KWOK WAI FAN v. TSE KIN CHUNG

1997, No.M.P.3154

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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The application

1. This is the hearing of a Vendor and Purchaser summons issued by the Plaintiff (Purchaser) in which he is seeking the following relief :

(1) A declaration that the requisitions as to title of the property that the parties had agreed to sell and buy had not been sufficiently answered by the Defendant (Vendor);

(2) A declaration that a good title to the property had not been shown; and

(3) A declaration that the Plaintiff is entitled to rescind the Sale and Purchase Agreement of the property and also recovery of the deposit.

Mode of proceedings

2. Before I embark on the issues, it is necessary to comment again on the mode of proceedings instituted by the Plaintiff. Apart from setting out the reliefs sought by the Plaintiff, the Originating Summons does not contain any information at all about the issues between the parties : matters affecting title or the requisitions raised were not disclosed. The issues could only be discovered halfway into the affidavit and by reference to the correspondence exhibited to the affidavit. This is not right. The Originating Summons must identify the issues clearly and succinctly either in the body of the summons or by way of a schedule. I understand other judges had likewise expressed their disapproval of the practice I had earlier mentioned. In future, plaintiff's solicitors are expected to be ordered to redraft the originating summons and will be penalised by costs personally if the direction is not observed.

The requisitions

3. In this case, the Plaintiff entered into a Sale and Purchase Agreement dated 27th August 1997 with the Defendant in respect of the property known as Flat C, 11th Floor, Tower 15, Tai Po Centre, Tai Po, New Territories, Hong Kong ("the Property"). Among the title deeds forming the chain of title is an assignment dated 3rd September 1987 ("the Assignment"). Four parties were involved in this Assignment, namely, Salen Properties Limited ("Salen") as the vendor, two confirmors and the purchaser, Mr Chung.

4. Requisitions of title were raised on this document. In the letter dated 20th September 1997, the Plaintiff's solicitors stated that the Assignments failed to state :

(1) the vendor assigned the property to the purchaser; and

(2) the receipt of the 2nd Confirmor of the purchase money.

Missing words

5. In Storey on Conveyancing (4th Edition) the authors stated that :

"(vi) The operative words and statement of the seller's capacity

The crucial part of the conveyance is the phrase that states that the legal estate in the property is passing from the seller to the buyer. In the traditional form of conveyance this will follow the consideration and receipt in the first clause. In a more modern conveyance it will be included in a separate clause. The usual wording is 'the seller conveys' but any words showing the seller's intention to pass along the legal estate to the buyer will suffice."

The recital to the Assignment stated that Salen was the beneficial owner of the property and had agreed to sell to the 1st Confirmor the property for the sum of $313,000; the 1st Confirmor had agreed with the 2nd Confirmor for the sale of the same property to the 2nd Confirmor for the same amount; the 2nd Confirmor had agreed with Mr Chung for the sale of the property for the sum of $350,000. The two confirmors requested Salen to execute the Assignment and assign the property direct to Mr Chung which Salen had agreed to do. Then the Assignment went on to state :

"In pursuance of the agreement referred to above and in consideration of the sum of DOLLARS THREE HUNDRED AND FIFTY THOUSAND ($350,000.00) Hong Kong Currency as to $313,000.00 paid by the Purchaser to the Vendor at the request and by the direction (hereby testified) of the First Confirmor and the Second Confirmor (the receipt whereof the Vendor is hereby acknowledged) and as to $37,000.00 being paid by the Purchaser to the Second Confirmor and the Second Confirmor as Confirmors

ASSIGN and CONFIRM to the Purchaser the Property TO HOLD the same unto the Purchaser absolutely ..."

6. What is missing from the words of grant are the words "The Vendor" before the words "ASSIGN and CONFIRM to the Purchaser the property". The Plaintiff further complained that the Assignment did not specify in what capacity Salen was selling. Clearly the intention of Salen was to assign the property as its beneficial owner to the Purchaser. This is apparent from the recital. I just cannot see what purpose would be served by Salen executing the Assignment if such was not the intention. The Plaintiff's complaint that the Defendant's title is defective in this regard is misconceived.

Receipt clause

7. Secondly, it is stated that the Assignment did not contain a receipt clause. There was an acknowledgement of receipt by Salen in the sum of $313,000. But in respect of the sum of $37,000, which was the difference of the $350,000 and $313,000 paid by Mr Chung to the 2nd Confirmor and by the 1st Confirmor to Salen, there was no acknowledgement of receipt.

8. In Williams on The Law and Practice Relating to the Contract of Sale of Land and the Title to Land (3rd Edition) at page 598, it was stated that :

"It is not enough that the consideration money is stated to be paid to the vendor by the purchaser. The deed must go on to say that the vendor acknowledges the receipt of the money."

The case of Renner v. Tolley (1893) 68 LT 815 was cited. That case concerns with s.55(1) of the Conveyancing Act of 1881, which stated that :

"A receipt for consideration money or other consideration in the body of a deed or indorsed thereon shall, in favour of a subsequent purchaser, not having notice that the money or other consideration thereby acknowledged to be received was not in fact paid or given, wholly or in part, be sufficient evidence of the payment or giving of the whole amount thereof."

9. The issue in Renner v. Tolley was quite simply whether the absence of an acknowledgement of receipt in a deed constitute a receipt within the meaning of s.55.

10. At the footnote of page 598 of Williams, it was stated that

"The absence of a proper receipt is a defect of title : Forbes v. Peacock (1846) 1 PH 717; and puts the purchaser upon enquiry as to whether the purchase money was paid : Greenslade v. Dare (1855) 20 Beav 284."

11. I have looked at the case of Forbes v. Peacock and referred it to Counsel. The case does not support the proposition made by the learned author.

12. The question of receipt of the purchase money is only relevant to the question of a vendor's lien on unpaid purchase money. Section 18(1) of the Conveyancing and Properties Ordinance provides that :

"18. Receipt in body of an instrument

(1) A receipt for consideration in the body of an instrument shall be a sufficient discharge to the person paying the consideration and, in favour of any other person acting on the faith of the receipt, shall be sufficient evidence of payment ."

This section is a combination of s.67 and s.68 of The Law of Property Act 1925. The authors of Barnsley's Conveyancing Law & Practice (4th Edition) (at page 440) commenting on s.68 of The Law of Property Act stated that the enforceability of a vendor's lien ultimately rests on the doctrine of notice rather than on a purchaser's reliance upon a receipt clause. The prima facie sufficiency of the receipt is displaced if the vendor, having parted with the deeds on completion, registers the lien as a Class C(iii) land charge, for this will give the purchaser actual notice. Similarly, if he retains the deeds their non-availability will constitute constructive notice of the vendor's rights.

13. In the present case the only person who could possibly complain of non-payment of the purchase money was the 2nd Confirmor who made $37,000 out of the transaction. The transaction was carried out over 10 years ago on 3rd September 1987. There was certainly no evidence of any registration of claim arising out of any lien. Leaving aside the question whether such a lien is available to a confirmor, there was not the slightest indication that the 2nd Confirmor had not received the purchase money. On the contrary, the Assignment referred to the $37,000 being paid by Mr Chung to the 2nd Confirmor and the recital stated that the Confirmors requested the property to be assigned directly by Salen to Mr Chung. In the circumstance of the case, I just fail to see why the Defendant's title is in anyway defective in this regard.

Answer to the requisitions

14. The Plaintiff argued that even if the title is not defective, the Defendant had not answered the requisitions properly. I disagree. The Defendant's solicitors had stated that the errors were clerical errors and that they had nothing to do with title. The omission of the words "The Vendor" in words of grant is clearly clerical. The absence of the receipt clause clearly does not affect title.

Other arguments

15. It is argued that in the copy of the Assignment obtained by the Plaintiff's solicitor from the Land Registry, there was alteration to the document. The words "First Confirmor" was inserted after the "Second Confirmor" in the words of grant. This had never been raised by way of requisition previously. The Defendant was never given an opportunity to deal with this in correspondence and the Plaintiff is not entitled to rely on it in this application. Likewise in the course of Mr Shum's submission, reference was made to the absence of Salen's signature in the Memorial. This was not a matter that had been raised in the requisition and this is not a matter that the Plaintiff is entitled to rely in this application.

Conclusion

16. In the circumstances, the summons must be dismissed with costs to the Defendant.

(P. Cheung)

Judge of the Court of First Instance,
High Court