XCHRX CHEUNG SAN HUNG and Another v. LAU NGAI HONG DANNY and Another

IN THE MATTER of a formal sale and purchase agreement dated the 17th day of July 1995 for the sale and purchase of Flat 6 on 16th Floor of Yue Chak House, Block D of Yue Tin Court, Shatin, New Territories.

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

(MISCELLANEOUS PROCEEDINGS No. 3439/1995)

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J U D G M E N T

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Wong, J.:

1. This is a Vendor and Purchaser Summons in relation to Flat 6, 16th Floor, Yue Chak House, Block D, Yue Tin Court, Shatin, New Territories, which I shall call the property.

2. In 1982, the property was purchased by its first owners, LIN Man Chi, Andy and CHUNG Chi King as joint tenants from the Hong Kong Housing Authority under the Home Ownership Scheme. By an Assignment date 22nd March 1994, LIN and CHUNG sold the property to the Defendants for a sum of HK$1,645,000.00. The disposition or alienation of any land under the Home Ownership Scheme is governed by the Housing Ordinance, Cap. 283. Section 17B of this Ordinance reads:

"Where -

(a) any land in any estate is sold under section

17A to any person; . . . .

any alienation or conveyance or purported alienation or conveyance or any agreement to alienate or convey such land -

(i) by that person in breach of any term or condition of the agreement for sale and purchase or any covenant in the deed of assignment relating to such land; and

(ii) . . . .

shall be void."

Paragraph 1 of the Schedule goes on to provide: -

"1. Subject to paragraph 4 of this Schedule, the purchaser shall not at any time alienate, convey, charge or part with possession or purport to alienate, convey, charge or part with possession or enter into any agreement to alienate, convey, charge or part with possession of the land sold other than to the Authority, or such person as the Authority may nominate, unless -

(a) either

(i) a period of 10 years has elapsed from the date of the assignment to the purchaser; or

(ii) . . . .. ; and

(b) the purchaser has first paid to the Authority the amount of the premium calculated under the following formula."

Paragraph 4 further says: -

"4. Notwithstanding that the purchaser has not paid premium mentioned in paragraph 1 of this Schedule, he may -

(a) . . . ..

(b) where -

(i) . . . .

(ii) 10 years has elapsed since the date of the assignment,

enter into any agreement for sale and purchase of the land providing it is a condition of such agreement that the premium as assessed by the Director be paid to the Authority prior to assignment and within 28 days of the date of the agreement or within such period as may be otherwise stipulated by the Director."

3. On 10th July 1995, the Plaintiffs and the Defendants entered into a preliminary agreement for the sale and purchase of the property and an initial deposit of HK$50,000.00 was paid. A further deposit of HK$120,000.00 was paid when the formal sale and purchase agreement was signed on 17th July 1995. In a letter to solicitors for the Defendants dated 21st July 1995, solicitors for the Plaintiffs raised requisitions to the effect although the Assignment by LIN and CHUNG to the Defendants was dated 22nd March 1994, the premium was not paid until 25th April 1994 which was more than one month after the execution of the Assignment. Thus, paragraph 1 of the Schedule to the Housing Ordinance had not been complied with before the execution of the Assignment. Messrs. Peter Cheung & Co. answered the requisitions in a letter dated 24th July 1995 in which it was contended that (1) the Assignment was incorrectly dated, it should have been dated 25th April 1994; (2) LIN and CHUNG only executed and delivered the Assignment on 22nd March 1994 in escrow pending payment of the premium to the Housing Authority and (3) the cheques for payment of the premium should have been delivered to the Housing Authority on 22nd March 1994 but payment was delayed until 25th April 1994 due to clerical errors of solicitors acting for LIN and CHUNG.

4. The issue is whether the premium to the Housing Authority was paid before the completion of the sale. If it was paid after the completion of the sale, the assignment of the property to the Defendants by LIN and CHUNG would be void pursuant to s.17B: Chan Chi Hung & Law Wan v. Tse Ying Piu & Wong Yin Lai Flavia, unreported, HCMP No. 3630 of 1994. I entirely agree with the views expressed by Jerome Chan J. on the matter and indeed it has not been disputed by counsel for either side that those views were correct.

5. It was submitted by Mr. C.Y. Li for the Defendants that the assignment of the property to the Defendants took place on 25th April 1994 and not on 22nd March 1994, the date that appeared on the Assignment. He placed some reliance on Clause 33 of the Agreement for Sale and Purchase between LIN and CHUNG and the Defendants. This document was dated 18th February 1994. The clause reads:

"The Vendor are responsible for their obligations under Clause 1(b) of the Schedule to the Housing Ordinance. In the event that the Vendor have not yet fulfilled the said obligations on or before the completion date herein, the completion date herein shall be postponed to within 5 working days after the Purchaser are being informed that the Vendor have fulfilled the said obligations."

Clause 34 is worth noting:

"The Vendor shall hand over the key in respect of the Property to the Purchaser on 15 March 1994."

I have no hesitation to reject this submission. The date of 22nd March 1994 that appeared on the Assignment is clear, distinct and unambiguous and could not have been wrongly typed or written for 25th April 1994. For the same reason, I reject the argument of "delivery in escrow". Clause 6 of the Agreement for Sale and Purchase specifically stipulated:

"Time shall in every respect be of the essence of this Agreement."

Part VI of the First Schedule perhaps puts the matter beyond argument. It says:

"Completion Date: On or before 18 March 1994 (before 5.00 p.m. on weekdays and before 1 p.m. on Saturday.)"

In the light of these provisions and the absence of any evidence on the intention of solicitors acting for LIN and CHUNG, it is not arguable that there could be an intention to complete the sale beyond 22nd March 1994. The case of the Defendants could only be either one of mistake or the Assignment was delivered in escrow. Mistake and escrow are mutually inconsistent and could not have co-existed side by side.

6. The Legal Advisory and Conveyancing Office Circular Memorandum No. 5 was also mentioned in argument. That does not assist the Defendants. Paragraph 5 provides:

"Notwithstanding that the payment of premium referred to in paragraph 4 above has not been paid, HOS/PSPA purchasers may: -

(a) . . . .

(b) enter into an agreement for sale and purchase in respect of the flat providing the premium as assessed by the Director of Housing is paid to the Authority within such period as specified by the Director and, in any event, prior to assignment . . . ."

7. Mr. C.Y. Li also submitted that in any event the Housing Authority would be estopped from alleging any breach of the term and condition of the Schedule and as such there is no basis to suggest that the Assignment can be void. The Housing Authority had accepted the premium and confirmed the removal of the alienation restrictions. Again I reject his submission. In a letter dated 16th March 1994, the Director of Housing wrote to LIN and CHUNG to inform them that the prevailing market value of the property had been assessed to be HK$644,640.00 and this assessment was valid for 3 months from the date of the letter and this means that the premium could be paid on or before 15th June 1994. I am unable to see how this letter can be construed to authorise LIN and CHUNG to deviate from complying with s.17B and the Schedule of the Housing Ordinance. There is no evidence that the Director of Housing had knowledge or was informed that alienation or assignment would take place on 22nd March 1994. The removal of restrictions to alienate etc is still subject to the premium having first been paid. The letter dated 16th March 1994 was only a notice to pay the premium which is different from actual payment. Payment of the premium must precede assignment or alienation.

8. In my judgment, the Defendants have not sufficiently answered the requisitions and objections by the Plaintiffs and have failed to show a good title of the property. Therefore, I will make an order in terms for the reliefs prayed in the summons with an Order Nisi for costs against the Defendants.

(Michael Wong)

Judge of the High Court