Lord Energy Ltd. v. Paul Chen and Another

1991, No.A7124

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H E A D N O T E

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Provisional sale and purchase agreement - whether time of the essence is to be inferred

Time ceasing to be of the essence through subsequent conduct - reasonable notice required if time is to become of essence again

Obligation to pay further deposit "upon signing of the formal agreement" - formal agreement not signed - whether purchaser in breach for not paying further deposit - payment as part of the balance of purchase price on completion to be implied - Fujian Finance Co. Ltd. v. Link Brain Co. Ltd. [1991] HKC 46 applies

Stakeholding provision - whether reasonable for purchaser to request stakeholding provision

Letter Memorial shown in incumbrances register - whether part of title deeds - whether vendor under duty to make copy available

Certificate of compliance - duty on vendor to explain absence Counterclaim - retention of the deeds by purchaser's solicitors - whether purchaser's solicitors entitled to lien where purchaser sues for specific performance

1991, No.A7124

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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J U D G M E N T

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1. In this action, the Purchaser sues the Vendors for specific performance under a provisional sale and purchase agreement signed on 1 August 1991 ("the Provisional Agreement") relating to Flat 24D, Block 25 Baguio Villa with Car Park No.L2 157 ("the property"). It is not disputed that the Provisional Agreement is binding although there is an earlier provisional agreement dated 31 July 1991 signed by only one of the Vendors and without a provision for agents commission.

The Provisional Agreement

2. The purchase price was $2.5 m. At the time the earlier provisional agreement was signed, an initial deposit of $50,000 was paid. A further deposit of $200,000 was payable upon the signing of the formal sale and purchase agreement on or before 10 August 1991. It was further provided that the balance of the purchase price was payable on or before 15 September 1991. The completion date was not expressly mentioned in the Provisional Agreement but it is accepted that it is to be inferred from the date for the payment of the balance of the purchase price which is 15 September 1991.

The issues

3. Three issues arise in the present case :

(a) whether time was of the essence of the Provisional Agreement;

(b) whether the Purchaser was in breach in

i) failing to pay the further deposit of $200,000; and

ii) failing to complete and pay the balance of the purchase price on 15 September 1991;

(c) whether the Vendor's solicitors had satisfactorily answered the requisitions raised.

4. Before turning to these issues, it is necessary first of all to set out the relevant events.

Chronology

5. It is common ground that the Provisional Agreement though dated 31 August 1991 was signed by the parties on 1 August. Two days later, the Vendors' solicitors wrote to the Hong Kong Bank ("the Bank") for the title deeds. On the same day, the Purchaser's solicitors wrote to the Vendors' solicitors asking for a draft formal sale and purchase agreement and the title deeds. Nothing happened until 9 August 1991 when at approximately 5:15 p.m., the Purchaser's solicitors received a draft formal agreement from the Vendors' solicitors. This was delivered by hand. The Vendors' solicitors informed the Purchaser's solicitors that they were still awaiting the title deeds from the Bank and would forward them when available. The letter made no reference to 10 August 1991 being the last day for the signing of the formal agreement.

6. On Monday, 12 August, the Vendors' solicitors threatened to forfeit the initial deposit unless the formal agreement was signed and the further deposit paid by 5 p.m. that day. On 13 August, after referring to a telephone conversation between the firms on 12 August, they renewed the threat to forfeit and further stated that they assumed the draft was acceptable as they had not heard to the contrary. This letter crossed with a letter from the Purchaser's solicitors returning the draft agreement with proposed amendments. On 15 August, the Purchaser's solicitors rejected some of the proposed re-amendments and at the same time sought clarification that the further deposit would be stakeheld unless and until they had received the title deeds and were satisfied with the title.

7. The travelling draft was further amended by the Vendors' solicitors on 20 August. They also stated that the further deposit would not be stakeheld as the parties had not agreed to it. They sent a reminder on 28 August, not having heard from the Purchaser's solicitors. On 3 September, the Purchaser's solicitors requested that a re-engrossment be sent to them following a telephone conversation between the respective conveyancing clerks of the firms. Surprisingly, no re-engrossment was tendered. Instead, on 4 September, the Vendors' solicitors sent another reminder. Then on 5 September they wrote stating that unless they heard from the Purchaser's solicitors within the course of that week, they would advise their client accordingly and further that in view of the lack of response, they presumed that no further amendments were required. At the same time, they reminded the Purchaser's solicitors that completion was to be on or before 15 September 1991 "in which respect time was of the essence". This letter prompted a telephone call on 6 September from Miss Chu, a conveyancing clerk of the firm acting for the Purchaser. She spoke to her counterpart, Mr Paul Cheng. There is a conflict of evidence as to what was agreed between the parties. In any event, it resulted in a letter being sent to the Vendors' solicitors enclosing two pages of the draft agreement containing amendments to provide for the further deposit to be stakeheld. Thereafter, there was no further correspondence between the parties dealing with the draft agreement.

8. Meanwhile, on 2 September, upon receiving the title deeds from the Bank, the Vendors' solicitors forwarded these to the Purchaser's solicitors against the latter's undertaking to hold the same to the order of the Vendors' solicitors. On the following day, the Purchaser's solicitors raised two requisitions. The Vendors' solicitors replied on 9 September. Thereafter, there were exchanges of correspondence between the two firms on 11, 12 and 14 September, with the Purchaser's solicitors asserting that the requisitions had not been properly answered and the Vendors' solicitors taking the contrary position. The Purchaser's solicitors were prepared to extend the time for answering requisitions but the Vendors' solicitors maintained that time was of the essence.

9. Completion did not take place on 15 September which was a Sunday.

10. On 16 September, based on the Purchaser's failure to pay the balance of the purchase price inclusive of the further deposit payable under the Provisional Agreement on or before 15 September, the Vendors' solicitors wrote and sought to forfeit the initial deposit and asked for the immediate return of the title deeds. Later the same day, the Vendors' solicitors' letter was treated as evincing an intention by the Vendors not to be bound by the Provisional Agreement and the Purchaser stated its intention of issuing proceedings for specific performance and damages. The writ for specific performance was issued the following day.

Was time of the essence?

11. In Wong Wai Chi Ann v. Cheung Kwok Fung Wilson [1996] 3 HKC 287 the Court of Appeal held that -

"In these Provisional Agreements for sale and purchase and today's secondary market in Hong Kong, everybody does, and usually, proceed on the footing that time is to be of the essence ... Of course, each case must depend on its own facts. But in the absence of special circumstances, it would usually be the case that a Provisional Agreement for sale and purchase in the common form in use in Hong Kong will be treated as one of which time is of the essence, although no express provision in that behalf is contained in the agreement."

See per Godfrey J.A. at 290D and G.

12. The common form Provisional Agreement in use in Hong Kong provides for the payment of an initial deposit upon the signing of the Provisional Agreement, the payment of a further deposit upon the signing of the formal agreement on or before a specified date and the payment of the balance on completion on or before a specified date. See the facts in Wong Wai Chi (at 288I-289A) andLee Kenny v. Wong Kwok Yan [1994] 2 HKC 309 at 311G-H. The latter is also a decision of the Court of Appeal holding that although the words "time shall be of the essence" did not appear in the agreement, the effect of those provisions was to make time of the essence for the payment of the balance of the deposit and the signing of the formal agreement.

13. The terms of the Provisional Agreement in the present case are in the "common form". Although Miss Eu Q.C. for the Purchaser pointed out that the time of completion was not expressly mentioned but had to be inferred, it is common ground that completion was to take place on or before 15 September 1991 when the balance of the purchase price was to be paid. In these circumstances, whilst I accept that each case must depend on its own facts, this difference is not one of substance so as to take it outside the Court of Appeal's holding referred to above.

14. Miss Eu referred to events subsequent to the Provisional Agreement to show that the Vendors could not have intended time to have been of the essence. It was pointed out that (i) there was nothing in the Vendors' solicitors' letter dated 3 August to the Bank asking for title deeds to indicate that time was of the essence : neither the date for the signing of the formal agreement nor of the payment of the balance of the purchase price was mentioned; (ii) in his witness statement, Mr Ma the solicitor handling the transaction for the Vendors stated that his firm "made the time essence of the agreement in [their] letter 5th September 1991"; and (iii) when the Vendors' solicitors eventually forwarded the draft agreement on 9 August, no reference was made to the deadline of 10 August.

15. Mr Mumford Q.C. for the Vendors submitted that it is not permissible to look at subsequent acts in order to arrive at the intention of the parties when they entered into the Provisional Agreement. He referred to Lee Kenny v. Wong Kwok Yan (supra). The passage relied on (at p.316G) does not in terms hold that the Court can never in any circumstances pay regard to subsequent acts. I can well see that subsequent acts may, in certain circumstances, be revealing as to the parties' intention at the time of the contract. In the present case, however, they throw no light at all on the question since the acts relied on are not those of the Vendors but of their solicitors who only became involved after the parties had already entered into the Provisional Agreement. I accept of course that a party may not unilaterally add a term to make time of the essence after the date of the agreement. So the question is, irrespective of Mr Ma's statement, on its proper construction, was time of the essence of the Provisional Agreement? In my judgment, there are no special circumstances in this case to render the holding of the Court of Appeal cases referred to above inapplicable.

16. However, it is equally clear from case law that time may cease to be of the essence through subsequent conduct. See, for example, the Wong Wai Chi Ann case where the Vendor's solicitors failed to come up with the agreement for signature by the Purchaser on the specified day, and Lee Kenny, where not only was the draft delivered at 12:30 p.m. on the specified day which was the latest time by which the agreement had to be executed, it was delivered to the wrong office. In the present case, the unchallenged evidence is that the draft was delivered at 5:15 p.m. on Friday, 9 August 1991. In their covering letter of 9 August, the Vendors' solicitors pointed out that they were still awaiting the relevant title deeds and documents from the Bank and would send them as soon as they were available. This was in response to the Purchaser's solicitors' request of 3 August that they be supplied with "all the title deeds and documents" for approval. These facts are on all fours with those in Lee Kenny where the learned judge concluded that it was to be inferred from those facts that the Vendor's solicitors did not consider the specified date to be of essence : see Lee Kenny at 315F-G. The Court of Appeal upheld the effect of the judge's finding which was that it would be inequitable in those circumstances to permit the vendors to refuse to perform their part of the contract, having failed to give the purchaser a reasonable opportunity to perform his. (See p.316E).

17. In the present case, even Mr Ma acknowledged that he was not expecting the formal agreement to be signed on 10 August. He said that by sending over the draft he was simply inviting the Purchaser's solicitors to examine it and it was open to them to make amendments and ask for more time. On these facts, there is but one conclusion, namely, that time ceased to be of the essence and I so find. From the correspondence exchanged between the respective firms, it is clear that from 13 August onwards, the parties were engaged in negotiations over the terms of the formal agreement. The last communication regarding proposed amendments is the letter of 6 September following the conversation between the conveyancing clerks of both firms. Whether or not there was any concluded agreement reached on 6 September, once time has ceased to be of the essence, the obligation on the Purchaser thereafter was to perform within a reasonable time. After the lapse of a reasonable time it was open to the Vendors to give notice fixing a time for performance. Time cannot become of essence again without reasonable notice to the other party. See United Scientific Holdings Limited v. Burney B.C. [1978] AC 904 at 946E-947A and Farrand on Contract and Conveyance, 4th Ed. at pp.184-187. Nothing of the kind occurred in the present case.

18. Rusky and Rose Imports Limited v. Loon Wear Garment Factory Limited, 1993 No.A9625 relied on by Mr Mumford is distinguishable on the facts. In that case, two days before the day for the signing of the formal agreement, the purchasers' solicitors received from the vendor's solicitors the engrossment of the formal agreement which incorporated the amendments that the plaintiff's solicitors had requested. So there was nothing further to negotiate which is very different from the present case where the Purchaser's solicitors had not even had the opportunity of raising amendments (through no fault of the Purchaser) let alone reaching any agreement on them before the date specified for the execution of the formal agreement.

Was the Purchaser in breach?

19. Provision for the payment of the further deposit which was to be made "upon signing of the formal agreement" on or before 10 August 1991 has been held to mean that no payment could be required unless and until the formal agreement had been signed. See Fujian Finance Co. Ltd. v. Link Brain Ltd. [1991] HKC 46 at 57G-H where the Court of Appeal further rejected the argument that if no such agreement were signed through no fault of the parties, the purchaser was nonetheless obligated to make the payment. The Court of Appeal held that "the proper implied term to read into the preliminary agreement was that in the events which occurred, the relevant payment, which was part of the purchase price, must have become payable as part of the balance of the purchase price on completion of the agreement." (at pp.57I-58B).

20. Having regard to that decision, the Purchaser was not in breach of Provisional Agreement by failing to pay the further deposit on 10 August 1991.

21. The Vendors contended that the Purchaser was in repudiatory breach of the Provisional Agreement because the three outstanding points left in the final draft sent to the Vendors' solicitors on 20 August had been resolved by 6 September. Further, it was contended that, in any event, it was unreasonable for the Vendors to insist on the further deposit being stakeheld since that was not a term in the Provisional Agreement.

22. As noted above, there is a conflict of evidence as to whether and, if so, what was agreed between Mr Cheng and Miss Chu on 6 September. The draft sent under cover of the Vendors' solicitors' letter of 20 August contained three amendments that had not been agreed to by the Purchaser. In that letter, the Vendors' solicitors also rejected any notion that the further deposit should be stakeheld. Miss Chu's account was that after receiving the Vendors' solicitors' letter of 5 September, she spoke to Mr Cheng. During that conversation, which took place on 6 September, Miss Chu intimated to Mr Cheng that she would be willing to give way on and agree to the three outstanding points as a trade-off for acceptance of the stakeholding provision. Mr Cheng responded by saying "Okay. Send the draft over." Miss Chu had understood Mr Cheng to be agreeing to her proposal.

23. Mr Cheng's evidence appears to be that Miss Chu simply agreed to the three outstanding points and then made a suggestion regarding the stakeholder provision. He did not agree to the stakeholder provision but asked Miss Chu to send the proposed amendment over for consideration. As it was not acceptable to the Vendors, he never went back to her on that point.

24. However, neither Miss Chu nor Mr Cheng gave any evidence regarding the telephone conversation between them referred to in the Purchaser's solicitors' letter of 3 September 1991 in which they asked the Vendors' solicitors for a re-engrossment of the formal agreement. The request would suggest that agreement had been reached between the parties and by this time of course the Purchaser had been supplied with the title deeds obtained from the Bank. There is no evidence that the re-engrossment was ever tendered. In fact on the following day, 4 September, inexplicably (in view of the 3 September request), the Vendors' solicitors were still pressing for the reply to the letters of 20 and 28 August. Then we come to the 6 September with the differing accounts of the conversation. What occurred on 3 September will remain a mystery. As to the two conflicting accounts of the 6 September conversation, it is unnecessary to decide whose evidence is to be preferred. At a minimum, the Vendors were prepared to consider the stakeholding amendment.

25. On the facts, it cannot be said that the Purchaser was unreasonable or was in repudiatory breach in not signing the formal agreement and not paying the further deposit on or before 15 September : they were never given an ultimatum which had the effect of remaking time of the essence. No re-engrossment was tendered although requested, and in fact, by continuing to entertain the Purchaser's request for having a stakeholding provision on 6 September, the Vendors' solicitors were acquiescing in the continuation of the negotiations. It is further clear from the correspondence subsequent to 6 September that what was foremost in the parties' minds was completion : the signing of the formal agreement effectively ceased to be an issue and payment of the further deposit merged into and became the completion issue. See the Vendors' solicitors' letters of 11 and 16 September. The letter of 16 September shows very clearly that the $200,000 was to be payable on completion as part of the balance of the purchase price. It is to be noted that it contained no allegation of any breach by the Purchaser in failing to sign the formal agreement or to pay the $200,000.

26. Leading counsel for the Vendors relied on Chu Wing Ning v. Ngan Hing Cheung 1991, No.A9409 (at pp.8-9) for the proposition that the purchaser was in repudiatory breach for insisting on a term to be inserted into the formal agreement which goes entirely beyond what had been expressly agreed in the Provisional Agreement. The initial question is whether the Purchaser's solicitors were acting unreasonably when they asked for a stakeholding provision on 15 August 1991.

27. It is clear from the Court of Appeal's decision in the Lee Kenny that at least in 1991, the conveyancing practice in Hong Kong was for all relevant title deeds and documents to be delivered before the formal contract. Mr Siu Chak Yu, a director and beneficial owner of the Plaintiff company and senior partner of Simmon Siu, Wong, Lam & Chan, the Purchaser's solicitors, gave evidence to the effect that the request for a stakeholding provision was made because when the draft formal agreement was sent over by the Vendors' solicitors, they were not in a position then to supply the title deeds that had been requested and that it was the practice in Hong Kong for title deeds to be delivered before the formal contract is made. His evidence was not challenged. In these circumstances, it cannot be said that the Purchaser's solicitors were unreasonable in asking for the further deposit to be stakeheld at least until such time as the Purchaser had been supplied with the title deeds and had a reasonable time within which to consider them. Whether or not it was reasonable for the Purchaser to have continued to ask for a stakeholding provision on 6 September, several days after the title deeds had been supplied may be another matter but the Vendors chose to entertain that request to the extent of asking for a draft of proposed amendments for consideration. Thereafter they neither served any notice on the Purchaser categorically rejecting the request nor did they insist on the execution of the formal agreement. Accordingly, time was never remade of the essence. Moreover, as noted above, no re-engrossment was ever tendered. It cannot be said that on any view the Purchaser was in breach in not having paid the $200,000 or signed the formal agreement on or before 15 September 1991. In these circumstances, I find that the Purchaser was not in repudiatory breach of the Provisional Agreement.

28. The further question whether the Purchaser was in breach by failing to complete and pay the balance of the purchase price on 15 September 1991, turns on whether, by that date, the requisitions raised by the Purchaser had been satisfactorily answered.

Requisitions

29. The requisitions were first raised by the Purchaser's solicitors on 3 September 1991 in the following terms :

" Please let us have Letter Memorial No.1599984 or a certified true copy thereof to enable us to approve the title to the property.

As the Conditions of Exchange No.10485 was issued after 1970, we should be grateful if you could let us have a certified copy of the certificate of compliance to prove that the grantee was entitled to a grant of the Crown Lease in pursuance of Section 14(3) of the Conveyancing and Property Ordinance."

This elicited a response on 9 September in the following terms :

"1. Our client is not prepared to supply you with certified copy of Letter Memorial No.1599984 as the same does not affect title to the above property.

2. There is no Certificate of Compliance issued up to date hereof."

This was followed by a further letter on 11 September :

" We believe your requisitions have all been satisfactory answered that they do not affect title and we will insist therefore that completion to take place as scheduled."

30. On 12 September, the Purchaser's solicitors replied as follows :

" We are still looking forward to your client's satisfactory answers to other outstanding requisitions and in particular written document proving that the conditions under the Conditions of Exchange No.10485 have been complied with to the satisfaction of the Director of Public Works and the Registrar General (Land Officer)."

On the same day, the Vendors' solicitors wrote stating that the requisitions were invalid and did not raise any doubts on title.

31. It has to be borne in mind that at the requisitions stage, the obligation is upon the Vendors to show good title by satisfactorily answering requisitions irrespective of the Vendors' ability to pass good title on the date for completion. See the Court of Appeal's decisions in Kok Chong-ho v. Double Value Developments Ltd. [1993] 2 HKLR 423 and Active Keen Industries Ltd. v. Fok Chi-keong [1994] 1 HKCLR 398 at 404-405 and 413.

A. Letter Memorial No.1599984

32. It is common ground that in the present case title commenced with the Conditions of Exchange ("the Crown Grant"). The land search reveals that the memorial in question is a letter with carpark layout plans dated 20 October 1978 and registered on 25 October 1978. It is shown in the incumbrances register. According to the Purchaser's expert, Mr Foo Tak Ching, the carpark plan affects title inasmuch as it has to be ensured that the carpark sold was in accordance with approved building plans. He stated that sometimes the carpark may not be one that had been approved, for example, where it had been allocated from the common area. Further, Special Condition (17) of the Crown Grant contained a number of provisions relating to the plans, compliance with which could not be ascertained without reference to the memorial itself.

33. Special Condition (17) was in the following terms :

"(17) A lay-out plan indicating the parking spaces or car ports to be provided within the lot in accordance with Special Condition No.(16) and approved by the Building Authority, or a copy of such plan certified by an authorized architect, shall be registered by the grantee by memorial in the Land Office. No transaction affecting the lot or any part thereof or any building or part of any building erected or to be erected thereon shall be entered into prior to such registration. The parking spaces or car ports indicated on the said approved plan shall not be used for any purpose other than the purpose set out in Special Condition No.(16). The grantee shall maintain the parking spaces or car ports in accordance with the said approved plan and shall not alter the layout except with the prior written consent of the said Director."

It should be mentioned in passing that a great deal of evidence was given about an apparent breach of Special Condition (17) in that according to the land search records, an agreement for sale and purchase was entered into prior to the registration of the carpark plan contrary to Special Condition (17). It was suggested that this was first mentioned in Mr Foo's witness statement. Mr Siu could not remember whether at the time he made requisition he had this point in mind. It appears to me that if this had been his concern, he should have spelt it out in his requisition.

34. In Wong Bik Ching v. Yu Hon Chung 1996 No.MP2969 it was held (at p.8) that prima facie when an instrument is registered against the property and it is not apparent from the land search that the document has ceased to affect the property, the document ought to be treated as part of the title deeds which the vendor should make available to the purchaser. The Vendors' expert Mr Lau Kwok Hing acknowledged that, strictly speaking, the Purchaser can ask for everything that is registered in the Land Office by memorial. He accepted that prima facie such a document affects title. It was therefore perfectly valid for the Purchaser's solicitors to have asked for a copy and if the Vendors were to refuse, the Purchaser could insist.

35. If such a request was reasonable and valid, there must be a concomitant duty on the Vendors to make a copy of it available. It goes against common sense to say to a purchaser that he is perfectly entitled to ask for a copy of this document but that the vendor is under no duty to make it available. In fact, Mr Lau could not explain why the Vendors' solicitors refused to produce a copy when so asked and in terms accepted that the Vendors' solicitors were under a duty to provide a copy. It also stands to reason that when a request is first made for such a document, the Purchaser's solicitors cannot be under any duty to offer any explanation having regard to the fact that prima facie all documents registered in the Land Office against the property affect its title. Until the Purchaser's solicitors have had the opportunity of perusing the document, they cannot be expected to formulate any specific requisition.

36. In re-examination, Mr Lau attempted to qualify his earlier answer by stating that upon the Vendors' refusal to provide a copy, it was incumbent upon the Purchaser's solicitors to explain to the Vendors' solicitors that because it was registered in the Land Office it is prima facie a document that affects the property and that whilst it may not be relevant to the proof of title, it is registered there. I do not accept that there was any such obligation on the Purchaser's solicitors where, as here, they were dealing with their opposite number and not with lay persons with no knowledge of requisitions. Lee Kim Ha v. Yim Moo Chiu [1990] HKDCLR 29 relied on by Mr Mumford is of no assistance. Not only did that case not concern a document that was registered at the Land Office against title, it concerned the absence of a valid execution of an assignment by an assignee or her attorney, a matter which did not affect the passing of title to the assignee.

B. Certificate of Compliance

37. It is common ground that the request for a copy of the certificate of compliance was perfectly legitimate. It is Mr Foo's evidence that the absence of a certificate of compliance indicates non-performance or non-observance of one or more covenants under the Crown Grant. In his opinion, it was incumbent on the Vendors' solicitors to explain why there was no certificate of compliance and that in spite of the absence of such a document, it would not affect title or alternatively that it would not cause any real risk of entry by the Crown.

38. Mr Lau gave evidence to the effect that the absence of a certificate of compliance for Baguio Villa was "notorious". Pausing here, whilst Mr Lau maintained that any conveyancer worth his salt would have been aware of the fact that there was no such certificate for Baguio Villa, he himself did not know the reason for its absence. Nevertheless he accepted that a solicitor who may have dealt with a unit in Baguio Villa previously may wish to know the updated position : he is perfectly entitled to raise a requisition about the absence of a certificate of compliance and to ask why if he did not know the reason for it. Mr Lau further accepted that there would have been no difficulty for the Vendors' solicitors to have written to the Land Registry for information regarding the absence of a certificate of compliance and that it was possible to obtain a reply reasonably promptly.

39. The issue here is whether the Vendors' solicitors' response to the 12 September requisition was insufficient because it did not explain the reason for the absence of such a certificate.

40. It was submitted for the Vendors that the 12 September letter was a mere repetition of the request made on 3 September. But is that analysis correct? On 3 September, the Purchaser's solicitors asked for a copy of the certificate. Had one been available, it would have meant that (1) the estate is a legal as opposed to an equitable estate and (2) the conditions of exchange had been complied with. Whilst the existence of an equitable estate is clear from the absence of a certificate of compliance, such absence left at large the question of compliance with the conditions of exchange and it is in this context that the letter of 12 September has to be viewed. So even Mr Lau agreed that the Purchaser's concern expressed in the 12 September letter was compliance with the conditions of exchange. It was as plain as a pikestaff that the concern was nothing more and nothing less than why there was no certificate of compliance. Was it because of non-compliance or breach or some other reason?

41. In my judgment, given the exchanges of 3, 9 and 12 September, the Vendors were under an obligation to explain the absence of the certificate. The answer would either reveal that it did not affect title or if it did then the Purchaser's solicitors would be in a position to render advice in the light of which the Purchaser (and its mortgagee) could evaluate the risk in completing without such a certificate. The Purchaser's concern was clear : the Vendors' solicitors chose not to address it.

42. Mr Mumford appeared to attach importance to the fact that the Crown has neither threatened nor to re-enter or sought re-entry in the last 17 or so years and that any risk of re-entry was therefore fanciful. But the question is not whether the Vendors have good title. Rather, as noted above, it is whether they have shown good title by satisfactorily answering the requisitions. This they failed to do.

Conclusion

43. It is a matter of regret that the Vendors chose to reject the Purchaser's offer to extend the time for completion so as to clear up the requisitions. Had they taken up the offer, the probability is that this action would not have materialized. It follows that in my judgment the requisitions had not been sufficiently answered and the Purchaser is entitled to an order for specific performance.

The Counterclaim

44. The Purchaser's solicitors did not return the title deeds until 4 December 1991 despite the Vendors solicitors' request made on 16 September 1991. The issue is whether the Purchaser or its solicitors were entitled to retain the deeds during that short period. The deeds were supplied by the Vendors' solicitors under cover of their letter of 2 September 1991 against the Purchaser's firm's "personal undertaking to hold the same to [the Vendors' solicitors] order and returnable on demand".

45. The Purchaser contends that it was entitled to retain the deeds because it has a lien for the deposit paid and further that it is suing for specific performance. As regards the Purchaser's solicitors who are also defendants to the Counterclaim, they take the position that the Vendors have no cause of action against them and that the proper party should have been the Vendors' solicitors.

46. Dealing first with the position of the Purchaser's solicitors, since the Vendors' solicitors were plainly agents for the Vendors, the technical defence advanced by the Purchaser's solicitors has neither substance nor merit. As to the Purchaser's lien argument, I do not see how it can assist. The essence of a purchaser's lien is for the return of monies paid to a vendor where the contract has gone off. See Snell's Principles of Equity 29^thEd. p.466, 28 Halsbury's Laws of England, para.560. But the relief sought here is not for the repayment of the deposit. The mere fact that the Purchaser is suing for specific performance cannot of itself entitle it to retain the Vendors' deeds. Entitlement to the deeds cannot arise prior to the adjudication of its claim.

47. It follows that neither the Purchaser nor its solicitors had any right to retain the title deeds. In the circumstances, the Vendors are entitled to nominal damages of $10.

48. I will hear counsel on the appropriate form of order to be made in the present case.