SIT SAU MING v. LEUNG MAY CHUN ALISON ALIANCE formerly known as SHAM MAY CHUN

DCCJ4453/2008

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO 4453 OF 2008

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JUDGMENT

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INTRODUCTION

1.  The plaintiff seeks an order for specific performance pursuant to a sale and purchase agreement of 6 carparks.

THE PLAINTIFF’S CLAIM

2.  The defendant was the registered owner of the land and premise known as parking lot nos 7, 15, 24, 25, 32 and 40 of the basement of Tung Lo Court, Nos 136-154 Tai Po Road; No 52-56 Shek Kip Mei Street, Hong Kong (“the 6 carpark spaces”).

3.  In or about 2000, the plaintiff came to know the defendant whilst she was working as a caretaker of the carpark in Tung Lo Court.  On 22 October 2007, they entered into a preliminary sale and purchase agreement, the defendant agreed to sell and the plaintiff agreed to purchase the 6 carpark spaces in consideration of HK$660,000.  At time of signing the preliminary sale and purchase agreement, the plaintiff paid HK$200,000 initial deposit to the defendant.  The plaintiff, through recommendation of a tenant of the carpark, retained Messrs Gary Mak, Dennis Wong & Chang, solicitors (“MWC”) to do conveyancing.  With a view to save costs, the defendant chose to retain the same solicitors.

4.  On 2 November 2007, the parties entered into a formal sale and purchase agreement in the office of MWC.  The plaintiff paid further deposit in sum of HK$120,000 to the defendant and 3^rd deposit in sum of HK$180,000 to MWC as stakeholder. 

5.  The express terms of the sale and purchase agreement were that, inter alia,

(i) the completion would take place at the office of MWC,  on or before 2 January 2008;

(ii) the balance of the purchase price, being HK$160,000, would be paid by the plaintiff to the defendant upon completion.

(iii) Part A, second schedule of the Conveyancing and Property Ordinance, Cap 219 was incorporated as part of the sale and purchase agreement.

6.  The 6 carpark spaces had title defects, namely,

(i) the number of car parking spaces in the Occupation Permit of Tung Lo Court, being the building of which the 6 carpark spaces formed part, (42) was different from that recorded in the deed of mutual covenant (60);

(ii) the control card relating to the number of car parking spaces of Tung Lo Court was unclear as to the total number of car parking spaces;

(iii) the total sum of HK$265,806.00, as outstanding management fee/liability, was due and payable to the incorporated owners of Tung Lo Court by virtue of the ownership of the 6 carpark spaces;

(iv) the 6 carpark spaces were registered with the Land Registry in the defendant’s former name, “Sham Mei Chun” but not in the name of “Leung May Chun, Alison Aliance”.

7.  In light of the title defect of as abovementioned, the defendant attempted to rectify them by the following attempts:

(i) On 2 January 2008, the plaintiff made a statutory declaration in Chinese at the Kowloon City District Office confirming and affirming that she was also known as “Sham May Chun” and that the names “Leung May Chun Alison Aliance” and “Sham Mei Chun” was the same person.  A facsimile copy was received by MWC on the same day.

(ii) On 7 January 2008, MWC wrote to the incorporated owners of Tung Lo Court to seek information with regard to the amount due and payable by the defendant.  The said incorporated owners replied to MWC that the outstanding liability due to them was in the amount of HK$265,806.

8.  Gordon Tsang, the conveyancing executive of MWC was in charge of the sale and purchase; Dennis Law was his supervising solicitor.

9.  At time of the sale and purchase agreement, the ratable value of each of the 6 parking spaces and their aggregate does not exceed HK$240,000.

10.  Prior to completion, MWC advised the plaintiff that the title of the 6 carpark spaces were defective, the plaintiff chose to postpone the completion date from 2 January 2008 to 9 January 2008 for the defendant to remedy the title defects.  The plaintiff signed a waiver, confirming her intention to proceed with completion. MWC then informed the defendant the new completion date.  The plaintiff transferred the balance of the purchase price to MWC on the day of completion.

11.  The defendant failed to complete on 9 January 2008, the plaintiff seeks an order of specific performance.

THE DEFENCE

12.  The defendant said MWC had only raised requisition on the discrepancy of carpark numbers between the deed of mutual covenant.  MWC did not raise any other requisitions. The defendant was only informed of the defect of her name discrepancy on 2 January 2008, she has duly rectified it by making the statutory declaration on the same day.

13.  The defendant denied she had agreed to postpone the completion dated to 9 January 2008.  On 2 January 2008, the defendant submitted the statutory declaration to MWC but was being told the plaintiff was not ready to complete. The defendant then informed the plaintiff she would forfeit the deposits paid if the purchase cannot be completed on this day.

14.  On 3 January 2008, the defendant enquired from MWC and was informed the plaintiff has not paid the balance of the purchase price.  The defendant accepted the plaintiff’s repudiation and had formally terminated the completion. 

THE ISSUES

15.  The issue of this action is whether the plaintiff and the defendant agreed to postpone the completion date from 2 January 2008 to 9 January 2008.  If so, whether the defendant is in breach of the sale and purchase agreement when she had failed to complete on 9 January 2008.  If not, whether the plaintiff is in breach of the sale and purchase agreement being not ready, willing and able to complete on 2 January 2008; and whether the defendant is entitled to accept the plaintiff’s repudiation on 3 January 2008.

THE EVIDENCE

16.  The plaintiff testified and had called Gordon Tsang (“Tsang”) and Ling Ho Fung (“Ling”) as her witnesses.  The defendant testified without calling other witness.

DISCUSSION

The events after signing the formal sale and purchase agreement

17.  The plaintiff testified, Tsang informed her the title defects of the 6 carpark spaces in or about late December 2007.  At that time, she was not too clear about the problem. Tsang had advised the plaintiff that she could rescind the contract because of the title defects.  The plaintiff did not take the advice, she opted to proceed with the completion. As time approached 2 January 2008, she had agreed to postpone the completion date.

18.  On 2 January 2008, the plaintiff met the defendant at the carpark of Tung Lo Court.  The defendant demanded the plaintiff to bear half of the outstanding management fees due to the incorporated owners of Tung Lo Court.  The plaintiff refused.  

19.  On 8 January 2008, the plaintiff signed a waiver with MWC, in that she made clear she had understood the existence of the title defects and had opted to proceed with the completion.  On the same day, the plaintiff paid the balance price of the 6 carpark spaces in sum of HK$160,000 to MWC.

20.  Tsang has been employed by MWC as a conveyancing executive since 1998.  He was working as the same post at time of the purchase.  He explained, in accordance to Rule 5C of the Hong Kong Solicitors’ Practice Rules, both the purchaser and the vendor can retain the same firm of solicitors when the consideration of the sale and purchase agreement was less than 1 million dollars. On approval of his supervising solicitor, Dennis Wong, MWC accepted to be retained for both parties.  Tsang did not prepare a written retainer, he made a note of the fees of this conveyancing transaction being HK$3,900 for the defendant and HK$5,000 for the plaintiff, plus disbursements.

21.  Tsang gave a detailed account of how he has conducted the title investigation.  On 25 October 2007, he discovered there were outstanding charges due and owing to the incorporated owners of Tung Lo Court.  He subsequently ascertained the sum was HK$265,806.  Tsang further discovered the name discrepancy defect when he had found the registered owner of carpark 24 and 25 was Leung May Chun Alison Aliance; and the registered owner of carpark no 7, 15, 32 and 40 was Leung May Chun Alison Aliance (formerly known as Sham May Chun).

22.  On 2 November 2007, the parties signed the sale and purchase agreement.  On 10 November 2007, the defendant delivered the title deeds to Tsang.  Tsang noticed one agreement and two assignments of the carpark space no. 15 was still missing.  Tsang informed the defendant to locate those missing title deeds or those will be retrieved from the Land Registry at her own costs.

23.  The first title investigation by a senior clerk of MWC, Choy Wood Yan, (“Choy”) there are other missing deeds.  Tsang advised then advised both the plaintiff and the defendant to seek separate representation, nevertheless, the parties insisted to retain MWC to proceed with completion.

24.  On 19 December 2007, the defendant turned up and had delivered one of the title deeds bearing assignment memorial number 2070492 to Tsang.  Tsang alerted her to have separate representation again and had recommended Messrs Kong & Chang to her.  Without accepting the advice, the defendant paid HK$5,000 to Tsang.

25.  Tsang applied for missing title deeds from the Land Registry. The certified copies of the occupation permit were obtained on 27 December 2007.  He discovered the occupation permit recorded 42 carpark spaces whereas the deed of mutual covenant recorded 60 carpark spaces.

26.  On discovery of the serious title defect, on advice of Tsang, the parties agreed to be represented separately.  Nevertheless, Tsang did not hear from the parties thereafter. On 2 January 2008, in light of the unresolved title defects, Tsang proposed to the parties verbally on phone to postpone the completion date to 9 January 2008.  Both of them agreed.  Tsang recorded in his notes that the completion date has been postponed.  On 3 January 2008, the plaintiff paid the balance of purchase price in sum of HK$160,000 to MWC as stakeholder.  On agreement to postpone the completion date, Tsang further applied for copies of the control card from the Land Registry on the same day.  On receipt of the same on 7 January 2008, Tsang was of the view that the title defect could not be remedied.

27.  On 8 January 2008, the plaintiff had chosen to proceed with completion notwithstanding there are serious title defects.  She signed a letter of acknowledgment on the same day.  Tsang proceeded to prepare the assignment where the plaintiff had duly signed.

28.  In the afternoon of 9 January 2008, the defendant went to  MWC.  Tsang was informed by his secretary, Ivy Fong that the defendant had left the office because Tsang did not attend to her immediately.  The defendant did not leave any message to Tsang.  Tsang called up the defendant on the same day for completion.  The defendant refused to execute the assignment without reason.  Tsang further pressed the defendant to complete the purchase but of no avail.

29.  The outstanding balance of purchase price in sum of HK$160,000 was repaid to the plaintiff on 16 April 2008.  MWC ceased to act for both parties after the completion had fallen through.  On 19 June 2008, respective invoices were issued to both parties.  MWC waived their professional fees with the defendant as previously agreed.  MWC then transferred the further deposit in sum of HK$180,000 to Messrs Au Yeung Lo & Chung, the newly retained solicitors for the defendant.

30.  During cross examination, Tsang admitted he should have ceased to act for both parties at time when Choy had discovered the title defects.  Wong, his supervising solicitor has instructed him more than once to cease representation in this transaction.  Tsang explained, at that time, he had continued to represent both parties in light of the potential conflict of interest because of his “kind heartedness”, especially when both parties do have intention to complete notwithstanding the title defects.  Tsang was surprised the defendant refused to complete on 9 January 2008.

31.  Ling was working as a legal executive of Messrs Cham & Co.  He handled the list of documents of the plaintiff.  The purpose of calling this witness was to confirm at time of compiling the plaintiff’s list of document, the defendant’s statutory declaration was a photocopy, not an original document.

32.  The defendant testified.  She said Tsang did not inform her about the title defects of the 6 carpark spaces, nor was she being informed of the right not to complete by returning the deposits to the plaintiff.  The defendant was only informed of the name discrepancy title defect in the morning of 2 January 2008.  She went to Kowloon District Land Office to do a statutory declaration.  She delivered the original statutory declaration to MWC on the same day.  The defendant intended to complete but was told the assignment can only be signed upon approval from Tsang’s supervising solicitor.  The defendant demanded to sign the assignment.  Tsang replied the plaintiff has yet to pay the balance of the purchase price,  the assignment was not ready and the defendant should not sign at this moment. For this reason, the defendant then told Tsang that she will not complete the purchase.

33.  Subsequently, on request of a staff of Messrs Mak, Wong & Cheung, without knowing the reason, the defendant attended their office on 9 January 2008. She explained she went there because of curiosity.  A male staff of Messrs Mak, Wong & Cheung represented to her that their firm was now representing her for completion.  The defendant informed a male staff of Messrs Mak Wong & Cheung that she has already terminated the purchase.  

34.  During cross examination, the defendant described a dramatic event happened on 2 January 2008.  The defendant claimed she was bewildered of the response of the plaintiff and Tsang as both of them said the completion was not ready.  The plaintiff had made a number of phone calls to MWC of the progress but she could not obtain an answer.  The plaintiff then went to Tung Lo Court.  She found the plaintiff.  The plaintiff said, as the completion date was postponed, she has not yet paid the balance price to MWC.  The defendant said she was alarmed. She refused to complete and had forfeited all deposits.

35.  The defendant confirmed she has retrieved all title deeds from MWC after completion had fallen through, nevertheless, she has not verified whether the original statutory declaration came with the title deeds.  She explained, Tsang has not told her the statutory declaration was made for the purpose of completion so she had paid no attention to it.

36.  Having considered the evidence, on balance of probabilities, I find both the plaintiff, Tsang and Ling are credible witnesses.  The defendant is not a credible witness.  Her evidence is unbelievable and unwarranted and I so rejected.  The reasons are as follows.

37.  Tsang’s evidence tallied with the plaintiff’s evidence.  The plaintiff as purchaser sought professional service from MWC to complete the sale and purchase of the 6 carpark spaces.  The events after the signing of the preliminary of sale and purchase are in the ordinary course of business which I have nothing to challenge.  The crucial events were those had happened prior to 2 January 2008 where the title defects were still remaining.  I accept Tsang’s evidence, I believed he was telling the truth.  As a conveyancing executive who was handling the transaction, I accept he has attempted his best endeavor to complete the sale and purchase.  The defendant was unhelpful in assisting proving title deeds of the 6 carpark spaces.  By the end of December 2007, when the serious title defects of the inconsistent number of carpark spaces surfaced, Tsang suggested to the defendant of separate representation.  For reason of the inaction of both parties, Tsang proposed to postpone the completion date for time to deal with the title defects. Tsang’s explanation is fair and sound. He regretted he was too kind to assist the parties to complete the sale and purchase, having known the potential conflict of interest.  In continuing to represent both of them, he was being told off, for more than once by Wong, his supervisor.  I also pay regard to the professional fees paid by the parties (which was more than reasonable in the market), I see no particular reason Tsang has to assist the plaintiff in putting up a case falsifying the completion date.  In fact, the consequence of representing both the purchaser and the vendor is disproportionate to MWC’s professional fees.

38.  The plaintiff acted in accordance with the agreement to postpone the sale and purchase to 9January 2008.  She signed a waiver and had paid the balance of the purchase price on 8 January 2008.

39.  The defendant’s evidence is incredible.  As she was informed of the title defects at a time when the completion date was approaching, she did not respond to Tsang positively of her stance whether to opt for separate representation.  The matter was left in abeyance until the completion date when Tsang informed her the title defects of name discrepancy was unresolved.  The defendant then went to do a statutory declaration.  If there were no agreement to postpone the completion date, I see no reason the defendant has chosen to fax the copy of the original copy of statutory declaration to Tsang instead of submitting the original copy to him at time of completion.

40.  The defendant’s acts were unusual. The defendant claimed she had refused to complete on 2 January 2008 because (i) Tsang has failed to prepare the assignment and (ii) the plaintiff has not paid the balance of the purchase price.  The defendant took no positive step to notify Tsang that she would not proceed to completion.  She did not attempt to retrieve the title deeds.  On 9 January 2008, when she went to MWC and had left without meeting Tsang. More ridiculously, the defendant went to the office of Messrs Mak, Wong and Cheung, a firm of solicitors located in the same building of MWC, without knowing the reason to be there.  The defendant’s conduct was so clear that she had changed her mind not to complete on 2 January 2008. This is particularly so when the plaintiff did not agree to shoulder half of the outstanding sum due and owing to the incorporated owners of Tung Lo Court.

41.  To conclude, my findings of facts must be that of the plaintiff and her witnesses. The completion date was postponed by mutual agreement to 9 January 2008.  The plaintiff was willing, ready and able to complete on 9 January 2008, it was the defendant who had refused to complete.  The defendant was in breach of the sale and purchase agreement. 

Duty of the solicitor

42.  The steps to be taken by solicitors who act for both the vendor and purchaser in a sale and purchase are found in Godfrey J’s obiter dictum in Yeung Kwok Cheung Dicky & Wong Wan Choi v Lam Yin Ha (HCMP 2511 of 1989, 6 April 1990, unreported), at paragraph 21,

“What is supposed to happen, as it seems to me, is this. First, the solicitors, acting as solicitors for the vendor, will receive the title deeds from the vendor. Second, they will consider the title. Third, they will come to a view whether or not they are satisfied with the title. (They may be able to come to this view immediately, or they may find it necessary to make further inquiries of third parties before they can be so satisfied. In either event, sooner or later, they have to decide whether or not they are satisfied with the vendor’s title. Fourth, if they are not satisfied with the vendor’s title, then they are to be at liberty so to inform the purchasers, who will have the right to rescind and to recover their deposit.”

43.  Premised on the finding of facts, I failed to see Tsang, or more precisely, MWC has departed from the general rule in Yeung Kwok Cheung Dicky.

Time to rescind the contract

44.  Notwithstanding of my finding facts, both parties argued on a legal point which I find appropriate to address.  Mr Chain submitted the defendant cannot rescind the contract on 3January 2008, which is on date late after the original completion date.  Mr Chain relied on Canberra Investment Ltd. Chan Wai Tak [1989] 1 HKLR 568.  In this case, both vendor and purchaser were represented by the same solicitor in the sale and purchase of a property.  Both parties agreed the purchase was to be completed 28 February 1989.  Prior to completion, the purchaser entered into a sale and purchase agreement with a sub-purchaser of whom has raised requisition in the morning of 28 February 1989.  This purchaser was unable to raise the same to the defendant as the time to do so has lapsed.  Nevertheless, the vendor gave notice to the plaintiff that he was ready to complete.  He left as no completion has taken place.  Later the day, the purchaser tendered balance of purchase price by way of a personal cheque.  The vendor was unable to be contacted and no completion took place.  It was held by the trial judge that the defendant’s rescission was effective.  On appeal by the purchaser, appeal was allowed and was held both the vendor and the purchaser was in mutual default.  The vendor did not tender assignment and the purchase did not pay up the balance of the purchase price in cash or equivalent, in absence of express provision to terminate, the time suggested by the solicitor who acted for both parties was reasonable, the vendor and the purchaser were obliged to complete.

45.  Mr Chong, counsel for the defendant submitted Canberra is distinguishable.  The parties were not obliged to complete within a reasonable time after the completion date, the defendant’s rescission on 3 January 2008 was effective. Mr Chong relied on European Asia (Hong Kong) Investment Ltd v Wong Shun On Anthony [2011] 1 HKLRD 35 and submitted the defendant, as an innocent party, is entitled to rescind the contract within a reasonable time, ie on 3 January 2008.

46.  In European Asia (Hong Kong) Investment Ltd, the vendor of a property passed away one month before completion on 28 January 2008.  The purchaser informed the vendor’s solicitors by way of letter in January 2008, that the intended administrator has 6 months to apply for grant and thereafter if deemed necessary the purchase will entertain a further extension of time for completion.  The vendor’s son applied for general grant on 15 January 2008 but no completion has taken place in October 2008.  The purchaser rescinded the contract and then brought proceedings against the vendor for return of the deposits.  It was held by Le Pichon JA, that paragraph 27,

“27. Although completion did not take place on 28 January 2008, it did not bring into play the principle in Camberra Investment Ltd v Chan Wai-tak [1989] 1 HKLR 568, 574E, which was a case of mutual default. In view of the January letter, absent notice given to the plaintiff prior to 28 January 2008 that the defendant was in a position to pass good title to the plaintiff, the plaintiff was entitled to proceed on the basis that there was no one to whom the purchase price could be paid who had the authority to act on behalf of the estate. Accordingly, the fact that completion could not take place on 28 January 2008 was not the plaintiff’s fault.

28. It matters not whether the plaintiff became entitled to accept the defendant’s repudiation on 28 January 2008 or, if the January letter was effective as a waiver, on 28 July 2008.  An innocent party may delay accepting the repudiation because lapse of time does not operate against a party who is entitled to elect to repudiate liability under a contract unless there is prejudice to the defendant or rights of third parties have intervened or the delay is of such a length as to be evidence that the party entitled so to elect had in truth decided to affirm the contract: see 28 January 2008 or, if the January letter was effective as a waiver, on 28 July 2008: see Cheung Ching Ping Stephen v Allcom Ltd [2010] 2 HKLRD 324 at §§21 and 22 and the cases therein cited and Everwin Inc Ltd v MTR Corporation Ltd, unreported, HCA 884/2008, 22 July 2008, CACV 218/2008, 30 November 2008 and FAMV 65-77/2008, 27 March 2009, where acceptance of the repudiation took place some two years after the repudiation.  On the facts of the present case, in my judgment it was not too late for the plaintiff to accept repudiation by the issue of its writ of 27 November 2008.”

47.  Canberra and European Asia (Hong Kong) Investment Ltd govern different scenarios.  Canberra is applicable in a case of mutual default, where both the vendor and purchaser failed to perform their own task for completion, then the parties are obliged to complete within a reasonable time.  European Asia (Hong Kong) Investment Ltd governs the situation in existence of an innocent party when completion has fallen through, the innocent party may accept repudiation within a reasonable time.  With respect, both authorities have no application in the present case.  It is so obvious that the parties’ evidence did not amount to mutual default. The issue defined must be fault on either party.  On the evidence, the defendant could not be an innocent party.  Should the finding of fact goes in favour of her that the completion date falls on 2 January 2008 where the plaintiff has failed to pay the balance of purchase price, she should have accepted the plaintiff’s repudiation expressly on the same day instead of disappearing on 2 January 2008 and revived her acceptance on 3 January 2008.

CONCLUSION

48.  For reason of the foregoing, I give judgment to the plaintiff.  I so order specific performance of the sale and purchase agreement dated 2 November 2007 as per the minute of order as annexed to this judgment.  I see no reason costs should not follow the event.  I therefore make a costs order nisi that costs of this action be paid by the defendant to the plaintiff, with certificate for the plaintiff’s leading counsel, to be taxed if not agreed.  The costs order nisi be made absolute in absence of application by way of inter parte summons to vary within 14 days from the date of this judgment.

ANNEX

MINUTE OF ORDER

1.   That the sale and purchase agreement dated 2 November 2007 referred to paragraph 4 of the Amended Statement of Claim be specifically performed and carried into execution.

2.   The completion do take place in the office of Messrs Pansy Leung, Tang and Chua at 21^st Floor, Regent Centre, No 88 Queen’s Road Central, Hong Kong on or before 30 June 2018.

3.   That upon the plaintiff paying the defendant the sum of $340,000 being the balance of the purchase price less the sum owed by the defendant to the Incorporated Owners of Tung Lo Court upon completion, the defendant do execute a proper conveyance / assignment of ALL THOSE 6 equal undivided 807^th parts or shares of and in ALL THAT piece or parcel of ground registered in the Land Registry as New Kowloon Inland Lot No 1107 and of and in the messuages erections and buildings thereon known as “Tung Lo Court”, Nos 136-154 Tai Po Road and Nos 52-56 Shek Kip Mei Street (“the Building”) TOGETHER with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THOSE PARKING LOT NOS 7, 15, 24, 25, 32 and 40 on the Basement of the Building (“the Property”) to the plaintiff, and the defendant do deliver to the plaintiff the said conveyance/ assignment so executed as aforesaid together with all deeds and writings in the defendant’s possession or power relating solely to the Property including in particular the original statutory declaration dated 2 January 2008 or one substantially the same.

4.   That the plaintiff be authorized to pay the sum due to the Incorporated Owners of Tung Lo Court as at the date of completion for and on behalf of the defendant.

5.   That the defendant do deliver vacant possession of the Property to the plaintiff upon completion.

6.   That there be liberty to both parties to apply.