SCHNEIDER WONG FUNG YIN v. PETER NGAI

DCCJ 2904/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2904 OF 2005

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JUDGMENT

1.  This is the Plaintiff's claim for relief relating to a memorandum of agreement made on 8 March 2005 ("Agreement") between the Plaintiff as purchaser and the Defendant as vendor, whereby the Plaintiff agreed to purchase from the Defendant the property known as Unit No. E8, Yee On Building, 26 East Point Road, Hong Kong ("Property"). The Plaintiff seeks declarations that the Defendant failed to prove and show good title to the Property in accordance with the Agreement, that the Defendant failed to answer the requisitions raised by the Plaintiff in accordance with the Agreement, and that the Plaintiff was entitled to rescind and did validly rescind the Agreement.  The Plaintiff further claims an order that the Defendant should return to the Plaintiff deposits paid under the Agreement in the sum of HK $200,000 with interest, and that the Defendant should pay to the Plaintiff liquidated damages of HK $200,000, or alternatively, damages in the sum of HK $15,660.  Finally, the Plaintiff claims a declaration that she is entitled to an equitable lien on the Defendant's interest in the Property under the Agreement for the deposit, interest, damages and the costs of this action.

The Facts

2.  The Plaintiff agreed under the Agreement to purchase the Property at the purchase price of HK $2,000,000, an initial deposit of HK $100,000 being payable before the signing of the Agreement, a further deposit of HK $100,000 being payable upon signing of the Agreement, and the balance payable on or before completion, agreed to take place on or before 20 May 2005.  Time was expressed under the Agreement  to be of the essence. 

3.  The initial deposit was paid by the Plaintiff to the Defendant on or about 10 December 2004.  The further deposit was paid on or about 8 March 2005.

4.  Under cover of a letter dated 9 May 2005, the title deeds to the Property were delivered by the Defendant's solicitors to the Plaintiff's solicitors.  Amongst the documents sent were an agreement for sale and purchase dated 2nd June 1998 made between Chiu Yin Mei (“Chiu”) and Ngai Pty Ltd (“Ngai Pty”) registered at the Land Registry by Memorial  No. 7550887 ("1998 Agreement"), a Nomination dated 2 July 1998 purportedly signed on behalf of Ngai Pty and registered in the Land Registry by Memorial No. 7576178 ("Nomination") and a deed of Assignment dated 2 September 1998 made between Chiu and the Defendant, Peter Ngai, which was registered in the Land Registry by Memorial No. 7576180 ("Assignment").

Historical facts

5.  To complete the understanding of the background to the dispute, it is pleaded in the Defence that the Defendant and his wife were the sole shareholders and directors of Ngai Pty, which was incorporated in Australia in 1977. 

6.  Preceding the 1998 Agreement, a provisional agreement for sale and purchase dated 16 June 1998 had been made between Chiu as vendor and Ngai Pty as purchaser of the Property.  The provisional agreement contained the usual receipt clause whereby Chiu as vendor acknowledged receipt of a preliminary deposit of HK $100,000 from Ngai Pty as part of the agreed purchase price for the purchase of the Property.  The 1998 Agreement likewise contained the usual acknowledgment of receipt by Chiu of the sum of HK $70,000, which was the further deposit of the purchase price referred to in Part IV of the Schedule to the 1998 Agreement, as having been paid by Ngai Pty as purchaser.

7.  The Nomination was sealed with the Common Seal of Ngai Pty and signed by Peter Ngai, its director.  It recites that the 1998 Agreement was made between Chiu and Ngai Pty for the purchase of the Property at the price of HK $1,700,000, and that Ngai Pty had actually entered into the 1998 Agreement for Peter Ngai and that all the deposit monies of HK $170,000 paid under the provisional agreement and the 1998 Agreement were in fact provided by Peter Ngai.  By the express terms of the Nomination ,  Ngai Pty declares that all interest, title, benefits and rights vested in Ngai Pty under the 1998 Agreement shall as from 2 July 1998 be vested in Peter Ngai.  Under the Nomination, Ngai Pty nominates Peter Ngai to take up and execute the Assignment, and further directs that Chiu should assign the Property directly to Peter Ngai as beneficial owner of the Property.

8.  By the Assignment, Chiu in fact did assign the Property to Peter Ngai in consideration of the sum of HK $1,700,000 said to be paid by Peter Ngai to Chiu who acknowledged receipt of the said sum.

The correspondence and the requisitions

9.  By a letter dated 11 May 2005, the Plaintiff's solicitors raised requisitions, by seeking a legal opinion to prove due execution of the Nomination by Ngai Pty.  It was pointed out in the letter that Ngai Pty was an Australian corporation, and that the Nomination was executed by one director of Ngai Pty. 

10.  In response, the Defendant's solicitors wrote on 13 May 2005 to state that Ngai Pty had been deregistered, and because the 1998 Agreement had been merged into the Assignment, the 1998 Agreement had ceased to have effect and hence production of a legal opinion was not necessary.

11.  The Plaintiff's solicitors disagreed.  It was pointed out in their letter to the Defendant's solicitors dated 17 May 2005 that Peter Ngai was only entitled to the Property by the valid execution of the Nomination by Ngai Pty, as otherwise the equitable interest of the Property would still remain in Ngai Pty.  They further pointed out that the effect of the deregistration of Ngai Pty, an Australian corporation, requires the legal opinion from a qualified Australian lawyer.

12.  The Defendant's solicitors reiterated in their letter of 18 May 2005 that Ngai Pty had been deregistered and was defunct, and that there was no purpose for seeking a legal opinion, since the 1998 Agreement had been merged into the Assignment, and Peter Ngai was a director of Ngai Pty at the material time such that "no resulting trust (if any)" arose.  This was followed by a letter dated 19 May 2005, by which the Defendant's solicitors sent to the Plaintiff's solicitors a copy of a search record confirming that Ngai Pty had been deregistered on 9 June 2002. The document sent was an extract from the database of the Australian Securities and Investments Commission showing that the status of Ngai Pty as at 18 May 2005 was "deregistered”, with a date of the deregistration being 9 June 2002.  There was shown on the document a record of an “application for voluntary deregistration of a company" dated 25 January 2002.

13.  In reply, the Plaintiff's solicitors wrote on 20 May 2005 (the letter being faxed at 10:14 a.m. on 20 May 2005) to say that the Nomination was executed under the common seal of Ngai Pty but was signed by one director only.  A legal opinion from an Australian lawyer was therefore stated to be necessary to prove due execution of the Nomination in accordance with the laws of Australia and the bylaws of Ngai Pty.  The Plaintiff's solicitors also pointed out that a legal opinion was necessary to certify the validity and effect of the deregistration, and also to certify the validity of the Nomination despite an apparent conflict of interest arising from the fact that the nominee appointed under the Nomination was a director of Ngai Pty, who was also the only director signing the Nomination.

14.  The parties were naturally anxious by then as completion was scheduled to take place on the day.  The Plaintiff's solicitors therefore in the same letter of 20 May 2005 referred to in the preceding paragraph requested an extension of the completion date to 31 May 2005, subject to their requisitions being dealt with to their satisfaction three working days prior to completion.

15.  In reply, the Defendant's solicitors wrote to say that they did not agree with the matters set out in the letter of 20 May 2005 from the Plaintiff's solicitors.  The Defendant's solicitors repeated that since Ngai Pty was defunct, there was no point to request a legal opinion.  They pointed out that the allegations made in the letter of 20 May 2005 from the Plaintiff's solicitors were "totally without ground and unsubstantiated", "merely hypothetical", and that the Nomination was duly executed unless the contrary is proved.  They cited a passage from the judgment of Sera Ltd. v. Excelling Profit Investments Ltd., which did not appear on its face to be directly relevant, but maintained in any event that the Plaintiff's requisition for a legal opinion was not necessary.  The Defendant's solicitors finally gave notice in the letter that as the Defendant had already proved good title to the Property, completion must take place on 20 May 2005, and that the proposed extension for completion was not acceptable.

16.  The last letter in the exchange between the solicitors on or before 20 May 2005, the scheduled date for completion, was a letter from the Plaintiff's solicitors of 20 May 2005, by which they reiterated the points stated in their earlier letter, and emphasized that it was necessary to ascertain the reason for the deregistration of Ngai Pty.  They pointed out that if Ngai Pty was voluntarily wound up, the latest balance sheet of the company had to be produced to ascertain whether the Property remained as one of the assets of Ngai Pty, in which case Peter Ngai might be a mere trustee for Ngai Pty, and if Ngai Pty was insolvent, its creditors would be able to trace the Property, particularly if the Property had been undervalued.  They asked for a board resolution or a certified copy thereof to accompany that legal opinion.

17.  Completion of the sale and purchase obviously did not take place on 20 May 2005.  The Plaintiff's solicitors wrote to the Defendant's solicitors on 23 May 2005 to explain further why their requisitions had not been dealt with :

"	(i)	It is a matter of Australian law as to the effect of deregistration of an Australian Company.  In particular, we observe that the Company was only deregistered in August, 2002.  In Hong Kong, by way of example, a company struck off the register can be restored.  Your contention that the Company is defunct is answer to our requisition, with respect, is simplistic and the merger point is also irrelevant to the issue.
	(ii)	Our fear of such possibility arose out of the Nomination.  On the face of that document Ngai Peter as the only executing director of the Company and purportedly on behalf of the Company declared that the Company was only a mere trustee for him.  There is a clear case of a director having an interest in the transaction if not conflict of interest.  As such, our client is being put on inquiry.
	(iii)	We do not know whether the Nomination has been validly executed and hence binding on the Company, as a matter of Australia law.  For example, whether there has been a valid board resolution to sanction the Nomination.  Whether Mr. Ngai has declared his interest to the board and whether even if he did, he could be counted towards the quorum.  You have not even bothered to provide us with either the board resolution or the Memorandum and Articles of Association (or the equivalent document).
	(iv)	You have not answered our requisition in relation to the solvency of the Company when it was deregistered, so that we can assess the risk of a third party challenging the Nomination."

18.    The Plaintiff's solicitors repeated that the Plaintiff was prepared to extend the completion date to 31 May 2005 if the Defendant could show and prove good title and satisfactorily answer their requisitions three working days prior thereto, which offer for extension was open for acceptance until 5 p.m. on 24 May 2005.

19.  On 24 May 2005, the Defendant's solicitors wrote to point out that the Plaintiff's solicitors’ unilateral imposition of a time limit was not acceptable to them.  They reiterated that the Defendant had proved good title to the Property.  The Defendant's solicitors pointed out that the Plaintiff conceding that Ngai Pty which may have an interest in the Property is no longer in existence meant that there was no point to further deal with the issue of the Nomination.  They pointed out that there was no evidence that Ngai Pty could be restored, the question of Peter Ngai having an interest in the transaction or a conflict of interest was an assumption and which could not be made by a defunct company, and referred to the case of Royal British Bank v. Turquand to say that the request for the board resolution was not necessary.  Finally, the Defendant's solicitors pointed out that the solvency of Ngai Pty was irrelevant to the transaction, as it only concerns the creditors of the company but not the intended purchaser of the Property.  In the same letter, the Defendant's solicitors gave final notice that completion must take place on or before 31 May 2005, and that the delay caused by the Plaintiff would be charged interest at a daily rate.

20.  By a letter dated 30 May 2005, the Plaintiff's solicitors gave notice of the Plaintiff's acceptance of the Defendant's repudiation of contract, by virtue of the fact that the Defendant had not satisfactorily answered their requisitions.

21.  Further letters were exchanged between the solicitors, the Defendant's solicitors claiming in their letter of 31 May 2005 that the Plaintiff had failed to complete the purchase despite the Defendant having allowed extension for completion up to 31 May 2005, and reserving the Defendant's rights.  It was only under cover of a letter dated 16 June 2005 that the Defendant's solicitors furnished a legal opinion of an Australian lawyer, minutes of the board of Ngai Pty relating to the deregistration of Ngai Pty, an extract of the Memorandum and Articles of Association of Ngai Pty, and a resolution approving the execution of the Nomination.

22.  The main issues in these proceedings are whether the requisitions raised in relation to the Nomination have been satisfactorily answered by the Defendant at a time reasonably before the scheduled completion date, and whether the Plaintiff was entitled to terminate the Agreement on 30 May 2002, when the Plaintiff's solicitors purported to accept the Defendant's repudiation of the Agreement.

23.  I will first deal with and dispose of one preliminary point.  In determining whether or not the requisitions raised by the Plaintiff's solicitors were satisfactorily answered, I should refer to and examine the correspondence exchanged between the parties’ solicitors before the scheduled and agreed date for completion, namely 20 May 2005 as provided for in the Agreement.  The Defendant does not dispute this, as it is pleaded in paragraph 36 of the Defence that "any post-completion legal arguments by way of solicitors' correspondence were irrelevant to the issue in dispute".  Counsel for the Plaintiff argues that matters disclosed by the Defendant or his solicitors after 20 May 2005 and evidence produced by them after this date are irrelevant for the purpose of showing title to the Property.  This is relevant as it was only on 16 June 2005 that the legal opinion of the Australian lawyers, board resolutions and extracts of the Articles of Ngai Pty were produced to the Plaintiff's solicitors.

24.  On the authority of Regent Summit (Hong Kong) Ltd. v. Smart Business (Asia) Ltd. [1988] 2 HKC 718 and Polyson Jewellery Co. Ltd.& Anor. V. Liu Song Carols [2002] 2 HKC 183, I accept that whether the Plaintiff as purchaser is entitled to call off the Agreement should depend on whether the Defendant in this case had provided a satisfactory answer to the requisitions raised by the Plaintiff's solicitors prior to the termination of the Agreement, which on the facts of this case was on 30 May 2005.  As was pointed out by the Court of Appeal in Polyson (at page 192)"the fact that the vendor, some years later, can bring forward facts to show that the title is good, is of no relevance".  On the facts of this case, even if the Defendant had put forward facts on 16 June 2005 to show that his title in the Property is good, if those facts were not apparent to the Plaintiff or her solicitors on the scheduled date of completion on 20 May 2005 or on the date when the Plaintiff terminated the Agreement on 30 May 2005, this would be of no relevance.

25.  The second point relates to the date of completion, and whether this was at any time extended with the agreement of both parties.  Under the Agreement, completion of the sale and purchase was to take place on or before 20 May 2005, time to be of the essence.  Although the Plaintiff's solicitors requested an extension of the completion date to 31 May 2005 under cover of their letter of 20 May 2005, this was never agreed to by the Defendant’s solicitors, who reiterated in their letter of 20 May 2005 that completion must take place on 20 May 2005.  Completion did not take place, as scheduled, on 20 May 2005, but neither party took any step to accept the repudiation of the Agreement by the other party on or immediately after 20 May 2005.  It was only on 23 May 2005 that the Plaintiff's solicitors indicated to the Defendant's solicitors by their letter  that the Plaintiff was prepared to extend the completion date to 31 May 2005, if the Defendant could prove good title and satisfactorily answer their requisitions three working days prior thereto.  In reply to this, the Defendant's solicitors wrote on 24 May 2005 to give "final notice" that completion must take place on or before 31 May 2005, and that interest will be charged on the delay caused by the Plaintiff.  The Plaintiff argued that this conditional extension to 31 May 2005 on payment of interest was not accepted by the Plaintiff.  On 30 May 2005, the Plaintiff's solicitors wrote to accept the Defendant's repudiation of the Agreement by virtue of the Defendant's failure to answer their requisitions satisfactorily. In these circumstances, I find that there was no agreed extension to the date for completion initially agreed as 20 May 2005, and that the Plaintiff purported to accept the Defendant's repudiation on 30 May 2005.

Legal Principles

26.  The law is clear that the burden is on the vendor to prove and show a good title.  There are two well established principles in this regard.  First, a vendor need not prove a perfect title and a good title is shown so long as he can satisfy the court beyond reasonable doubt that the purchaser would not be at risk of a successful assertion against it of an encumbrance in the future: see MEPC Ltd. v. Edwards [1981] AC 205, in which Lord Russell of Killowen said:

"

In my opinion if the facts and circumstances of a case are so compelling to the mind of the court that the court concludes beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the encumbrance, the court should declare in favor of a good title shown."

27.    MEPC Ltd.'s case was relied upon in the Hong Kong case of Kan Wing Yau v. HK Housing Society [1988] 2 HKLR 187, in which the Court held :

"

The obligation on the vendor to prove good title meant that the title proved must be one which can at all times, and in all circumstances, be forced upon an unwilling purchaser in an action for specific performance.  The court would not force a doubtful title on a purchaser.  A doubtful title was one which would expose the purchaser to risk or hazard.  The court must be satisfied beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the encumbrance.  It was only if the blot on the title was purely theoretical and not a practical blot that it could be ignored."

28.  The second principle is that whenever questions arise as to whether  title has been proved, it must be approached from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonably robust common sense, both intending to see the transaction through to completion in terms of their own bargain ( Mexon Holdings Ltd. v. Silver Bay International Ltd. [2000] 2 HKC at 8G-H).  An alternative test to this is whether a prudent and experienced solicitor can properly advise his client that he can accept the vendor's title (per Ching PJ in Chi Kit & Another v. Lucky Health International Enterprise Ltd. FACV 18/1999).

29.   Another well established principle is that requisitions must be satisfactorily answered in reasonable time before the scheduled completion date.  In Active Keen Industries Ltd. v. Fok Chi-keong [1994] 1 HKLR 396 Litton, JA. (as he then was) said at 406 :

"

Obviously, if a purchaser raises a substantial objection as to the vendor's title and there are facts within the vendor's knowledge which, if revealed, might meet the objection, and the vendor chooses to withhold that from the purchaser, the vendor clearly cannot, on the day fixed for completion, turn around and say to the purchaser : ‘now I will both show you a good title and make you good title; you'll pay the balance of the purchase price today or I will rescind.’ The purchaser must be given a reasonable time to consider the title of the vendor and his own position; and the implied obligation of showing a good title would not have been discharged by disclosure on the day fixed for completion.

But assume the objection to have no substance.  In such a case, as Godfrey, J. remarked, this presents considerable difficulties.  Is it enough for the vendor to say : "there is no substance in the purchaser's objection"? … If the matter was self-evident, the purchaser's solicitor cannot insist upon a fuller reply.  But the vendor's solicitor must act with total candour, so that the purchaser can be reasonably certain that there are no facts and material relevant to the requisition known to the vendor which have not been disclosed.  A requisition as to title is not an occasion for the parties' solicitors to bandy propositions of the law : each party must decide for himself, ultimately, what the legal position is, based upon the facts known to himself: although, obviously, if one party can persuade the other to his own point of view on the law, so much the better."

30.  In this case, counsel for the Plaintiff did not seriously contend that the requisitions raised by the Plaintiff's solicitors were answered too late before the scheduled completion on 20 May 2005.  The Plaintiff contends that satisfactory answers were not provided by the Defendant's solicitors at all, by the time the Plaintiff through her solicitors gave  notice to terminate the Agreement on 30 May 2005.

Whether requisitions answered

31.  Ngai Pty was an Australian Corporation.  It was open to and reasonable for the Plaintiff's solicitors to seek from the Defendant's solicitors a legal opinion from Australian qualified lawyers to prove due execution of the Nomination.  The Nomination was purported to be signed by Ngai Pty under its Common Seal, and was purportedly signed by one director.

32.  Counsel for the Defendant argued that a nomination can be validly signed by one director of the company exercising the power of nomination, without the necessity of a deed.  However, Ngai Pty did not choose that option.  The Nomination was clearly on its face signed as a deed.  The operative part begins : "Now this deed witnesseth that …"  The execution clause  appears with the words : " In witness whereof we hath caused our Common Seal to be hereunto affixed this 23rd day of July 1998".  It was expressed to have been "sealed with the Common Seal of Ngai Pty and signed by Ngai Peter its director" in the presence of a solicitor.  Even if the Nomination could have been signed by one director, and not as a deed or without the common seal of Ngai Pty, the Nomination was clearly executed as a deed and with the common seal of the company affixed.  It was therefore appropriate and proper for the Plaintiff's solicitors to regard the Nomination as a deed signed with the use of the common seal of Ngai Pty, and to raise requisitions as to its proper execution as an instrument to which the Common Seal was affixed.

33.  Counsel for the Defendant also seeks to rely on section 23A of the Conveyancing and Property Ordinance ("CPO") and the presumption of due execution of the Nomination in an attempt to show that the requisition raised by the solicitors for the Plaintiff was unnecessary and that the objection to the Nomination was without substance.

34.  Section 23A (1) (b) of CPO provides that a deed purporting to be attested by a secretary or more than one signatory, where the signatory or each of the signatories, if more than one, “is a person who could have been authorized under the articles of association or other instruments of the corporation (emphasis added)”, shall, until the contrary is proved, be presumed for the purposes of proof of title to any land to have been duly executed by the purported signatory or signatories, as the case may be, with the authority conferred by the articles of association or other instruments of the corporation, whether or not the source of the authority or the means by which such authority was purportedly conferred is apparent from the deed.

35.  Counsel for the Plaintiff argued that as the Defendant did not rely upon section 23A of CPO as an answer to the requisitions before the scheduled completion date, the Defendant should not be permitted to raise section 23A now to show that the requisitions raised were not justified.  However, adopting the approach referred to by Litton, JA. (as he then was) in the case of Active Keen, each party is to decide what the legal position is at the time when requisitions are made and are purportedly answered. Section 23A of CPO represents the legal position, and in my judgment, even if it was not raised by the Defendant's solicitors in May 2005, the presumption provided for in the ordinance should have been considered by the Plaintiff's solicitors in May 2005, and should be considered by this Court now when deciding whether or not the requisitions were properly raised and answered at the material time.

36.  In the case of Lee Chat v. China Roll Industries Ltd. [1998] 1 HKC 269, Le Pichon, J (as she then was) held that if the articles of association of a company were not produced, section 23 of CPO was not triggered and the vendor cannot rely on the presumption set out in that section of CPO to prove the due execution of an assignment of the company.  Section 23 of CPO provides that an instrument "appearing to be duly executed" shall, unless the contrary is proved, be presumed to have been duly executed.  Applying Lee Chat, because the articles of association of Ngai Pty were not produced by the Defendant to the Plaintiff's solicitors, the Defendant cannot rely simply on the presumption in section 23A to prove the due execution of the Nomination on behalf of Ngai Pty.  Without the articles of association of the Australian company having been made available to the Plaintiff's solicitors, there was no way for the Plaintiff or her solicitors to ascertain if it was within the powers of Ngai Pty to authorize one director to sign the Nomination.

37.  The answer given by the solicitors for the Defendant, that Ngai Pty had been deregistered, was not an adequate answer to the requisition raised as to the due execution of the Nomination.  Even with the provision of the extract from the database of the Australian Securities and Investments Commission, which showed that the application for the voluntary deregistration of Ngai Pty was made on 25 January 2002, the Plaintiff's solicitors were entitled to an opinion from qualified Australian lawyers as to the effect of the deregistration of Ngai Pty under Australian law, as they so requested on 17 May 2005, and which was not provided by the Defendant's solicitors until 16 June 2005, after the scheduled completion date and after the Plaintiff had purported to accept the Defendant's repudiation of the Agreement on 30 May 2005.

38.  The merger point made by the Defendant's solicitors in their correspondence does not give an appropriate or satisfactory answer to the requisition as to the due execution of the Nomination.  The fact that the 1998 Agreement had merged with the Assignment only meant that any remedies and rights under the 1998 Agreement would have merged with the remedies and rights under the Assignment, but if, as the Plaintiff's solicitors contend, the Nomination was not validly executed or does not bind Ngai Pty, the merger does not mean that Ngai Pty would be bound by Peter Ngai's execution of the Assignment.  Nor can it mean that the Plaintiff could have ignored the issue of the due execution of the Nomination.

39.  The further issue raised and maintained by the solicitors for the Plaintiff with regard to the alleged apparent conflict of interest on the part of Peter Ngai (being the sole signing director of the Nomination to declare that all interests and rights in the Property be vested in Peter Ngai) was also not adequately answered by the solicitors for the Defendant, as they failed to provide a copy of the memorandum and articles of association of Ngai Pty to the Plaintiff.

40.  The requisitions raised by the Plaintiff's solicitors as to the due execution of the Nomination were therefore reasonably raised, but were not adequately answered by the Defendant's solicitors.  However, even though the requisitions were not sufficiently and satisfactorily answered, the question which remains to be asked is whether the requisitions had any effect on the title to the Property, and whether the Plaintiff had raised doubts in the Defendant's title.

Whether good title shown

41.  As counsel for the Defendant has pointed out, the obligation to be discharged by the vendor is to show beyond reasonable doubt that the vendor is in possession of the estate and that he is in a position to convey it without any blot or possibility of litigation to the purchaser (Qualihold Investment Ltd. v. Bylax Investment Ltd.[1991] 2 HKC 589).  It is for the vendor to satisfy the court that the possibility of any impeachment of title is remote and fanciful. 

42.  Recently, the courts are in favor of a robust, common-sense approach being applied in cases of this nature, as Litton PJ emphasized in the passage cited under paragraph 28 above, in the case of Mexon Holdings Ltd. v. Silver Bay International Ltd. [2000] 2HKC 1.  He also made it clear (at page 8G) that "any good title does not mean a perfect title, free from every possible blemish".

43.  Liu, JA also said in Jumbo Gold Investment Ltd. v. Yuen Cheong Leung and Another [1999] 3 HKLRD 825 at 833F-G :

"

In a vendor and purchaser summons under s.12 of the Conveyancing and Property Ordinance (Cap. 219), the court would be considered best guided by the commercial reality as to whether there is any real risk of problems in title.  It is not to be troubled by the absence of an accident risk-free assurance, nor unduly hampered by strict legal proof in matters requisitioned.  Conveyancing practice must be geared to uphold bargains."

44.  Adopting this robust, common-sense approach to uphold and give effect to a bargain freely made, and being guided by commercial reality, I am not convinced that there is a real risk of a successful assertion and impeachment of the title in the Property.  The Nomination was signed by Peter Ngai, described in the attestation clause as a director of Ngai Pty.  The Nomination recites that the 1998 Agreement was entered into by Ngai Pty for Peter Ngai, and that all the deposit monies in the total sum of HK $170,000 were in fact provided by Peter Ngai.  The Nomination contained the declaration that all interest, title, benefits and rights vested in Ngai Pty under the 1998 Agreement was to be vested in Peter Ngai, who was nominated to take up the Assignment of the Property, and Chiu was directed to assign the Property to Peter Ngai as beneficial owner. Ngai Pty was voluntarily deregistered in 2002, and had not taken any step between 1998 and 2005 to assert any equitable or other rights in the Property or under the 1998 Agreement.  Even if it can be argued that there was an assumption that the Property was held by Peter Ngai on trust for Ngai Pty with regard to any portion of the deposit money paid by Peter Ngai, such presumption can be rebutted by evidence that Ngai Pty did not intend to retain any interest in the Property.  Such evidence can be found in the Nomination, but even if it was not clear whether the Nomination was validly executed on behalf of Ngai Pty, the fact that Ngai Pty had not intended to retain any interest in the Property can be supported by the fact that Ngai Pty had failed to take any action since the execution of the 1998 Agreement to exercise its rights under the 1998 Agreement. I have not been referred to any fact or circumstance in this case which leads me to believe that there is any chance of a third party coming forward to reactivate Ngai Pty and thereafter to challenge the Defendant's title in the Property. 

45.  In Mariner International Hotels Ltd. v. Atlas Ltd. and Another CACV 291/2004, Le Pichon, JA endorsed the legal principles enunciated by Burrell, J at the first instance trial for considering the adequacy of requisitions raised in conveyancing transactions relating to the risk of enforcement for breach of Building regulations.  These include the following remarks of Burrell, J :

"

Whether or not there is a real risk …  is to be assessed on the basis of objective facts.  A theoretical possibility that enforcement action may be taken some time in the future is not sufficient.  A sense of proportion, a sense of reality and common sense must all be applied to the question – ‘Is there truly a risk ?’ "

46.  On the facts of this case, I find that although the Defendant's solicitors had not made the issue of the due execution of the Nomination clear in their correspondence with the Plaintiff's solicitors, in my judgment there was no real risk of a successful assertion of title against the Property.  The Plaintiff's solicitors had not unreasonably raised the requisitions which they did, and on 20 May 2005, when the Defendant's solicitors had failed to answer the requisitions with the best candour, they were possibly in a difficult situation.  However, armed with even the little information which they had, looking at the substance and contents of the Nomination, and the history and status of Ngai Pty, they could have appreciated and should have explained to the purchaser that in reality, there was only a very remote risk, if any, of Ngai Pty being restored to the register and making a successful claim to any title which it may have to the Property.  As the Court of Appeal emphasized in the case of Active Keen Industries Ltd., the Plaintiff's solicitors should have taken a commercial view of the situation, and if they had done so, applying the sense of proportion, sense of reality and common sense advocated in Mariner International Hotels Ltd., they would have concluded that any risk of title being impeached in this case was purely theoretical and not a practical blot on title. 

47.  I conclude that whether applying Litton PJ's robust and willing parties approach, or Ching PJ's prudent and experienced solicitor's approach, there is no real risk of a successful assertion of title against the Property, and that the Defendant as vendor had shown good title to the Property.

48.   Since the Defendant has discharged his obligation to show and prove good title to the Property, the Plaintiff had wrongfully terminated the Agreement on 30 May 2005 and was in breach of the Agreement by failing to complete the purchase.  The Plaintiff's claims in the action are dismissed.

Counterclaim

49.  In relation to the Defendant's counterclaim, I will allow it in terms of paragraphs (1) to (4) of the counterclaim filed on 22 August 2005.  I accept the submissions of Counsel for the Plaintiff that as the Defendant has not adduced any evidence to prove his loss and damage sustained as a result of the Plaintiff's breach of the Agreement, I will only allow nominal damages of HK $100 to the Defendant.

Costs

50.  I will make an order nisi that the costs of this action, with certificate for counsel, should follow its outcome.  Unless the parties make further submissions, the order will become absolute after 14 days.