YEUNG KAI KAI AND ANOTHER WAI CHING v. SHUM WAI SHEK AND ANOTHER

HCMP 1184/2022

[2023] HKCFI 1405

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANCEOUS PROCEEDINGS NO 1184 OF 2022

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BETWEEN

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R E A S O N S    F O R    J U D G M E N T

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1.  This is the application of Yeung Kai Kai & Chan Wai Ching (“the Plaintiff”) by originating summons dated 24 August 2022 (“OS”) for declaratory relief against Shum Wai Shek & Sim Suee Gan (“the Defendant”) in relation to Flat D, 18/F, Block 6, Melody Garden, Tuen Mun, New Territories, Hong Kong (“the Property”).

2.  The Defendant did not appear. At the conclusion of the hearing, I granted the declaratory relief sought for the reasons set out below.

Procedural history

3.  On 16 November 2022, Master Phoebe Man ordered that service of the OS be deemed to have been effected on the Defendant by the placing of a Chinese notice of the proceedings once in the Oriental Daily News. The notice was duly placed on 2 December 2022.

4.  No acknowledgement of service was filed.

5.  On 10 February 2023, K Yeung J ordered that service of the notice of hearing be effected by inserting an advertisement of a Chinese notice of these proceedings once in the Oriental Daily News.

6.  Such notice was duly placed on 27 March 2023.

Background facts

7.  The Plaintiff purchased the Property under the Home Ownership Scheme (“HOS”) in 1994. The sale and purchase agreement is dated 25 August 1994. The assignment of 28 October 1994 to the Plaintiff was duly registered. Messrs KC Man (“KCM”) acted for the Defendant while Messrs Knight & Ho (“KH”) acted for the Plaintiff in that transaction.

8.  The Housing Authority (“HA”)’s letter dated 3 November 1994 removed the alienation restrictions as specified under the HO, stating that the premium assessed in the sum of $110,719 had been paid.

9.  Many years later, on 2 October 2021, the Plaintiff entered into a preliminary sale and purchase agreement of the Property with a purchaser at a consideration of $6.97 million. But prior to the signing of the formal agreement, the Plaintiff was informed that the purchaser could not obtain a mortgage because the latter had been advised by the bank that the letter of payment of premium post-dated the assignment of the Property.

10.  That sale had to be aborted for obvious reasons.

11.  Shortly thereafter, on 18 October 2021, the Plaintiff’s solicitors Messrs Chung & Kwan (“CK”) wrote to the Housing Authority (“HA”) seeking confirmation that there has been no breach of the HO and that no enforcement action would be taken.

12.  The HA confirmed receipt of the premium and removal of the restriction on 3 November 1994 and stated that prosecution action for offences under section 27A are time-barred after a lapse of 2 years from the date of the offence.

13.  Enquiries were then made with the Law Society as to who had taken over the practices of KH and KCM. CK was informed that KH’s cessation agent is Messrs Cheung & Yeung (“CY”).

14.  CY was requested to provide all documents relating to the purchase of the property. CY opined that there was no problem with the title to the Property and that a partner of KH would prepare a statutory declaration to set out the facts showing the common intention of the parties to comply with section 17 B of the HO once the file was located.

15.  CY caused a search to be made but found that the conveyancing file had been destroyed with the consequence that no statutory declaration (as had originally been envisaged) could be prepared.

16.  There was no cessation agent for KCM but the Law Society forwarded CK’s fax to the last known address of the sole practitioner of KCM. CK never received a response to its fax.

17.  Having exhausted all avenues to contact those who were involved in the 1994 purchase of the Property, the Plaintiff had no option but to make the present application so that it would be in a position to sell the Property.

The SPA

18.  Clause 33 of the SPA provides as follows:

“33. The parties hereto are fully aware that the Property was assigned unto the Vendor subject to the terms covenants and conditions in the Schedule to the Housing Ordinance (Cap. 283, Laws of Hong Kong) and any amendments thereto. Under the said terms and conditions, the Vendor shall not, inter alia, enter into any agreement to alienate the Property other than to the Housing Authority (“the Authority”) or such person as the Authority may nominate unless a period of 10 years has elapsed from the date of the Assignment to the Vendor and the Vendor shall have paid such sums as mentioned in paragraph 1(b) of the said Schedule to the Crown. The Vendor declares that he had already applied to the Authority for the payment of premium. The Vendor hereby undertakes and agrees that he shall pay the premium hereinafter assessed by the Authority and furnish to the Purchaser with receipt of payment issued by the Authority on or before completion and to produce to the Purchaser’s solicitors the letter from the Authority certifying the removal of the restriction on alienation within 21 days from the actual completion date together with the necessary registration fee and the duly completed memorial for registration.”

19.  The parties to the SPA were plainly aware of the HO requirements regarding the payment of a premium for the sale in respect of which the vendor must furnish to the purchaser with the receipt of payment issued by the HA on or before completion.

20.  On that basis, Ms Becky Wong, counsel for the Plaintiff, submitted that there would be no delivery of the Assignment until the restriction against alienation had been removed by such payment, irrespective of the date which appears on the face of the Assignment.

21.  The authority cited is Wong Yiu Ting v Kwok Wing Chiu & Another [2009] 1 HKLRD 399 where this issue arose for determination. In that case (like the present) the HA’s letter certifying the payment of premium postdated the assignment: the letter was dated 20 January 1998 and the assignment was dated a day earlier, namely, 19 January 1998. The sale and purchase agreement contained provisions similar to clause 33 of the SPA set out above.

22.  Lam J (as he then was) held that a deed takes effect upon delivery. While the date appearing a deed this prima facie evidence of its effective date, that is not conclusive, citing (at §8) Barnsley’s Conveyancing Law and Practice 4^th., at 454 and Emmet & Farrand on Title, Vol. 2 at §13.005.

23.  To pass title to the purchaser, the assignment had to be delivered by the vendor and the date of delivery depends on the intention of the executing party. Often it is usually inferred from conduct in terms of signing and sealing: Bolton Metropolitan Borough Council v Torkington [2004] Ch 66, and Barnsley at 449. Those principles were applied in Yeung Yun Choi v Lam Pa Kin, unrep, HCMP 554/2016, 23 June 2016.

24.  In the present case (as in Wong Yiu Ting), it was the clear intention of all parties handling the transfer of the Property to the Plaintiff in 1994 to comply with the requirements of section 17B of the HO. That is evidenced by the terms of clause 33 of the SPA itself.

25.  In my view, the Assignment plainly took effect on 3 November 1994, upon receipt of HA’s letter of even date.

26.  As the declaratory relief sought serves a practical purpose, I had no hesitation in granting the relief sought and made an order in terms of the draft order submitted.