CHAO MEI HUA AND ANOTHER v. FERRIER INVESTMENT LTD.

1994 M.P. No. 1530

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. It concerns a shop on the ground floor of Lee King Mansion, 83, 85 and 87 Electric Road ("the premises") which the Plaintiffs ("the purchasers") agreed to buy from the Defendant ("the vendor") by a sale and purchase agreement dated 26th May 1994. Completion was due to take place on 20th June 1994.

2. By clauses 8 and 9(a) of the agreement, the vendor undertook to prove its title to the premises at its own expense in accordance with section 13 of the Conveyancing and Property Ordinance (Cap. 219) ("the Ordinance"). In order to do that, its solicitors provided the purchasers' solicitors with copies of a number of documents. The purchasers claim that the vendor had not proved its title by the date on which completion was due to take place, that the vendor had therefore repudiated the agreement, and that they are entitled to the return of the deposit of $380,000 paid by them. For its part, the vendor asserts that it has proved its title. It claims that it was the purchasers who repudiated the agreement by failing to pay the balance of the purchase price by the date on which completion was due to take place. It claims that the purchasers have forfeited the deposit of $380,000 pursuant to clause 14 of the agreement.

3. Among the documents provided to the purchasers' solicitors were four assignments. They were all dated 30th May 1974. They related to various floors of 83 Electric Road. However, their significance for present purposes relates to what they each recited. What they each recited was as follows:-

(i) the land on which 83 Electric Road was erected ("the land") had been assigned on 29th November 1950 to Leung Yuk Chun,

(ii) she died intestate on 10th November 1951,

(iii) letters of administration of her estate were granted to her husband on 10th March 1953,

(iv) he died intestate on 22nd August 1960,

(v) letters of administration of his estate were granted to two of his sons on 1st February 1962.

In addition, the four assignments, which were executed by his two sons, recited that by the date of the assignments, "the said premises are now vested in the Vendors as such Administrators as aforesaid", i.e. that the land was then vested in the sons as administrators of their father's estate "as aforesaid".

4. The concern of the purchasers is that no document has been produced to them to show that the land ever became vested in Leung Yuk Chun's husband. It was open to Leung Yuk Chun's husband, as the administrator of her estate, to make an assent vesting the land in himself, but that assent had to be in writing: see sections 66(1) and (3) of the Probate and Administration Ordinance (Cap. 10), the equivalent of which in the U.K. were so construed by Pennycuik J. in Re Kings Will Trusts [1964] 1 Ch. 542. Accordingly, in the absence of such a vesting document, the land remained part of the unadministered estate of Leung Yuk Chun. If the land never became vested in her husband, it could only have become vested in his sons as administrators of his estate if they had become the administrators of the unadministered part of her estate by the grant of administration de bonis non: see Halsbury's Laws of England, 4th ed., Vol. 17, para. 984. In the absence of a grant de bonis non to administer the unadministered part of her estate, the two sons had no power to assign the land, and the assignments did not operate to pass title to the vendor's predecessors in title.

5. That argument calls into question the accuracy of the recital in the assignments that the land was then vested in the administrators as administrators of their father's estate. Can the accuracy of that recital be called into question? The answer lies in section 13(4) of the Ordinance, which provides:-

"A recital ... of any fact ... contained in any document of title ... relating to any land and dated ... not less than 15 years before the contract of sale of that land shall, for the purposes of any question as to proof of title concerning the parties to that contract and unless the contrary is proved, be sufficient evidence of the truth of that recital ..."

Since the assignments in which the recital is contained were dated 30th May 1974, i.e. not less than 15 years before the date of the contract of sale between the purchasers and the vendor, i.e. 26th May 1994, the recital is presumed to be true unless the contrary is proved. The issue therefore is: have the purchasers proved that the land had not become vested in the two sons of Leung Yuk Chun's husband by 30th May 1974?

6. At first blush, the answer to that question must be No. The absence of a reference in the earlier recitals to a document vesting the land in Leung Yuk Chun's husband, and the absence of a reference to a grant de bonis non to the two sons to administer her estate, do not mean that the purchasers have proved that the land had not become vested in the two sons. It is only if the absence of such references meant that there had never been a vesting instrument in writing or a grant de bonis non that it can be said that the purchasers have proved that the land had not become vested in the two sons. The absence of such references cannot mean that: their absence only means that it cannot be proved that the land had become vested in the two sons. The presumption in section 13(4) means that the vendor does not have to prove that. It is the purchasers who must prove the contrary.

7. In the light of that, the ingenious argument of Mr. Henry Lo for the purchasers - in support of the proposition that the purchasers have proved that the land had not become vested in the two sons - relies on the words "as aforesaid" in the recital. He argues that the recitals formed part of a narrative, and that the words "as aforesaid" show that the recital purported to explain the vesting of the land in the two sons by reference to the earlier recitals in the narrative. However, the absence of references to a document vesting the land in their father, or to a grant de bonis non, meant that there was nothing in the earlier recitals which could have explained the vesting of the land in the two sons, and it had therefore been proved that the land had not become vested in the two sons at all.

8. I reject this argument. The recital recorded the vesting of the land in the two sons. It is that which is presumed to be true. It may be that whoever drafted the recital thought that its accuracy had been proved by the recitals which preceded it. I accept that, for that reason, doubt may be cast on the accuracy of the recital. But since such doubt does not amount to proof that the recital is untrue, the presumption which section 13(4) requires to be accorded to the recital has not been displaced.

9. Since the purchasers have not proved to my satisfaction that the land had not become vested in the two sons by 30th May 1974, the recital is presumed to be true. Accordingly, the assignments operated to pass title to the vendor's predecessor in title, and the vendor has therefore proved its title to the premises in accordance with section 13.

10. For these reasons, I declare that:

(I) the requisitions and objections in respect of the title to the premises contained in the letter of 3rd June 1994 from the Plaintiffs' solicitors to the Defendant's solicitors have been sufficiently answered by the Defendant,

(ii) the Defendant has shown good title to the premises,

(iii) the Plaintiffs repudiated the sale and purchase agreement dated 26th May 1994 by failing to pay the balance of the purchase price by 20th June 1994 when completion of the agreement was due to take place.

11. Mr. Lo reserved the right to argue, in the event of the court declaring that good title to the premises had been shown, that clause 14 of the agreement, which provided for the forfeiture of the deposit of $380,000 paid by the Plaintiffs to the Defendant, is unenforceable on the basis that the forfeiture constituted a penalty, rather than a genuine pre-estimate of the Defendant's loss. Accordingly, I adjourn the determination of that issue to a date to be fixed after consultation with counsel's diaries. If that issue is settled, the parties will have to inform the Clerk of Court of that immediately. I make an order nisi that the Defendant's costs of the summons be paid by the Plaintiffs to the Defendant to be taxed if not agreed.