NG TIM YEE AND ANOTHER v. KINDBEST INVESTMENT LTD

IN THE HIGH COURT OF HONG KONG SAR

COURT OF FIRST INSTANCE

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REASONS FOR JUDGMENT

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1. By an Agreement for Sale and Purchase dated 11^th April 1997 ("Agreement") preceded by a Provisional Agreement for sale and purchase dated 27^th March 1997, the Defendant as Vendor agreed to sell to the Plaintiffs as Purchasers, Shop No. 1 on the Ground Floor of 86-90 Johnston Road, Hong Kong ("the Shop") for $10 million. The Plaintiffs Purchasers after paying the Deposit of $1 million, raised requisitions. After exchange of correspondence, the Plaintiffs Purchasers contended that the requisitions had not been properly answered. Completion of the purchase did not take place on the day stipulated in the Agreement for completion, 30^th May 1997. The Vendors in fact gave some answers to the requisitions just shortly before closing time on 30^th May 1997. Unilaterally the Vendors extended the time for completion to Monday, the 2^nd of June 1997, the intervening days between the 30^th May and 2^nd June being the weekend. On the 3^rd of June 1997, the Vendors terminated the Agreement and purported to forfeit the Deposit. The Purchasers thereupon issued the Writ and claimed the return of Deposit.

2. At the trial of the Action four issues were debated before me, namely:-

GOVERNMENT LEASE

3. The history of the title of the property is this. The Crown lease was terminated by re-entry of the Crown. There was then an agreement to a new Government Lease by the offer of the Government contained in a letter dated 4^th September 1959 and the acceptance letter by Messrs. Peter Mo & Co. to the Government dated 12^th of September 1959. By the requisition, the Purchasers asked for the production of the original or certified copies of these two letters, which together constitute the agreement for the Government Lease. The Vendor was unable to produce the two letters neither the original nor certified copies. The argument at the hearing was eventually reduced to whether the Vendor could rely on secondary evidence in lieu of the production of the original documents or certified copy of documents.

4. The contractual obligation of the Vendor under Clause 9(a) of the Agreement provides that:-

Section 13 of the Conveyancing and Property Ordinance ("Ordinance") provides:-

Therefore as a matter of contractual right, it is clear that the Purchasers are entitled to the production of the Government lease. Production means the giving of the physical and tangible document, being the original of the Government Lease or as permitted under section 13(2), the certified true copy of the same. Therefore, there is for me no room to substitute the contractual bargain for anything less and the Court has no power to alter the agreement of the parties. This for me provides the short and complete answer on this issue. But if any authority is required then we have the decisions of Deputy Judge Finlay in Chan Kam Sing v Lam Ping Ping [1990] 1 HKC 373, of Barnett, J. in Gatewood Ltd. v Silver Noble Investment Ltd. [1993] 1 HKLR 248 and of Patrick Chan, J. in Wong Wai Ming v Tang Tat Chi [1993] 1 HKC 341. I do not read the unreported decision of Godfrey, J. in Gold Check Investments Ltd. v Star Investment Ltd. and the decision of Rogers, J. in BMC International Ltd. v Star Win Co. Ltd. [1996] 2 HKC 302 as having decided otherwise and certainly not as having laid down any principle that secondary evidence of existence of Government Lease can be accepted in lieu of production of the Government Lease. After all as Yuen, J. said Yiu Ping Fong v Lam Lai Hing [1998] 4 HKC 476 at page 483 "the handling over of original title deeds and documents (or at least those which relate exclusively to the property being sold) is an important part of the vendor's obligation in a sale of land." In my judgment, the obligation of the Defendant is clear. Therefore on this first and most important issue alone, the Plaintiff is entitled to judgment.

5. Having reached this conclusion it is strictly speaking not necessary for me to consider the other three issues but as they had been argued, I will briefly state my reasons why I also find in favour of the Plaintiffs on these other three issues.

SURRENDER AGREEMENT

6. As part of the chain of title, the Purchasers also required the production of the Surrender Agreement dated 8^th August 1988 ("Surrender Agreement") which was referred to in page 7 of the Agreement for Sale and Purchase dated 8^th August 1988. This the Vendor was unable to produce and instead the Vendors contended in correspondence that such production was not necessary for a number of reasons. At the hearing Mr. Yeung for the Vendor Defendant sought to show why the business tenancy of this Shop must have been terminated and that therefore the Surrender Agreement sought should be considered as fanciful. In my view, the concern of the Purchasers was not fanciful. It must be remembered that the test of a good title is one which can at all times and in all circumstances be forced on an unwilling purchaser in an action for specific performance and that a buyer of the property should not be forced to buy into a likely lawsuit. In this case there was neither the production of the Surrender Agreement nor even a statutory declaration from either the previous owner or the tenant or the new tenant Telecom that the Shop was in fact surrendered by the tenant and the tenancy created had been terminated. I hold against the Defendant on this second issue.

SHARES UNDER DMC

7. The Deed of Mutual Covenant dated 2^nd August 1960 contains provision on the undivided shares. The Shop in the Schedule of the DMC shows it was assigned 1 share out of a total of 132 shares but the total assigned shares in the Schedule of the DMC add up to only 128 and not 132. The Vendor contended that the 4 missing shares were impliedly reserved by U but this contention (not supported by the DMC) was disputed by the Purchasers. What is worse is that the land search records show the Caretaker room (not mentioned in the DMC) on Ground Floor as having one share, the Roof (not mentioned in the DMC) as having one share and the Shop No. 2 on Ground Floor as having 3 shares when the same Shop No. 2 in the Schedule of the DMC is shown as having only one share. To put it mildly, there is uncertainty as to the total number of shares under the DMC and it follows that there is uncertainty as to the obligations and rights of the owner of the Shop under the DMC. This is not a position which can be forced upon an unwilling future purchaser from the Plaintiffs. There is substance in the objection of the Plaintiffs and I find against the Defendant also on the third issue.

REPUDIATON

8. It is accepted by the parties that the Vendor has the obligation to answer the requisitions and show a good title in good time, namely sufficiently long in advance of the completion date to allow the Purchasers an adequate opportunity to consider the documents and answers given by the Vendor. The last batch of documents and answers given by the Vendor was on the day of the completion and just before the closing time of 30^th May 1999. This was just too late. The agreed completion was 30^th May and the Vendor was not entitled unilaterally to change the completion date to 2^nd of June, specially when it was done not as part of the 1^st Fax of 30^th May (pages 75-95) but separately by way of a later Fax of 30^th May (page 96-7) sent after 8 p.m. that night. I therefore agree with Mr. Li that by its acts the Vendor had repudiated the Agreement. The Defendant also fails on the last issue.

CONCLUSION

9. For reasons given above, the Plaintiffs have satisfied this Court that the Requisitions of the Plaintiffs Purchasers had not been sufficiently and satisfactorily answered and that good title had not been proven or shown by the Vendor Defendant. Accordingly I do make the order that the Defendant should refund the Deposit to the Plaintiffs with interests thereon and that the Defendant must pay the costs of the Action.