PANG MOON KEE AND ANOTHER v. CONCORD PROPERTY DEVELOPMENT LTD

HCCT 127/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

CONSTRUCTION AND ARBITRATION PEOCEEDINGS

 NO. 127 OF 1998

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D E C I S I O N

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1.  Concord is the developer of a substantial residential development called Vista Paradiso.  On 30 July 1997, at the height of the 1997 property boom, Mr Pang and Ms Kam, as joint tenants, by three separate agreements in writing, agreed to purchase 2 residential properties, and a car parking space in Vista Paradiso for a total sum of $17,930,000.  In all relevant respects the three agreements are identical.

2.  By a letter dated 24 October 1998, Concord required Mr Pang and Ms Kam to complete the sale and purchase of the properties.  They did not do so, and on 17 December 1998, they issued a writ seeking a declaration that the three agreements had been validly rescinded by them.  They also sought a refund of deposits paid in the sum of $5,379,000.  Concord defend the action.  Concord has subsequently resold the properties and by counterclaim seek a declaration that they have rescinded the agreements, that they were entitled to resell the properties and to forfeit the deposits.

3.  Mr Li, for Concord now comes before me seeking summary judgement on the counterclaim pursuant to O 86 r 2.  Mr Chain, for Mr Pang and Ms Kam, seeks leave to defend.  Summary judgement under O 86 is determined in the same way as an application under O 14.  So long as a triable issue or an arguable defence can be shown, Mr Pang and Ms Kam are entitled to leave to defend.

4.  Mr Chain has satisfied me that there is an arguable defence.  He has raised a number of points, and abandoned others, in particular the contention that Mr Pang and Ms Kam have successfully rescinded the three agreements, and a plainly untenable contention that an extension of time for the completion of Phase 1 of Vista Paradiso was not granted by the designated Authorised Person.  The issue on which he has succeeded in persuading me that there is an arguable defence is not yet properly pleaded; that is a matter that I will deal with in due course.

5.  Mr Li was obliged to concede that the three agreements are agreements in which Concord, as vendors, agreed to sell a legal title to the three properties to Mr Pang and Ms Kam, as purchasers.  In terms of the agreements Concord were entitled to notify the purchasers that they were in a position to validly assign the properties within one month of the consent of the Director of Lands to assign; [Cl 5(1)].  Completion was required within 14 days of that date; [Cl 5(2)].  On completion Concord were required to execute a proper assurance of the property to the purchasers free from encumbrances, but subject to the Government Grant; [Cl 6].

6.  Mr Li was further obliged to concede that at the date upon which Concord gave that notice to the purchasers and required completion they were not in a position to assign legal title to the properties to the purchasers, but only an equitable title.  This situation arose because at the time the notice was given, the Director of Lands, while willing to give consent to assign, had not yet issued a Certificate of Compliance in relation to the development.  Until that certificate was issued Concord were not in a position to assign legal title.  That certificate, in practical terms, would not be issued until both Phase 1 and Phase 2 of the Vista Paradiso development were completed.

7.  Mr Chain contends that there is nothing in the agreement which provides that the purchasers are obliged to accept a mere equitable title.  He makes the point that if the development were never properly completed, in the absence of an appropriate provision in the contract, the purchasers may never be able to get legal title.  He relies further on a Legal Advisory and Conveyancing Office (LACO) Circular Memorandum No. 39, issued by the Director of Lands on 21 May 1999 which contains the following statement:

“2.  Pursuant to a Consent to Assign, a vendor can convey an equitable interest and not a legal estate.  Although the approved form of Agreement does not stipulate that there be an assignment of a legal estate upon completion, with a view to avoiding the possibility of argument that the vendor must convey a legal estate on completion, a new subclause 12(2) has been added to the approved form of Agreement as per the attached.”

The attachment records:

“Clause 12(2)   The Purchaser shall raise no objection if the Vendor’s interest in the Property is an equitable interest and not a legal estate.”

8.  The agreement is silent as to whether Concord are entitled, on the completion date as defined in Cl. 5(2), to deliver only an equitable title.  Mr Li contended that the wording of the operative clause of the agreement, (Cl. 2), was sufficient to cover the entitlement of Concord to require the purchasers to accept an equitable estate.  That clause describes that which the vendor shall sell and the purchaser, purchase, and includes the following words:

“TOGETHER with…other rights and all privileges…whatsoever of the Vendor in and to the Property…”.

Mr Li acknowledged that when completion was undertaken prior to the issue of the Certificate of Compliance, only an equitable title was transferred.  He informed me that the conveyancing practice was that in due course when the Certificate of Compliance was issued, a copy was registered in the Register at the Lands Registry, but that no further step was taken by the vendor to convey the legal title.  Apparently it is accepted by all, with what justification is unknown, that the registration of the Certificate of Compliance somehow has the effect of converting the equitable title into a legal title.

9.  There is a sensible logic in Mr Li’s contention, but it requires a long step to be taken to base that contention on the words in the agreement upon which he relies.  That the Lands Department found it necessary to amend the standard terms of Agreement in the way that has been done, by itself, points to the potential validity of the argument made by Mr Chain.  But the central issue upon which Mr Chain has satisfied me there is an arguable defence is whether or not Concord can require the purchasers to accept merely an equitable title at the date provided in the agreements for completion.  Both counsel agree that there is no authority on the point.

10.  While I am not at all confident that the argument will succeed, I cannot dismiss it out of hand summarily, and perhaps even without expert conveyancing evidence.  Somewhat reluctantly therefore, I find myself obliged to grant leave to defend.  The application for Summary Judgement is dismissed.  There will be an order nisi that costs on the application will be Plaintiffs’ costs in the cause.  That order will be absolute in 14 days.

11.  Mr Chain mounted other arguments, but both counsel were agreed that if any one argument should find favour, it was not necessary to proceed to consider those other arguments, for they are better left for the trial.

12.  It is plain that the pleadings, particularly the Statement of Claim, require amendment.  The Plaintiffs’ action for recession has been abandoned, as have other pleas now extant.  Concord should have the opportunity to properly respond in order that the issues may be clearly focused by the pleadings.  It does not seem to me that it is necessary for the counterclaim to be amended.  Concord’s position in respect of any contention upon which Mr Pang and Ms Kam may rely by way of amendment can be appropriately put in the amended defence that will be required.

13.  Pursuant to O 86 r 5 I direct that the Plaintiffs must file a Re-re-amended Statement of Claim within 21 days of this judgement.  The Defendant must file his Re-amended Statement of Defence 21 days thereafter, with any reply from the Plaintiffs, 14 days thereafter.  Leave is reserved to apply should any further directions be required.