SIN TAI KONG AND ANOTHER v. TANG KAM MING KEITH

DCMP 450/2019

[2019] HKDC 781

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO 450 OF 2019

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DECISION

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INTRODUCTION

1.  This is an application made by the plaintiffs by way of an originating summons (“OS”) under section 38A of the District Court Ordinance Cap 336 (“the DCO”) for (i) an order that the defendant do sign a deed of rectification to remedy an error in the assignment of a property jointly owned by the plaintiffs; and (ii) in the event that the defendant neglects or refuses to sign and execute the same, to appoint the plaintiffs’ present solicitor to sign the same.

BACKGROUND

2.  The plaintiffs who are an elderly couple had purchased the property known as Flat No 2 on 35^th Floor of Block G, Hong Pak Court, No.139 Pik Wan Road, Kowloon, Hong Kong (“the Property”) from the defendant under the Home Ownership Secondary Market Scheme in 1999. They owned the Property as joint tenants.

3.  In 2017, the 2^nd plaintiff intended to transfer her interest in the Property to the 1^st plaintiff and allow him to own it solely. Hence, through their former solicitors instructed for handling the transfer of interest, applied to the Hong Kong Housing Authority (“HKHA”) for approval. In the process, HKHA discovered that the original assignment of the Property (“the Assignment”), which had been signed by the vendor and purchasers in 1999, was not executed in accordance with the terms prescribed in §4(c) (C) of the Schedule to the Housing Ordinance, Cap 283 (“the HO”).  As the Assignment was not executed in the prescribed form as authorized by HKHA, it was void under section 17B of the HO.  HKHA advised the plaintiffs, through their former solicitors, that rectification was necessary before their application could be processed further. The former solicitors then informed the solicitors who represented the plaintiffs 20 years ago of the defect.

4.  Subsequently, a deed of rectification was drafted and prepared by the solicitors who now represent the plaintiffs in the present application (“Deed of Rectification”).  Incidentally, they are the same firm of solicitors who had acted on behalf of the plaintiffs (in their capacity as purchasers of the Property) in the 1999 transaction.   The draft Deed of Rectification was approved by the Housing Authority, subject to the compliance of certain conditions set out in its letter to the plaintiffs’ solicitors dated 29 June 2018.  One of the conditions is the rectification of the Deed of Rectification by the parties.  Although the vendor (the defendant in the present application) of the Property could still be located after 20 years, unsurprisingly, he has absolutely refused to sign the Deed of Rectification and/or to co-operate with the plaintiffs’ solicitors.  In short, the plaintiffs’ solicitors have not been able to obtain his consent to its execution despite multiple attempts and written and/or oral assurances from them.  Hence, the plaintiffs took out the present application by way of OS on 1 February 2019 to ask the court to interfere.

5.  When the case was first heard before Deputy Judge SH Lee on 26 March 2019, the plaintiffs through their counsel, Mr Wilfred Tsui, applied to amend the OS by deleting the reference to section 35 of the DCO and replacing it with section 36 of the same Ordinance.  The defendant was absent during that hearing.  Leave was granted by the deputy judge for the plaintiffs to amend the OS.  The hearing was adjourned to another date for that purpose. The OS was duly amended and filed and served on 3 April 2019.

6.  When the matter came before me on 9 May 2019 for substantive arguments, again the defendant was absent.  I was satisfied that all the documents and notice of the hearing had been properly served on him by the plaintiffs’ solicitors.  The plaintiffs were represented by the same team of lawyers at this adjourned hearing as before the deputy judge. However, I refused to accept a 2-page written submission from the plaintiffs’ counsel, which, with due respect, completely devoid of any legal analysis or authorities in support of the application.  The attempt to submit and rely on section 35(1)(b) of the Conveyancing and Property Ordinance, Cap 219 (“the CPO”) at the hearing was also rejected by the court as it was not contained in the written submission or any list of authorities lodged with the court prior to the hearing.  More importantly, the submission did not provide any legal basis to address the crucial issues of why the plaintiffs say that: (i) a party can ask the court to force a reluctant vendor of a property, namely, the defendant, who had executed the Assignment and successfully sold the Property to the plaintiffs 20 years ago, to sign the Deed of Rectification; and (ii) in the event that the defendant fails or refuses to do so, that the plaintiffs’ solicitors, who had caused the mistake 20 years ago, should be allowed to sign the Deed of Rectification on his behalf.

7.  I therefore directed the plaintiffs’ counsel to prepare a fuller and revised written submission with decided authorities to deal with the situations where:-

(i)   the court has ordered a reluctant party to sign an assignment by way of a mandatory injunctive order; and

(ii)   that a solicitor acting on behalf of a purchaser will be the appropriate person to sign such rectification in the event that the defendant neglects or refuses to sign and execute the deed of rectification.

8.  The hearing was adjourned to 29 May 2019 to be heard before me with costs reserved for the above purpose.     

9.  On 20 May 2019, just 2 days before the deadline for lodging the revised written submission and list of authorities, the plaintiffs’ solicitors took out a summons to re-amend the OS with a proposed amendment to §2 thereto by crossing out the name of the plaintiffs’ solicitor and in its place substituted it with “Registrar of the District Court or other suitable person” as the appropriate person to sign the Deed of Rectification on behalf of the defendant.

10.  The plaintiffs’ revised submission and list of authorities were lodged with the court on 21 May 2019.

DISCUSSION

11.  As can be gleaned from the affirmation of the 1^st plaintiff filed in support of the application and the affirmation of service of Tan Yanni, the solicitors’ clerk, the defendant is fully aware of the plaintiffs’ application but has, understandably in my view, refused to respond to the OS (including not acknowledging service thereof), claiming that the transaction was some 20 years ago and he does not want to have anything to do with it now.

12.  Hence, the plaintiffs are facing with a situation, which, due to no fault of their own, they are not able to effect a simple transfer of ownership/interest amongst themselves. They had relied on the professional knowledge and skills of their solicitors who handled the conveyancing in 1999.  It is most unfortunate that they are now being caught up with this saga.

13.  What I am happy to see though is that at least the plaintiffs’ solicitors have the courage and integrity to own up to the mistake they made since the day it was pointed out to them. In the affirmation of the solicitor now in charge of the case, she has admitted the prescribed form contained in a Law Society’s Circular Nos. 147/97(PA) and 99-20(PA) of 12 May 1997 and 18 January 1999 was not used “due to inadvertence of the then trainee solicitor of our firm who drafted the 1999 Assignment…”: (See §7 of the affirmation of Lam Mui Mui filed on 3 April 2019).      

14.  In my judgment, there is little doubt that something needs to be done in order to rectify the mistake made by the plaintiffs’ solicitors some 20 years ago.  The only question is how this should be done properly in the absence of any co-operation on the part of the defendant. In my view, the court cannot and should not issue a mandatory injunction to force a defendant vendor to sign a document to rectify the Assignment for which he was in no part to blame.  If the defendant refuses or neglects to sign the Deed of Rectification, the court should consider appointing the Registrar of the District Court to sign the document in his place.

15.  The plaintiffs had expressed to the court their extreme worries and anxieties over this matter when they attended the hearings before me.  As such, I consider that an early resolution of the matter will be in the best of their interests.

Relevant Statutory Provisions

16.  According to the affirmation of the plaintiffs’ solicitors filed on 3 April 2019, the Assignment was executed pursuant to an agreement for sale and purchase dated 19 June 1999 between the defendant as vendor and the plaintiffs as purchasers (“the S&P Agreement”). Clause 4 of the S&P Agreement stipulated that:

“… the Vendor and all other necessary parties (if any) will execute a proper Assignment of the Property to the Purchaser …”.

17.  By clause 6 of the Assignment parties agreed that:

“… the respective covenants by the Vendor and the Purchaser implied by the Conveyancing and Property Ordinance Chapter 219 and herein contained shall take effect…”.

18.  Mr Tsui on behalf of the plaintiffs submits that, by section 35(1)(b) of the CPO, there shall be implied that:

“in an assignment to a purchaser for valuable consideration, the covenants, by a person who is expressed to assign as beneficial owner, mentioned in Part II of the First Schedule”,

and §5 of Part II of the First Schedule to the CPO stipulated that:

“That all such lawful acts, assurances and things for further or more perfectly assuring the land and every part thereof to the purchaser and to those deriving title under the purchaser shall, from time to time and at all times at the request and cost of the purchaser or any person deriving title under him, be executed and done (subject to the manner in which the assignment is expressly to be made) as by the purchaser or any such person may be reasonably required”.

19.  Mr Tsui further submits that, under section 41(4)(a)(i) of the CPO, the implied covenant is enforceable by way of an injunction or other equitable relief.

20.  The plaintiffs submit that the reliefs sought by them are clearly covered by the S&P Agreement, the Assignment and covenants implied by statute.  

21.  In Goldsteady Investment Limited v Fatima Estate Limited HCMP 2943/1995, unreported, (27 November 1995; Woo J (as he then was)), a defect arose from the execution of the assignment by an attorney for the defendant.  The power of attorney whereby the attorney was appointed to sign was not executed in accordance with the requirements of the articles of association of the defendant.  Instead of signed by two directors with the common seal, it was signed by one director only.  The plaintiff relied on section 35(1)(b) of the CPO to ask the court to rectify the assignment.  The court held that the plaintiff was entitled to the relief under the implied covenant as spelt out in section 35(1)(b) of the CPO.  Although the court found that a confirmatory assignment of the property to be executed by the defendant is a reasonable requirement made by the plaintiff, as the defendant and its directors are nowhere to be found within the jurisdiction, the court order the Registrar of the Supreme Court to be appointed to execute the confirmatory assignment “to take effect as if the same were executed by the defendant”.   

22.  Similarly, a wrong common seal applied in the execution of the assignment concerned was rectified by reference to the implied covenants set out at §5 of Part II of the First Schedule to the CPO.  The court ordered the Registrar of the Supreme Court to sign on behalf of the defendant “as if the same were executed by the defendant.”: See Li Kwan Chuen and Vector Development Ltd [2009] 3 HKLRD 511, per Sakharani J at p 513 §11.

23.  Based on the above, I have scant doubt that the Assignment can be and should be rectified by the Deed of Rectification, the contents of which have already been approved by the HKHA.

Appropriate person to execute the Deed of Rectification

24.  Section 38A of the DCO provides:

“(1) Subsection (2) applies where –

(a) the Court has given or made a judgment or order directing a person to –

(i) execute any conveyance, contract or other document; or

(ii) ...

(b) that person –

(i) neglects or refuses to comply with the judgment or order; or

(ii) …

(2) The Court may, on such terms and conditions, if any, as may be just, order that the conveyance, contract or other document is to be executed … by such person as the Court may nominate for that purpose.”

25.  The amended OS filed on 3 April 2019 named Ms Lam Mui Mui, the plaintiffs’ solicitor as the person to be appointed to execute the Deed of Rectification.  The plaintiffs’ counsel submits that this is appropriate based on cases where solicitors had been closely involved in matters in the action were appointed to sign on their clients’ behalf: See for example Chan Ling Ling & Others v Chan Ching Kit, HCA 2534/2013, unreported (17 July 2017: Deputy High Court Judge Kent Yee).   

26.  With respect, I do not agree.

27.  I can see in situations where there is an innocent omission or mistake made in the conveyancing transaction; or where there is no objection from any of the parties concerned, the court may order a solicitor to sign “on their client’s behalf”.  

28.  However, where there is a potential conflict of interests, as clearly there is between the plaintiffs and their solicitors who had made the mistake in 1999 in this case, it will not, in my view, be appropriate nor desirable to appoint a party’s own solicitor (who potentially could be sued by his/her former client) to sign the rectification on behalf of the vendor.   

29.  In this regard, I draw analogy from mortgagee actions under Order 88 of the Rules of High Court/District Court where in situations when errors in the original assignments were found, the Registrar of the High Court or District Court was appointed to execute confirmatory assignments: See for example Chu Po Chuen v Kwong Yip Company Limited and Others, DCMP 1062/2015, unreported (21 July 2015; Deputy Judge Ludwig Ng) and Lau Yun Lin v Registrar of Companies [2018] HKCFI 1073, unreported, (15 May 2018; Deputy High Court Judge Leung).   

30.  For that reason, I allowed the plaintiffs’ proposed amendments contained in the re-amended OS dated 20 May 2019 to substitute the Registrar of the District Court as the person to be appointed instead of the plaintiffs’ current handling solicitor to execute the Deed of Rectification in the present case at the second adjourned hearing.

31.  Further, based on the above discussed principles and authorities, I consider that the Registrar of the District Court is the appropriate person to be appointed to sign the Deed of Rectification on behalf of the defendant in this case. I so make such an order.

CONCLUSION

32.  In conclusion, based on the aforesaid, I dismiss §1 of the re-amended OS which requests the defendant to sign and execute the Deed of Rectification.  Instead, I would order the Registrar of the District Court to be appointed to sign the Deed of Rectification on behalf of the defendant as per §2 of the re-amended OS.

33.  Following the discussion I had with counsel at the end of the hearing, I further order that the Deed of Rectification be settled and submitted by the plaintiffs’ solicitors to the court within 90 days from the date hereof for the Registrar’s approval and execution.

34.  In terms of costs, under the re-amended OS, the plaintiffs ask for no order as to costs for this application.

35.  Mr Tsui has clarified this by stating that they only seek no order as to costs insofar as the costs of the defendant is concerned.  Insofar as the plaintiffs’ costs in bringing this application is concerned, including the costs of the 2 adjourned hearings, Mr Tsui has assured me that the elderly plaintiffs will not be charged by the plaintiffs’ solicitors for any costs of making this application as well as for any costs and expenses incurred or to be incurred for the preparation, execution and subsequent filing of the Deed of Rectification. 

36.  With that undertaking given by the plaintiffs’ solicitors through counsel, I am prepared to allow no order as to costs for this application.