SO DAY WING v. LOU PENG LEUNG AND ANOTHER

HCMP4500/97

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 4500 OF 1997

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J U D G M E N T

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1. This is a Vendor-Purchaser Summons taken out by the Plaintiff, the purchaser of 1/3rd part or share of and in Lot No.489 in Lamma Island Demarcation District No.3, together with the right to exclusive use and occupation of second floor and roof of the building thereon ("the Property") for inter alia, a declaration that the Defendants (i.e. the Vendor) have failed to show good title to the Property and other ancillary reliefs.

The Facts

2. By an agreement dated 10th November 1997 ("the Agreement") made between the Plaintiff as Purchaser of the one part and the Defendants as Vendor of the other part, the Defendants agreed to sell and the Plaintiff agreed to purchase the Property at the price of HK$850,000. Under the Agreement, completion was to take place on 5th December 1997. Time has also been made the essence of the Agreement. Deposits in the total sum of HK85,000 have been paid by the Plaintiff to the Defendants. The material part of the Agreement reads as follows :-

"6. (1) The Vendor shall at his expense prove and give good title to the Property in accordance with Section 13 of Conveyancing and Property Ordinance. The costs of verifying the title by inspection and examination, including search fees, shall be borne by the Purchaser. If any document of title is registered with a Public Office, the Purchaser agrees to accept, as proof of title, copy thereof retrieved and delivered by the Vendor's Solicitors from such Public Office provided that the Vendor's Solicitors undertake to forward a certified copy thereof within 3 months from the date of completion.

(2) Subject to sub-clause (3) below, the Vendor shall deliver to the Purchaser all title deeds and documents in Vendor's possession relating to the Property.

(3) Notwithstanding the above, if any documents of title relate also to other properties of the Vendor the Vendor is entitled to retain such documents and the Purchaser shall pay the Vendor for the charge of production of one set of certified copies of such title deeds. The Purchaser agrees not to make copies thereof without prior written consent of the Vendor."

3. Despite the fact that the Agreement was dated 10th November 1997, by letter of 1st November 1997, the Defendants' solicitors had sent to the Plaintiff's solicitors what purported to be title deeds. However, the root of title document which was supplied was a certified copy of the Schedule of Government Lessees. Neither the Block Government Lease nor a certified copy nor a plain copy thereof was supplied by the Defendants' solicitors to the Plaintiff's solicitors. Accordingly, the Plaintiff's solicitors, by letter of 6th November 1997, raised the following requisition :

" It is noted that the relevant Block Government Lease of the subject lot is missing. The certified true copy of the respective Lessees sent by you is now returned herewith for your replacement of the missing Block Government Lease of the subject lot."

4. Despite this objection or requisition raised by the Plaintiff's solicitors, the Agreement was entered into on 10th November 1997. By letter of 1st December 1997, the Defendants' solicitors replied to that requisition raised by the Plaintiff's solicitors alleging that as the relevant lot number, owners and other particulars are specified in a Schedule of Government Lessees, that document would be sufficient to prove title to the Property. To this, the Plaintiff's solicitors replied by letter on the same day pointing out that the Schedule of Government Lessees was merely a list of the names of the Block Government Lessees, and that the Block Government Lease itself was still missing. To that, the Defendants' solicitors replied by letter dated 4th December 1997 alleging, firstly, that the production of the Schedule of Government Lessees was sufficient for the purpose of s.13 of the Conveyancing and Property Ordinance. Secondly, that as the Schedule of Government Lessees was in the custody of, and certified by the Land Registrar, it would be admissible as the original document as to the truth of its contents by virtue of s.43 of the New Territories Ordinance. And thirdly, the land search record, as certified by the Land Registrar, is admissible evidence of the duration of the Government Lease and the rent thereof.

5. This, however, did not persuade the Plaintiff's solicitors that good title has been shown and by letters dated 4th and 5th December 1997, the Plaintiff's solicitors insisted upon the production of the relevant Government Lease and further pointed out that s.43 of the New Territories Ordinance only concerns admissibility of evidence and would not exempt the Defendants from the production of the Block Government Lease. By reason of this impasse between the parties, completion was not carried through and the Plaintiff now brings this Summons.

The Plaintiff's argument

6. Mr Lee, who appears for the Plaintiff, argues his case as follows. Firstly, he submits that Clause 6(1) of the Agreement has incorporated s.13 of the Conveyancing and Property Ordinance. By Clause 13, he submits that it is incumbent upon the Defendants to produce the root of title document, in this case, the Block Government Lease. Secondly, he accepts that Clause 6(1) of the Agreement has qualified s.13 of the Conveyancing and Property Ordinance, but only to the extent that Clause 6(1) allows the Defendants to produce a plain copy of the Block Government Lease with an undertaking to furnish a certified copy thereof three months from the date of completion. Mr Lee therefore submits that the failure of the Defendants to produce either the Block Government Lease, or a certified true copy thereof, or even a plain copy with an undertaking to furnish a certified true copy within three months from completion, is such that the Defendants have failed to discharge their duty to show and prove good title to the Property.

7. Mr Lee further submits that s.43 of the New Territories Ordinance does not help the Defendants since that section merely provides that a certified true copy of any document in the custody of the Land Registrar would be admissible in evidence in all Courts to the same extent as the original document would be admissible. Therefore, in this respect, s.43 cannot overcome the Defendants' failure to produce either the Block Crown Lease, or a certified copy, or even a plain copy thereof with an undertaking to produce a certified copy three months after completion. On this footing, Mr Lee says that the Plaintiff is entitled to the reliefs now claimed by way of this Summons.

The Defence argument

8. Mr Chong, who appears for the Defendants, accepts that if unqualified, s.13(1) of the Conveyancing and Property Ordinance requires a vendor to produce the Crown Lease, in this case it would be the Block Crown Lease or Block Government Lease. However, Mr Chong submits that in this case s.13(1) has been qualified and that a contrary intention has been shown by the wording of the Agreement in two ways. Mr Chong submits that the first way in which a contrary intention can be seen is that, in Clause 6(1) of the Agreement, the words, "If any document of title is registered with a Public Office..." have the effect that the Plaintiff is obliged to accept, as proof of title, a certified copy of any document registered as a document of title in the Land Registry. Therefore, in the present case, where the Schedule to the Block Government Lease had been registered with the Land Registry as a document of title, the production by the Defendants' solicitors of a copy, duly certified by the Land Registry, is sufficient to discharge the Defendants' duty under the Agreement.

9. Mr Chong further suggests that in construing the effect of Clause 6(1), the Agreement must be construed as a whole and against the factual background, namely, that the Property was land in the New Territories, the subject matter of a Block Government Lease as the origin of title; that no single grantee has ever had a copy of the Block Government Lease or even a counterpart thereof, and, that as a practice, the contents of the Block Government Lease could only be traced from, inter alia, the Land Registry.

10. The second way in which a contrary intention has been shown, submits Mr Chong, is that the wording of Clause 6(2) of the Agreement is such that the duty of the Vendor to produce all title deeds and documents are limited to only those in the Vendor's possession. This, says Mr Chong, is further support for the construction which he says should be given to Clause 6(1) of the Agreement.

11. Mr Chong further submits that if I should be against him in his first two arguments, and that I should find the Plaintiff entitled to rescind the said Agreement, then he further submits that the Plaintiff is not entitled to firstly, the costs and disbursement incurred in the investigation of the Defendants' title; and secondly, that the Plaintiff is not entitled to reimbursement of the estate agent's fees.

12. In so far as the reimbursement of estate agent's fees are concerned, this is conceded by the Plaintiff, and it is no longer pursued. As for the costs and disbursements in the investigation of the Defendants' title, Mr Chong develops his argument in this way. Firstly, he concedes that it is settled law in England that under s.49 of the Law of Property Act, costs and disbursements incurred in the investigation of the title of the Vendor in an abortive sale are recoverable under a Vendor and Purchaser Summons. However, he submits that the position in Hong Kong is quite different from that in England. He says that the authorities in support of the English practice where costs and disbursements in the investigation of title can be recovered by way of Vendor and Purchaser Summons are invariably confined to cases of unregistered land and because in England, where unregistered land is common, incurring costs and disbursements in the investigation of vendor's title is a necessity whenever there is a sale and purchase of unregistered land. However, Mr Chong distinguishes the position in Hong Kong by saying that in Hong Kong all interests in land are registered land, and therefore those authorities have no direct relevance to Hong Kong. For this reason, he argues that the Plaintiff is not entitled to the costs and disbursements arising from the investigation of title. Moreover, Mr Chong submits that the sum of HK$10,635 referred to in paragraph 23 of the affirmation of Yip Wing-kwong, whilst it is stated to be the charges of the Plaintiff's solicitors inclusive of costs and disbursements, there is no clear indication as to what was in fact done insofar as the investigation of the title to the Property is concerned.

Conclusion

13. Dealing first with Mr Chong's first argument, I note that the first sentence of Clause 6(1) of the Agreement states that "The vendor shall at his expense prove and give good title to the Property in accordance with section 13 of Conveyancing and Property Ordinance." Section 13(1) of that Ordinance reads as follows :

"Unless the contrary intention is expressed, a purchaser of land shall be entitled to require from the vendor as proof of title to that land only production of the Crown Lease relating to the land sold."

In the present case, the Crown Lease would be the Block Government Lease. The second observation I note is that the Schedule of Government Lessees, a copy of which was produced to the affirmation of Yip Wing-kwong marked "YWK-16", shows that it is a one-page document divided into columns showing the lot numbers, the serial numbers, the area, the description of lot, the name of owner, both in Chinese and transliteration, the address, Crown rent and a column of remarks. This document is certified as a true copy by the Assistant Registrar of the Registrar General's Department. While I can accept that this document was part of the Block Government Lease, by itself, it does not constitute the complete Block Government Lease. When s.13(1) of the Ordinance provides that a purchaser of land is entitled to require from the vendor the production of the Crown Lease, that must mean the complete Crown Lease, and not just a part of it.

14. The issue, therefore, that I have to decide is whether there has been a contrary intention expressed by the parties such that the Vendor need only produce the Schedule of Government Lessees, or a copy of it, to prove title instead of the entire or complete Block Government Lease. In this respect, I note that the word used in s.13(1) of the Ordinance is "expressed". To my mind, this means that the contrary intention, if there be one, is to be apparent from the wording of the Agreement and not merely to be inferred therefrom. Looking at the wording of Clause 6(1) of the Agreement, I am unable to find any such contrary intention as submitted by Mr Chong, on behalf of the Defendants, to the effect that the Schedule of Government Lessees, or a certified copy or plain copy thereof, would be sufficient to prove and give good title to the Property in lieu of the Block Government Lease. What is apparent from the wording of Clause 6(1) of the Agreement is that it qualifies s.13 of the Ordinance, but only to the extent that the Purchaser would agree to accept a plain copy of any documents of title registered with a Public Office, plus an undertaking by the Vendor's solicitors to forward a certified copy thereof within three months from the date of completion.

15. Furthermore, I do not accept Mr Chong's contention that since the Schedule of Government Lessees is registered in the Land Office, it is thereby treated by the Land Registry as a document of title. In the first place, the Land Registry is not a titles registry in a sense that only documents of title may be registered there. It is clear from s.2 of the Land Registration Ordinance, Cap.128 that all deeds, conveyances and other instruments in writing and even judgments, which may affect land in Hong Kong, can be entered and registered in the Land Registry. Therefore, it does not follow, as argued by Mr Chong, that because the Schedule of Government Lessees has been registered in the Land Registry, it must necessarily, therefore, be treated as a document of title in the form that it has been produced.

16. Moreover, it has been held by Barnett J. in the case of Gatewood Ltd v. Silver Noble Investment Ltd [1992] 2 HKC 473 that a purchaser is entitled to see the document which, subject to s.13, contains complete particulars of the terms upon which he will hold the land. In our present case, the Schedule of Government Lessees cannot, in the form that it is in, comply with that criteria.

17. I therefore cannot, for my part, see how the Schedule of Government Lessees can, per se, be a document of title. In any event, the wording in Clause 6(1) of the Agreement cannot be read to mean that any document registered with the Land Registry is a document of title, which is necessarily the way it has to be read if Mr Chong's contention is to succeed.

18. In the final analysis, therefore, I do not accept Mr Chong's contention that Clause 6(1) of the Agreement has, in any way, qualified the provisions of s.13(1) of the Ordinance save and except to the extent that I have already referred to above.

19. Coming now to Clause 6(2) of the Agreement. There is nothing in the wording there to suggest that the delivery of title deeds and documents by the Vendor is limited only to those in the Vendor's possession relating to the Property. Moreover, sub-clause (2) deals with delivery of title deeds and documents and nowhere in the wording suggests that it has anything to do with proof of title to the Property. In this respect, therefore, I am of the view that sub-clause (2) does not assist the argument put forward by Mr Chong on behalf of the Defendants either. In the circumstances, I come to the conclusion that the Defendants have failed to show and prove good title to the Property, both under the Agreement as well as by law.

20. I note also that Mr Chong did not, in his submission before me, seek to rely on s.43 of the New Territories Ordinance despite the fact that it was relied upon in the answers by the Defendant's solicitors to the Plaintiff's requisitions. For completeness sake, I should state that I agree with Mr Lee's submission that s.43 only deals with admissibility of evidence and, can in no way exempt the Defendants from production of the complete Block Government Lease or a copy thereof to prove title in the absence of any contrary intention expressed pursuant to s.13(1) of the Conveyancing and Property Ordinance.

Remedies

21. I come now to deal with the point taken by Mr Chong in respect of the costs and disbursements expended by the Plaintiff in relation to the investigation of title. Section 12 of the Conveyancing and Property Ordinance provides as follows :-

"(1) A Vendor or Purchaser of land may apply by petition or by originating summons to the court in respect of any question arising out of or connected with any contract for the sale or exchange of land (not being a question affecting the existence or validity of the contract or relating to compensation payable by the Crown or a public body). And the court may make such order upon the petition or originating summons and as to costs as to the court appears just."

These words of s.12 of our Ordinance is borrowed from the wording of s.49 of the Law of Property Act 1925, and just as in England, it gives the Court the power to make such order as to the Court appears just. It has for long been the practice of the Hong Kong Courts that costs and disbursements incurred in the investigation of the title of the Vendor in an abortive sale are recoverable under a Vendor and Purchaser Summons. Undoubtedly, this practice came about by reason of the fact that it is a common feature of conveyancing in Hong Kong that the Vendor's title has to be investigated into quite elaborately and that Courts in Hong Kong have given effect to the words of s.12 of the Conveyancing and Property Ordinance in that it considers as 'just' to make an order for the recovery of costs and disbursements for the investigation of title where good title has not been shown by the Vendor. It is not necessary for me to decide what the practice is in England, suffice it to say that I see no good reason to depart from what has been for long the normal practice in these Courts. In the circumstances, I make the following orders :

1. A declaration that the requisition by the Plaintiff for the production of the Block Government Lease by the Defendants or a copy thereof has not been sufficiently answered by the Defendants.

2. A declaration that good title to the Property has not been shown by the Defendants in accordance with the Agreement.

3. A declaration that the Plaintiff shall be entitled to rescind and/or cancel the Agreement.

4. A declaration that the Plaintiff shall be entitled to the refund of all the deposits paid under the Agreement in the total sum of HK$85,000, together with interest on the said sum of HK$85,000 at judgment rate from the date of service of the Originating Summons to date of payment.

5. An order that the Defendants do pay the costs and disbursements incurred by the Plaintiff in the investigation of title in the sum of HK$10,635.

I will make the usual costs order nisi that costs of the Originating Summons, including the costs of the hearing before me, be paid by the Defendants to the Plaintiff.