GOLDJET INTERNATIONAL INVESTMENT LTD. v. LING KI WAI and Others

1996 M.P.No. 4160

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is a vendor and purchaser summons taken out by the Plaintiff, the purchaser under an agreement for sale and purchase dated 6th December 1995, by which a declaration is sought that the Defendants failed to answer requisitions raised by the Plaintiff as to title, alternatively that the Defendants have failed to show a good title, and that the Plaintiff is entitled to rescind the agreement, recover the deposit of $180000 and the sum of $7000 for legal costs of investigating title.

2. Under the agreement, the Plaintiff agreed to purchase Flat F, 1st Floor, Universal Mansion, 52 Hillwood Road, Kowloon for the price of $1800000. Completion was to take place on or before 5th February 1996, time was to be of the essence, and there were the usual clauses as to giving and proving good title, and providing that requisitions had to be delivered to the Defendants' solicitors within 7 days of delivery of the title deeds.

3. Under cover of a letter dated 8th December 1995, the Defendants' solicitors sent a number of title deeds to the Plaintiff's solicitors, and by a letter dated 11th December 1995 the Plaintiff's solicitors raised a requisition in the following terms:-

"There is no allocation of shares contained in the Deed of Covenant. In view of the cases Lee Tak Chun vs East Weal International Limited and Global Luck Property Limited (HCMP No. 857 of 1994) and Woo Turhan and Li Wai Keung vs Taiwan Fuji Trading (HK) Limited (HCMP No. 168 of 1995), please let us have evidence in writing to prove how the shares are allotted to the above property."

4. The Defendants' solicitors' reply came by letter dated 2nd January 1996 saying, in respect of this requisition:-

"We enclose herewith a copy of our letter to the Land Registry dated 18th October 1995 and the Land Registry reply us (sic) letter dated 27th December 1995 for your perusal."

5. The letter from the Land registry reads as follows:-

"I refer to your letter dated 18.10.95.

It is revealed from our record that there is no schedule of shares apportionment in respect of the captioned property supplied by the developer's solicitors. The creation of sub-division registers with undivided shares are based on their respective first Assignments which were lodged to this office for registration."

6. The Plaintiff's solicitors indicated by a letter of 4th January 1996 that they were not satisfied with this answer and insisted on evidence being provided. The Defendants responded by a letter of 13th January reiterating that the Land Registry's confirmation of the allotment of shares by the first Assignments was a sufficient answer, and sending a copy of a "control card" obtained from the Land Registry showing the total of 108 shares in the building. The Plaintiff's solicitors pointed out that the control card showed that there were 90 units, each allotted one share, and 9 shares on the ground floor, leaving 9 shares unaccounted for, and again insisted that evidence be provided showing how the undivided shares of the building were allotted. By a letter of 25th January the Defendants' solicitors replied that the remaining 9 shares could only be attributable to the roof.

7. On 29th January the Plaintiffs asked for evidence as to how the control card came into existence, on what documentary evidence it was based, and, for the first time, why the entry for Flat F was different from the others. They also asked for copies of the assignments for the other 107 shares in the building. In reply the Defendants' solicitors repeated that there were no other documents that related to the allocation of shares.

8. On 5th February, the Defendants' solicitors sent two letters to the Plaintiff's, the first enclosing a further letter from the Land Registry confirming that the remaining 9 shares were reserved by the developer for the roof of the building, and the second reminding them that completion was scheduled to take place that day. The Plaintiff's solicitors faxed a letter back, timed by their fax machine at 16.55, rescinding the agreement.

9. It is usual now for a schedule of shares apportioned to the respective units in a new building to be included in the Deed of Mutual Covenant, making it clear how all the shares are divided. However, in 1962 this was not always the case and the Land Registry compiled their own record of shares as the assignments were registered with them. The assignments, of course, state clearly the number of shares which were allotted to the property being conveyed. In this case there can be no dispute that the assignments of this property, and in particular that of 8th April 1976, the "Root of Title", have always recited that it has allotted to it one of the 108 shares in the land and building.

10. It is apparent from the correspondence that the Plaintiff's initial concern was that the allocation of shares was not set out in the Deed of Mutual Covenant, and the solicitors considered that the cases cited in their letter of 11th December 1995 were authority for their view that they were entitled to proof of allocation of the share to this unit. However, the facts of this case can easily be distinguished from these cases. In Lee Tak Chun the part of the building in question had been subdivided by subsequent owners and there was clear evidence of a document existing which allotted the shares which had not been disclosed. In Woo Turhan the defective execution of the DMC and the assignment made it necessary to show how the shares allotted to the property in question came to be allotted.

11. That is not the case here. The assignment of 8th April 1976 clearly conveys to the purchaser "one equal undivided one hundred and eighth part or share..." and there is no suggestion that the first assignment conveyed any lesser or greater share. There is no suggestion that there is any defect in the assignments, or any recent subdivision which could affect that title as established by the 1976 assignment.

12. The Plaintiff's solicitors then, by their letter of 29th January, asked to see the assignments of all the other 107 shares in the building "so as to enable us to get a more complete view on the title of the subject premises".

13. Mr. Cheung, on behalf of the Plaintiff, claims that the judgment of Jerome Chan J. in Lee Tak Chun supports such a request, where, at page 731 he says:-

"Many of the rights and liabilities of an owner of a unit vis-à-vis other co-owners depend solely on the exact proportion in the undivided shares of the land his unit was legally and validly allotted. Thus, it is singularly important for the exact proportion of the undivided shares of each unit to be proved by a vendor."

14. Mr. Cheung maintains that this means that a vendor must show the number of shares allotted to all units in the building. This cannot be right. I have no doubt that Jerome Chan J. meant by the above that the vendor should prove the proportion the shares for the unit he is selling bear to the whole, so that the purchaser has no illusions as to the extent of his rights and liabilities. It can be of academic interest only to a purchaser what is the extent of the rights and liabilities of the owners of each of the other units.

15. What then is the position here? There is evidence in the first assignment of this property of the allotment of one share. That is repeated in the root title of 1976. There is no doubt cast on that allotment by any of the documents of title, and there is no suggestion that there is some other document dealing with the allotment which has not been disclosed. The only possible exception is the Control Card with which I shall deal below.

16. Mr. Cheung contends that, in the absence of a schedule of shares in the DMC, a vendor should be obliged to show that no more than the total number of shares in the land and building has been allocated. I regret that I can find little merit in this contention. The vendor is not obliged to prove a negative in the absence of some evidence of irregularity in the allocation of shares. All that is required is to show that there is good title. The lack of a schedule in the DMC as to shares does not cast doubt on a clear and unchallenged assignment of title to the unit in question and the share in the land.

17. Until 29th January 1996 the Plaintiff's only concern had been as to proof of the allocation of the share to this unit, although they appear to have accepted, by their letter of 16th January, that each of the units had been allotted one share, and the apparently unaccounted for 9 shares, which it later transpired had been reserved for the roof. By their letter of 29th January, however, they raised for the first time the matter of the control card which had been supplied to them on 13th January. They requested evidence as to how the control card came into existence and on what documentary evidence it was based, and clarification as to why there were two reference numbers in the box relating to this unit while the others only had one.

18. The answer to the first was given by the letter of 5th February from the Land Registry, that the card had been drawn up according to the shares of the first assignments registered, forwarded to the Plaintiff's solicitors the same day. As to the two sets of numbers, Mr. Cheung submits that this is sufficient to raise a suspicion that the numbers refer to a document presented to the Land Registry which is not registrable. I agree that there must have been some information available to the Land Registry to cause the entry on the control card to have been made. But could this affect the title to, and the allocation of, shares in respect of this unit? In my judgment it could not. While it is sufficient to raise an enquiry, this has been adequately answered by the Defendants' solicitors in their letter of 2nd February, where they state : "...as far as we are aware and also our enquiries reveal, there are no document(s) exist (sic) that relate to the allocation of shares which we can produce." Together with the overwhelming evidence of the previous assignments and the Land Registry records, this should have been sufficient to remove the concerns of the Plaintiff.

19. I do not consider, therefore, that the initial requisition was justified in the light of the evidence of title supplied by the Defendants, and even if it was, in my view it was adequately answered by the information supplied from the Land Registry. The enquiry regarding the entry on the control card, which seems to have come almost as an afterthought, was equally not justified in the light of the other evidence of title.

20. For these reasons the Plaintiff's application for relief is dismissed, and I make an order in favour of the Defendants in terms of their points of counterclaim with costs of the action to be taxed.