SO MARIKO v. TSE CHUN CHUNG JOHN AND ANOTHER

HCA 579/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 579 OF 2010

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J U D G M E N T

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Introduction

1.  This is a conveyancing dispute relating to the sale of a flat  [“the property”] at Taikoo Shing, [ Flat G, 3rd Floor, Po On Mansion, Tai Yue Avenue, Hong Kong].

2.  The plaintiff is the purchaser and the defendants are the vendors.

3.  It is submitted on the plaintiff’s behalf that the vendors have failed to adequately answer a requisition, and that in such circumstances they have failed to prove title, which has put them in breach of the conveyance, entitling the plaintiff to the return of her deposit and to damages.

4.  The defendants’ case is that the requisition has been answered satisfactorily and that they have proved title.

5.  As will be seen presently, it is submitted on their behalf by Mr C Y Li that the contract has been wrongly repudiated by the plaintiff, in which circumstances the defendants are entitled to forfeit the plaintiff’s deposit and to claim compensation for expenses incurred by them, such as a three-month rental on a flat which they had moved into in anticipation of the conveyance being completed, and also for a declaration that they are entitled to be indemnified by the plaintiff for any estate agent’s commission that the estate agent may claim from them for the aborted conveyance.

6.  I should observe that the plaintiff’s solicitors have decided to adopt the procedure of issuing a writ, rather than a more appropriate and convenient vendor and purchaser summons.

7.  The matter comes before me by summons under Order 14A of the Rules of the High Court to answer a number of questions, which, if answered as the plaintiff would wish, will result in the plaintiff obtaining the relief that she asks for.

8.  Whilst this procedure is open to a plaintiff, in a case such as this, I am in no doubt that the far better course would have been to adopt the more usual process by vendor and purchaser summons.  As a result, if the plaintiff were to succeed, there may be cost implications resulting in the successful plaintiff not being awarded all of her costs.  This would only arise if the plaintiff were to succeed and I will return to this issue in due course, if I am required to.

The course of the conveyance

9.  The provisional sale and purchase agreement is dated 17 January this year [B99 to 100].  The formal sale and purchase agreement is dated 29 January [B2 to 16].  The agreed purchase price was $4.68 million.  A total deposit of $468,000 was paid by the plaintiff.  Completion of the conveyance was fixed for 26 March.

10.  The plaintiff’s solicitors had raised two requisitions, but now only one is relied on, the second relating to proof of payment of stamp duty being abandoned by Mr Paul Wong, the plaintiff’s counsel, in his skeleton argument on the eve of the hearing.

11.  In order to understand the substantive requisition upon which the outcome of the summons must depend, it is essential to consider the defendant’s title to the property.

12.  The property was assigned to one Ho Kwai Lung, [Mr Ho] on 7 May 1982.  This can be seen from the Land Register at B20, and also from the assignment memorial at B26 to 35.  Mr Ho died on 10 May 1998.

13.  Letters of administration of Mr Ho’s estate, he having died intestate, were granted to Ho Suk Tak on 19 August 1999 [B37 to 43].  She was represented by the solicitors’ firm of Lawrence Pang & Co.

14.  On 5 March 2001, there was an assignment of the property - the estate comprising the property and cash in various bank accounts - between Ho Suk Tak as an assignor; Yu MeiYing, Ho Tat Tak and Ho Suk Tak as confirmers; and Ho Tat Tak and Ho Suk Tak as assignees, by which Ho Suk Tak assigned the property to herself and to Ho Tat Tak [B45 to 52]. 

15.  This was an assignment for nil consideration.  The assignment was also prepared by Lawrence Pang & Co.  Mr Edmond Yuen, a solicitor of Lawrence Pang & Co., attested to the execution of the assignment.

16.  It is necessary to consider the material terms of the assignment.

(a)        Recital 2 stated that Mr Ho had died intestate and that the confirmers of the assignment were the only persons entitled to share in his estate [B45].

(b)        Recital 5 says that arrangement has been made between the confirmers to assign the property to the assignees [ B46].

(c)         By Clause 1, the assignment was made to the assignees with the consent of the confirmers.

(d)        Finally, Ho Suk Tak and Ho Tat Tak assigned the property to the defendants on 8 May 2008.  [see Land Register at B20].

The Requisition

17.  The question that arises here is that the plaintiff’s solicitors wish to satisfy themselves that the three confirmers of the 2001 assignment were the only lawful beneficiaries of the estate of Mr Ho so that they could validly confirm the assignment of the property to the two assignees.

18.  What they fear is that at some time in the future some other beneficiaries might appear and challenge the assignment to the assignees, which in turn might have the effect of vitiating the conveyance by the assignees to the defendants.  It is accepted by Mr Li that this was a perfectly proper requisition.

The Response to the Requisition

19.  At the heart of the response, which is said to be sufficient, is a statutory declaration by Mr Edmond Yuen [B54 to 55].

20.  I will reproduce its material parts here:

“1.  On or about March 2001, I was under the employ of Messrs Laurence Pang & Co. solicitors (“my firm”) for Ho Suk Tak to apply for the grant of Letters of Administration to the estate of Ho Kwai Lung (“the Deceased”) under Grant No. HCAG005149/99 and registered in the Land Registry by Memorial No. UB8413457 (“the said Letters of Administration”). 

2.  After the said letters of administration being granted by the Court, my firm were instructed by the said Ho Suk Tak in preparing the Assignment Memorial No. UB8399704 to vest the Property to Ho Suk Tak and Ho Tat Tak (“the said Assignment”), and I was the solicitor who prepared the said Assignment.

3.  According to the instructions given by Ho Suk Tak, the Deceased died intestate, leaving him surviving the Confirmers in the said assignment being the only persons entitled to share in the Deceased estate.”

21.  There is no dispute that a statutory declaration can stand as evidence of proof of title.  The crucial question is to look to the contents of the declaration, particularly in relation to the proximity of the maker to the facts stated in it.

22.  Mr Wong submits that Mr Yuen has failed to state what steps he took, or at least what steps were taken, to the best of his information and belief, to ascertain that these three confirmers were the only beneficiaries of the estate.  All he says is that according to Ho Suk Tak (that is paragraph 3), these being her instructions, the three confirmers were the only beneficiaries entitled to the share in the estate.

23.  What Mr Wong is submitting is that this instruction by Ho Suk Tak to Laurence Pang & Co. is entirely self-serving.  It is redolent of conflict of interest and no real weight can be placed on it.  A more independent confirmer, Yue Mei Ying, has not been contacted to corroborate Ho Suk Tak’s instructions. 

24.  Mr Wong says that it is entirely possible that some time down the line another beneficiary or beneficiaries may appear and confound this conveyance and the two following it.

The Defendant’s answer

25.  Mr C Y Li begins his response by reference to what needs to be shown to prove good title.  He starts with passages from chapter V, page 1 and 1A, in Hong Kong Conveyancing by Sihombing and Wilkinson, [2010 edition]

“A good title is such title as will enable the purchaser to hold the property against any challenger. In the words of Clough JA in Kan Wing Yau v Hong Kong Housing Society [1988] 2 HKLR 187 at 193 (CA):

‘A good title is one which can at all times and in circumstances be forced on an unwilling purchaser in an action for specific performance.’

A good title need not, however, be a perfect title and the degree of imperfection tolerated was clearly expressed by Lord Russell of Killowen in MEPC Ltd v Christian-Edwards [1981] AC 205, where he 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 incumbrance, the court should declare in favour of a good title.’

The author suggests that this test should be extended to include the risk of a title being defeasible and not merely defective by reason of the existence of the encumbrance.

The practical approach of the court in construing the nature of the title offered is illustrated in Re Heaysman’s and Tweedy’s Contract [1893] 69 LT 89, where Lindley LJ observed:

‘It is a general principle that a purchaser ought not to be forced to accept a doubtful title or buy a lawsuit. In applying that principle, however, we must exercise our common sense and see if the supposed lawsuit has any basis whatsoever. We must see if there is the slightest reasonable chance of any lawsuit being instituted. If we come to the conclusion that the supposed lawsuit exists only in the imagination of the purchaser, we ought to disregard it, giving him the advantage of any reasonable doubt.’

This test was applied in Hong Kong by Godfrey J in his judgment at first instance in Kan Wing Yau v Hong Kong Housing Society [1987] MP No. 2436/1987.  In his words:

“if in a particular case the facts and circumstances are so compelling that beyond any reasonable doubt, the risk is, for all practical purposes, illusory, the court can and should be prepared to ignore it and accordingly dismiss any objection to title founded upon it.’”

26.  It is also helpful to refer to what the learned editors have said about the court’s approach to the question of good title at page 1B:

“When approaching the question of whether a vendor has given good title, Litton PJ has exhorted judges in Mexon Holdings Ltd v Silver Bay International Limited [2000] 1 HKLRD 935 at 942 to look at the situation from the standpoint of a willing vendor and purchaser, both possessed of robust common sense. The learned judge said,

‘A good title does not mean a perfect title, free from every possible blemish.  Whenever a question like this arises (in this case, whether the unauthorised partitioning of a floor in a building constituted a title defect), it must be approached from the standpoint 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 bargain.’”

27.  It is this call to common sense that Mr Li relies on.  Apart from Mr Yuen’s statutory declaration, he invites consideration to what he calls the objective conveyancing facts.

28.  Firstly, that Mr Ho died in 1998, 12½ years ago, since when no other beneficiary has appeared.  Whilst by no means conclusive, it is a factor to have regard to.

29.  Secondly, Laurence Pang & Co., who employed Mr Edmond Yuen, acted for Ho Suk Tak in her application for letters of administration.   By the non-Contentious Probate Rules, Cap.10A (see rules 2A, 3, 5 and 6), an oath would have had to have been made in support of the grant and the oath in statutory form would have had to identify who the beneficiaries of the estate were.  The registrar would then have had to approve the application, ensuring that it was in proper form, before granting the letters of administration. 

30.  As to the 2001 assignment, Laurence Pang & Co. also dealt with this.  In dealing with the preparation of the assignment, Laurence Pang & Co., in this case, Mr Edmond Yuen, would have had available to him the papers which resulted in the court granting the letters of administration.  The beneficiaries were known then, and Mr Yuen was there to attest their signatures with their identity card numbers and addresses.

Conclusions

31.  Mr Wong has drawn attention to a number of other authorities, in an area of the law which is now very well-trodden. Once the general principles are understood, to which I have already made reference, the court is required to apply the particular facts of the case before it to those principles.

32.  Although perhaps the statutory declaration does not add very much to the basic conveyancing facts as to the grant of the letters of administration and the assignment in 2001, the compelling evidence given on oath in 1999, when the letters of administration were granted, leaves me sure that in the absence of anything to the contrary or any other suspicious features emerging during the 12½ years following Mr Ho’s death, that there are no other beneficiaries lurking in the shadows who might appear to challenge the 2001 assignment.

33.  Both the letters of administration and the assignment stand in proof of the assignees’ title, which in my judgment, amounts to a good title.  The prospect of any as yet unidentified beneficiary appearing is so illusory that it can be safely discounted.

34.  In such circumstances, there was no justification for the plaintiff’s solicitors not proceeding to completion on her behalf as required on 26 March this year.

35.  In these circumstances I propose to answer the questions posed in the Order 14A summons in a way that arrives at a favourable conclusion for the defendants.

36.  I will leave it to the solicitors to draft the order accordingly for the court’s approval.

37.  Finally, on the counterclaim, the defendants, apart from being entitled to retain the deposit, will also have the indemnity that they seek, and a money judgment as asked for in paragraph 11(b) of the affidavit of John Tse Chun Chung [Bundle A, 36 - 37] in the total sum of $75,900, together - I presume there is no answer to this - the costs of the action to be taxed on a party and party basis.