TONG LAI MING v. KONG BING CHAI

DCCJ3946/2006

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 3946 OF 2006

D E C I S I O N

1.  The plaintiff applies for summary judgment under Order 14 for,

 (1)     a declaration that the defendant had failed to show and prove good title to the property known as Shop No. 7 on the Ground Floor of Wai Yip Building, 82-88A Wai Ching Street, Kowloon (hereinafter referred to as “the property”), in accordance with the terms of the agreement for sale and purchase between the plaintiff and the defendant, dated 15 June 2006;

(2)      alternatively, a declaration that the defendant had failed to answer the requisition on title to the property;

(3)      for the return of the deposit of $250,000 and $25,000; and

(4)      a declaration that the plaintiff has a lien over the property for the payment of the sum of $250,000 and $25,000 with interest and costs.

Background

2.  The plaintiff and the defendant entered into a provisional agreement for sale and purchase of the property on 27 May 2006.  On 15 June 2006 the parties signed a formal sale and purchase agreement.  They agreed that the completion date would take place on 28 July 2006 on or before 5 pm.  Clause 33 of the formal sale and purchase agreement incorporated the terms of the provisional or preliminary sale and purchase agreement which was annexed to the formal sale and purchase agreement under Part VIII of the schedule.

3.  Consequently, it is not disputed that clause 15 of the provisional sale and purchase agreement had become a term of the agreement.  This clause is to the effect (roughly translated) as follows: “before completion of the sale and purchase of the property, the vendor shall deliver to the solicitors the existing noodle licence and, without any condition before completion, transfer to the purchaser the licence”.

4.  Clause 18 of the formal sale and purchase agreement made time the essence of the agreement.  Clause 10 further stipulated that the vendor shall give and prove good title to the property under section 13 of the Conveyancing and Property Ordinance.  The plaintiff claims the defendant had failed to:

(1)       prove and show good title in that the defendant failed to show the toilet and partition inside the toilet, including the drainage installation, had been erected after obtaining the approval of the Buildings Department;

(2)       transfer the existing light refreshment restaurant licence to the plaintiff before completion of the sale and purchase of the property.  

5.  Therefore, the plaintiff claims that it is entitled to accept the repudiation of the agreement, the repudiation being the defendant’s failure to complete the two essential requirements under the contract.

6.  Page 163 of the Hong Kong Civil Procedure 2006, Order 14, Practice Note 14/1/1 provides as follows:

“There is no reason why Order 14 may not be employed in an action for declaration where the case is clear, for example, a declaration as to proprietary right or a declaration of infringement of copyright, or a declaration as to whether or not a binding contract was concluded between the parties.  But a declaration will not be made on default or on admission or by consent (see per Buckley and Scarman LLJ in Wallersteiner v Moir).”

7.  On these bases, unless the defendant can show there is an issue or question in dispute which ought to be tried, or that there ought for some other reason to be a trial, the court may give judgment to the plaintiff, and this is with reference to Order 14 rule 3(1).

8.  The plaintiff produced a number of letters exchanged by the parties’ respective solicitors.  These letters in particular are written close to the date of completion on the requisition that whether the toilet or water closet and drainage installation had the approval of the Buildings Department and whether the transfer of the light refreshment restaurant licence had been effected.

9.  The plaintiff produced an architect’s report posing queries on the legality of the erection of the water closet and drainage system at the property by a letter of 28 July 2006 which was the day of completion.  The defendant, on the other hand, informed by a reply letter that an authorised persons’ certificate had been given to the plaintiff days before in support of the transfer of light refreshment restaurant licence application.  The plaintiff had, in fact, in her possession such a certificate in support of the legality of the facilities at the property on or about 13 July 2006, which was the date of the authorised persons’ certificate.

10.  In a letter of the same date, that is, 28 July, the defendant’s solicitor also informed the plaintiff that from inquiries made of the Food Environmental Hygiene Department, the transfer of the light refreshment restaurant licence had been approved by the Department.  However, since some of this information had been sent to the plaintiff after the completion time of 5 pm on 28 July 2006, although the defendant vendor had, in the same letter of 28 July, extended the time of completion to 31 July 2006 at 5 pm.  This, apparently, was not met with any acceptance by the plaintiff. 

11.  Mr Chong, counsel for the defendant, argued that so far as the light refreshment restaurant licence is concerned the defendant had done all that he could do to ensure the licence could be transferred.  The application was lodged by the plaintiff or her solicitor with an Authorised Person Certificate obtained by the defendant on the plaintiff’s behalf and the plaintiff had in her possession such documents.  Any delay to the issuance of the licence was entirely due to the plaintiff, first, changing the name of the licensees on the licence from the plaintiff to her daughter, Miss Chung, then further delay by Miss Chung’s reluctance to obtain an Authorised Person Certificate, etc. 

12.  Furthermore, Mr Chong argued that the layout plan submitted with the Authorised Person Certificate had been registered with the authorities and the plaintiff was given a copy of the layout plan, which was an updated layout plan.  Miss Chung failed to look at these documents given to her, ignored their existence and delayed in making further requisitions of title on the property.  Therefore, it is the defendant’s submission that the defendant should be given sufficient time to answer such further queries.  Mr Chong relies on Sihumbing and Wilkinson’s Hong Kong Conveyancing Law and Practice Volume 4, page 129E on Proof of Title, paragraph 303-1.  In that paragraph the authors referred to the judgment of Yuen J, as she then was, in the case of Regent Summit (Hong Kong) Ltd v Smart Business (Asia) Ltd [1998] 2 HKC 718. 

13.  It is an application for summary judgment.  From the facts disclosed by the letters exchanged and the documents produced in support, there are clearly disputes as to both law and facts as to whether the requisition on titles have been fully answered; whether time should be extended to answer requisitions just before the completion; whether the delay in the transfer of the licence was due to the purchaser’s fault; and whether this transfer of licence is a condition precedent under the sale and purchase agreement.  All these questions needed to be answered and these are questions that require the decision of the trial judge after hearing full evidence and argument on the law.  It is not a case that should be decided summarily.  For these reasons I grant unconditional leave to the defendant to defend and costs be in the cause with certificate for counsel.

14.  I grant an order in terms of the draft order on the undertaking of the defendant to pay into court the sum of $250,000 within seven days.