the interest of the property" in the mortgagors. They also referred to the fact that originally the release was executed by Raymond Yee but the rectification of the errors was initialed by Madam Tam and queried the regularity of such rectification. In answer to all these the vendor's solicitors by their letter of 27th August 1998 took the following points:

(1) All money advanced under the mortgage were fully settled. The mortgagee had executed at least a receipt evidencing that all the money advanced was fully settled. The mortgagee was thus estopped from denying that the money advanced was not settled. Once the money advanced were fully paid, the mortgagee had no interest in the property. The vendor's title was being fed after the amendment to the Release.

(2) The amendments to the release were and properly made and were duly initialed. The purchaser had not suggested any other way of curing the defects of the document.

(3) The party to the deed of Release was the lender bank and not the attorney. There was no rule of law that the lender must instruct the same attorney to rectify the mistakes on the deed

12. The sale and purchase was not completed on 31st August 1998. The purchaser maintained that since the requisitions had not been properly answered, the vendor was in breach and the purchaser was entitled to rescind the agreement. The vendor maintained that all the requisitions were answered and the purchaser had repudiated the agreement in failing to complete and the vendor was thus entitled to forfeit the deposit paid.

The purchaser issued this originating summons and asked for inter alia a declaration that the requisitions had not been sufficiently answered and that a good title had not been shown. The purchaser also sought to recover the deposit paid.

13. There were 3 outstanding requisitions between the parties: (1) the production of the Mortgage Memorial no. 7167791, (2) the supply or production of the certificate of compliance or to adduce evidence to show that in spite of the absence of the certificate of compliance, no enforcement action or re-entry will be taken or exercised by the Government, (3) the requisition in relation to the "rectified" Release. However as the vendor's answer to (1) & (2) was that the requests were made out of time, there were only effectively 2 issues before me viz. whether the requisition for the mortgage and the certificate of compliance were waived under clause 10(1) and whether the requisition in relation to the release was sufficiently answered.

Whether the requisition for the mortgage and certificate of compliance was waived.

14. Since the decision of Hillier Development Ltd. v Tread East Ltd. [1993] 1 HKC 285, it is settled law in Hong Kong that where the agreement provides that any requisition not raised within a specified period is deemed to be waived, the purchaser must raise all the requisitions which he could raise from the documents and information provided to him by the vendor within that specified period. If he should fail to do so, he will be bound by the contractual provision and must be treated as having waived any requisition which he could have raised but not raised within that period. It does not matter that the requisition he seeks to raise subsequently would go to the root of title. In this case, the existence of the Mortgage Memorial no. 7167791 was brought to the attention of the purchaser by the vendor's solicitors in their letter of 28th May 1998 when a number of title deeds were delivered. Thus it is plain that had the purchaser wished to ask for that mortgage or a copy thereof, the purchaser would be in a position to do so within the 7 working period. Again the requisition relating to the certificate of compliance plainly arose out of the provisions in the Conditions of Exchange which was sent to the purchaser's solicitors on 28th May 1998. Thus likewise, the purchaser would have been able to raise the requisition in relation to the certificate of compliance. The vendor thus contended that the purchaser had waived the requisitions for these documents.

15. Counsel for the purchaser submitted that on true construction of clause 10 of the agreement, the 7 working days period would not start to run until all the title deeds and documents were delivered. He distinguished the case of Hillier Development Ltd. on the ground that there, the contract provided that the requisitions were to be made within 5 days after the delivery of "sufficient title deeds" to the purchaser. He pointed out that clause 10(1) in the present case provided that any requisition or objection shall be delivered within 7 working days after receipt of "the title deeds and documents" by the purchaser's solicitors. His point was that in Hillier Development's case, time could start running even if some of the title deeds were not yet delivered whilst in the present case when the clause spoke of "the title deeds and documents", it must mean all the title deeds and documents which the vendor was obliged to delivered. He contended that as the certificate of compliance and the mortgage in question were plainly "title deeds and documents" and they were not delivered, then the 7 working days would not start to run. He further pointed out that unless the words "title deeds and documents" would mean all the title deeds and documents which the vendor would be liable to produce, the vendor could just produce one title deed, such as the Government Lease, to make the time limited for the raising requisition to start running.

16. I am unable to accept this submission for 2 reasons. First, if the contention is right, it would mean that there was in fact no time limit for requesting for further title deeds or documents at all. The words "title deeds or documents" were very wide. They include those documents which could be properly described as "title deeds" as well as any other documents so long as they were relevant for the purpose of showing good title. Hence on this contention, so long as the title deeds or documents requested for related to the proof of good title, the purchaser could ask for them at any time before completion. This would wholly defeat the purpose of any provision to limit the time for the raising of requisitions. Secondly I am of the view that clause 10(1) must be construed as a whole. The 2nd sentence to clause 10(1) plainly envisaged the situation that there would be requisition raised upon the receipt of title deeds and documents. When these requisitions were answered, the purchaser may find it necessary to raise further requisitions arising from the answer. Thus if the vendor should fail to deliver all the necessary title deeds then the purchaser would be able to request for the missing ones. When the same are supplied, the purchaser will have another 7 working days to raise further requisitions arising from those documents supplied in answer to the request. The purchaser's contention, if correct, would in effect mean that the 2nd sentence in clause 10(1) would only operate when the requisition raised or answer thereto do not relate to supply for any further title deeds or document. I see no reason for such contention. In my view, the effect of the first sentence of clause 10(1) is that any requisition or objection in respect of title which the purchaser could raised from the title deeds and documents delivered by the vendor must be raised within 7 days from the delivery of those title deeds and documents.

17. Thus in my view, the vendor is right that the requisition for the mortgage and the certificate of compliance had been waived by the operation of clause 10(1) of the agreement.

18. The purchaser however contended that even if the requisition in relation to the Charge memorial No. 7167791 was caught by clause 10(1) of the agreement, the vendors were estopped from relying on clause 10(1) because by telling the purchaser's solicitors that the vendor's solicitors was retaining that Charge for the purpose of preparing the release upon completion, the vendors' solicitors had represented to the purchaser's solicitors that the vendors' solicitors would be prepared to deliver the Charge to the purchaser's solicitors once the preparation of the release was completed and if the preparation should take more than 7 working days the vendor would not rely on clause 10(1) to decline supplying the Charge to the purchaser. I do not agree with such contention. I am unable to read into the letter of 28th May 1998 any representation that the vendor would be prepared to entertain requisitions on the Charge retained out of the 7 working days period. At any rate, it must be recalled that what the purchaser had requested for was only a copy of that instrument. There was no reason for the vendors not being able to supply a copy of the charge to the purchaser even though the original of the charge was required for the purpose of preparing the release.

19. The vendors further submitted that in any event the charge memorial no. 7167791 need not be produced because it was plain from the clause 4(1) of the agreement itself that the vendor would be obliged to discharge the charge and to obtain a release at its own expense on completion. Hence it was argued that whatever was contained in the charge, it would not affect the title which the purchaser would be able to obtain on completion. I do not agree to this contention. While there could not be a clog on the equity of redemption altogether, there is nothing to stop the parties to any mortgage from agreeing to some reasonable restraints on the period during which the mortgage would remain irredeemable. In my view, the purchaser was at least entitled to look at the charge to satisfy itself that the charge was redeemable upon completion.

The Release memorial no. 7167789

20. There can be no doubt that the purchaser was entitled to query the release before the same was rectified. The mortgage dated 28th February 1997 (memorial No. 6984864) was a legal charge in favour the Hong Kong & Shanghai Banking Corporation Ltd., mortgagee bank. By section 2 the Conveyancing and Property Ordinance, a legal charge is a legal estate. By section 4(1) of the same Ordinance, a legal estate in land may be created, extinguished or disposed of only by deed. Thus it would require a deed to release the legal charge. The release dated 22nd April 1997 was obviously not a deed. There was no seal attached to the instrument and the instrument was not expressed to have been sealed. Thus it is not effective to release or extinguish the legal estate created in favour of the Bank. Accordingly the requisition raised in letter of 1st June 1998 was amply justified.

21. The vendors however contended that the requisition although justified was sufficiently answered by the rectification done to the instrument. It is now clear that the rectification was done by amendment to the testimonium of the deed so that instead of reading "signed by Mr. Raymond Yee Shin Lyn for and on behalf of the Lender whose signature(s) is/are verified by...", the testimonium was amended to read "SIGNED SEALED AND DELIVERED by Mr. Raymond Yee Shin Lyn the lawful attorney of the Lender whose signature(s) is/are verified". The person signing on the deed was Raymond Yee Shin Lyn. There was no new signature put on to the deed after the alteration to the testimonium aforesaid save that the alterations were authenticated by initials of Madam Tam Chan Lai Han Annie. It is important to note that Madam Tam did not sign the deed again. There was a seal being affixed to the instrument on the occasion of the rectification. This was plainly not the seal of the Bank.

22. Before me, the purchaser contended that the rectification was not valid and that the rectified release did not have the effect of a valid release of the mortgage. It is fair to say that the purchaser's solicitors had not given very elaborated argument in support of this contention in their letters. It is however clear from the letters that they did not accept that the deed as rectified had the effect of a valid release by the Bank. If the purchaser's contention that the deed as rectified was still an invalid release is right, I do not think that the vendor could complain that the purchaser's solicitors had not given them the legal basis for such contention or had given a wrong legal reasoning; so long as the vendor had not been misled and prejudiced by such conduct of the purchasers.

23. I am of the view that the Release as rectified was still invalid. It is plain that to be valid, the Release would have to be a release by the Bank or by a lawful attorney of the Bank acting in that capacity. On the face of the deed, it purported to be an instrument of the Bank executed by its attorney. Thus this is not a case where the deed was purported to be executed in accordance with Section 20(1) of the Conveyancing and Property Ordinance. The material legislative provision is section 20(2) which provides that -

"(2) Where a person is empowered to execute a deed by a corporation, he may execute the deed as agent by signing the name of the corporation or his own name and by affixing his own seal".

Assuming that both Raymond Yee and Madam Tam were duly authorised attorney of the Bank, the release as rectified could not satisfy the requirement of Section 20(2). If it is said that the Deed was executed by Raymond Yee, it was plain that he did not affix his own seal or any seal to the instrument although he signed the deed in his own name. In so far as Madam Tam was concerned, although it could be said that the seal she affixed to the deed was her own seal, she never signed on the deed. Her initials at the testimonium were merely to authenticate the alterations and were not intended to be her signature for the purpose of execution of the deed. I could not read Section 20(2) as having the effect that where a corporation empowered 2 attorneys to act on its behalf, a deed of the corporation could be executed by one attorney signing his own name and the other attorney affixed his own seal to the instrument. I should add that Section 6(1) of the Powers of Attorney Ordinance would not assist the vendor in this case.

24. In my views the proper way to rectify the defects in this Release was to re-execute and re-deliver the deed in the manner either in accordance with Section 20(1) or 20(2) of the Conveyancing and Property Ordinance.

25. As an alternative argument, the vendors contended that in fact the release did not have to be in the form of a deed and as the release contained an acknowledgement that all monies due under the mortgage had been repaid, it was a good receipt and a good release. I do not think this is right. I shall deal with this argument more fully in the last part of this judgment.

26. As I have come to the view that the rectified release was not a valid deed of the Bank, it is not necessary for me to express any view on whether the terms of the power of attorney in favour of Madam Tam was sufficient to enable her to rectify the release. However as the point was extensively argued by counsel, I would also express my view on this matter.

27. Counsel for the vendors relied in particular on clause 3 and clause 4(iii) of the Power of Attorney which said:

"3. to execute and to sign, seal, deliver and receive all deeds, contracts, receipts, acknowledgements, notices, documents, letters, agreements, memorials, releases, reassignments, discharges, consents and instruments of any nature whatsoever which the Attorney may consider necessary or desirable in connection with the exercise of any powers conferred hereby;

4(iii) the Corporation undertakes to ratify all that the Attorney shall do or cause to be done in the exercise or execution of the power and authorities contained in this deed."

There could be no dispute that clause 3 was sufficient to authorise Madam Tam to execute a release on behalf of the Bank. In my view, this clause would by necessary implication also authorise her to make and authenticate any alterations to an instrument signed or execute by her. The dispute between the parties centered on whether this clause was wide enough to enable her to rectify any instrument not originally signed or made by her. I think it was wide enough. If she was given the power to sign or to execute a document on behalf of the Bank, I do not see why that power would not be wide enough to enable her by signing or initialing on an instrument to perfect it as instrument of the Bank.

28. However the purchaser's argument went a step further. It was argued that even if Madam Tam would have the power to rectify an instrument to make it a release of the Bank, she did not have the power to effect the rectification in the present case because what she did here was not to re-seal or re-deliver the release as a deed of the Bank, but rather to make it a deed executed by Raymond Yee in his own name as attorney of the Bank. On the face of the rectified release, the instrument purported to take effect on 22nd April 1997 and not on the date when she initialed the alterations. As the power of attorney in her favour was only dated 21st August 1997, she could not create any instrument on behalf of the Bank taking effect before she was granted the power. I am of the view that this was a sound objection. If Madam Tam had simply resealed and re-delivered the release, the instrument would simply take effect on the date of the re-sealing and re-delivery. However what she purported to do here was to make the instrument to take effect on the original date when Raymond Yee signed on the document. She did not have any power to do that. I do not think her lack of power could be cured by the Bank's undertaking to ratify the acts of the attorney in clause 4(iii) of the power of attorney.

29. The vendors contended that as the point that the release was dated before the power of attorney in favour of Madam Tam was not raised in correspondence and was only taken during the hearing, the same should not be open to the purchaser. I am of the view that as the point of the validity of the release had been squarely raised generally in requisition, the purchaser was entitled to rely on this point to support the contention that the rectified deed was not valid even though the same was not raised earlier. Of course, the position would be entirely different if it could be shown that had the point been taken earlier, the vendor would have a good answer to it.

30. Finally the vendors argued that even though the release (both before or after rectification) was defective, there was no real risk of any action taken by the Bank to enforce the legal charge as it was clear that the Bank had been fully repaid and the Bank would have no interest in the property. In the circumstances, it was said that a good title was shown in accordance with the test laid down in the well known case of MEPC Ltd. v Christian Edwards [1981] A.C. 205.

31. I agree that it is obvious that the Bank had been fully repaid. This is so because the release contained the clear statement "Now this Deed witnesseth that the Lender hereby acknowledges that all monies payable under the said Deeds have been paid and satisfied". Even if this instrument did not amount to a deed, at least it was an instrument under hand of a duly authorised attorney of the Bank namely Raymond Yee acknowledging that all monies had been repaid. Furthermore the contents of the Bank's letter of 20th June 1998 and the fact that the Bank was willing to ask its attorney Madam Tam to "rectify" the instrument to make it a deed of the Bank were also clear evidence to show that the Bank would consider that all monies were repaid and that the Bank would have no further interest in the property. I therefore agree that the risk of any action to be taken by the Bank under the legal charge dated 28th February 1997 was nil.

32. However the fact that there was no risk of any enforcement action by the Bank does not provide a complete answer in the present case. It must be remembered that under the agreement, the purchaser was entitled to a legal estate in the property agreed to be sold free from encumbrances (see Chen Paul v Lord Energy Ltd. [1998] 1 HKC 702 at 709A; also pages 7 & 12 of the transcript of the judgment of Chief Justice Li in the decision of the same case in the Court of Final Appeal: FACV No. 11 of 1998). Without a valid release, even though the mortgagor had fully repaid the indebtedness under a mortgage by way of legal charge, his interest in the land would still be subject to the legal charge, which is a legal estate. He would not be in a position to assign to his purchaser the legal estate in the property free from encumbrances. No doubt in such circumstances, he would be in a position to call for the legal title by calling for a release. However without such release, the purchaser is entitled to refuse to complete.

33. Thus in the present case, I have no doubt that the vendors or their predecessors in title Leung Kit Ming Stella and Leung Kit Ting Kitty, were in a position to call upon the Bank to perfect the Release. Had the vendor undertook to cause such release to be obtained or perfected, I have no hesitation to hold that the requisition had been sufficiently answered. However I do not think that the vendor was entitled to insist that the release as rectified was a valid release and that a good title had already been shown without any further act to be done to obtain the legal title or to remove the legal charge.

34. It is convenient for me now to explain why I reject the Vendor's argument that the release need not take the form of a deed and that the instrument under hand signed by Raymond Yee was a sufficient release of the legal charge dated 28th February 1998. The crux of the Vendor's argument was that (1) the instrument signed by Raymond Yee was a clear receipt by the Bank through its authorised attorney, and (2) by reason of section 55 of the Conveyancing and Property Ordinance a receipt given by a mortgagee need not be under seal. Hence it was argued that section 4(2)(f) of the same Ordinance applied to such receipt and accordingly section 4(1) did not apply to make it mandatory that the release of the legal estate in the form of legal charge must be by deed. Hence it was contended that the document would constitute a good release even though the same was not under seal.

35. I am unable to accept this argument. Section 55 of the Ordinance read:

"55. (1) A receipt in writing of a mortgagee or a receiver shall be a sufficient discharge for the money arising under a power of sale or for any money or security comprised in the mortgage or arising under it; and a person paying that money or transferring that security shall not be concerned to inquire whether any money remains due under the mortgage.

(2) A receipt mentioned in subsection (1) need not be under seal."

In my judgment, section 55(1) only provides that a receipt in writing given by the mortgagee will constitute a good discharge to the person paying the money. The discharge referred to in this section is the discharge of the payment obligation when the property charged is sold under a power of sale. It does not have the effect of releasing the legal estate which comes into existence when the legal charge is created. It is only a provision directed for the protection of persons making payment to the mortgagee from any allegation that the mortgagee had acted improperly in selling the mortgaged property or from dealing with the proceeds.

36. Of course, had the release and receipt signed by Raymond Yee been annexed to the mortgage deed dated 28th February 1997 or had the words acknowledging the receipt of all monies due under the mortgage were repaid been endorsed on the mortgage deed itself, then under section 56(1) the receipt would "operate without any surrender or release as a discharge and also as a reassignment of the mortgage property from all principal money and interest secured by, and from all claims under" the mortgage. If this should be the case, then section 4(2)(f) will apply and there would be no requirement to have a separate release by deed. However the release so signed by Raymond Yee was not so annexed to the mortgage nor was it so endorsed on the mortgage.

37. Accordingly in my judgment the plaintiff is entitled to a declaration that requisition 2 contained in the plaintiff's solicitors' letter of 1st June 1998 has not been sufficient answered, and also a declaration that a good title has not been shown. I will also grant the plaintiff the relief in paragraphs (1) and (4A) of the amended originating summons. I will also order that the defendant shall repay the deposit received to the plaintiff. The parties were in agreement that cost should follow the event in this case, I order that the defendant shall pay the plaintiff's cost of this action.