CHAN WING NGA AND ANOTHER v. CHUNG CHI WAI AND ANOTHER

DCCJ 5656/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 5656 OF 2005

______________________

______________________

Judgment

1.  This is the Plaintiff's application for summary judgment against the Defendants under O.86 of the Rules of District Court. 

2.  By way of a preliminary sales and purchase agreement dated 27 August 2005 ("the PSA"), the Plaintiff agreed to purchase and the Defendants agreed to sell as vendors the property ("the Property") known as ALL THAT GROUND FLOOR, the Remaining Portion of Lot No. 89 in DD 225, 106 Sheung Yeung, Sai Kung, New Territories, Hong Kong for the purchase price of HK$2,350,000.  It is common ground that the Property included a garden.

3.  Under the PSA, the completion date was 10 October 2005 ("the Completion Date").  

4.  It is common ground that the Plaintiff has pursuant to the PSA paid the Defendants deposits ("the Deposits") in the total sum of HK$235,000.  It is also common ground that, although the parties never managed to enter into a formal sale and purchase agreement (as they could not agree on the terms thereof), the PSA was a binding agreement for the sale of the Property.

5.  The parties did not complete on the Completion Date, as the Plaintiff was of the view that the Defendants' solicitors had failed to sufficiently answer some of the requisitions as to title.   Although the Plaintiff's solicitors then sought to demand for the return of the Deposits, the Defendants refused to do so and proceeded to forfeit the Deposits, as they were of the view that they had satisfactorily answered the requisitions and it was the Plaintiff who was in breach of the PSA in failing to complete.

6.  The Plaintiff naturally brought the present action against the Defendants to claim effectively for the return of the Deposits and damages, on the ground that the Defendants were in breach of the PSA in failing to show and/or prove title to the Property.

7.  The Plaintiff now seeks summary judgment for:

(1)	A declaration that the Defendants have failed to prove a good title to the Property.
(2)	A declaration that the Property is subject to a lien for the Plaintiff's claim for damages to be assessed.
(3)	The return of the Deposits.
(4)	The Defendants do pay the Plaintiff the sums of HK$35,250 being the stamp duty of the PSA and HK$210 being the registration fee for the registration of the PSA.
(5)	Damages to be assessed.

8.  Both parties accept, as it is trite, that in the sale and purchase of a landed property, the vendor has the obligation to show and prove good title to the property.  This includes answering properly raised title requisitions satisfactorily. 

9.  Thus, for the purpose of the present application, the issues to be determined by the Court are:

(1)	whether the outstanding requisitions raised by the Plaintiff were properly raised title requisitions; and
(2)	if so, whether they had been satisfactorily answered by the Defendants' solicitors

10.  In order to understand the nature of the outstanding requisitions, it is necessary for me to set out below the brief background leading to the present dispute.

Background

11.  Chun Wah Holdings Ltd ("Chun Wah") was the registered owner of the land known as ALL THAT piece or parcel of ground situate lying and being at Sai Kung, New Territories, Hong Kong and registered in the Sai Kung New Territories Land Registry as Lot No. 89 in DD No. 225 ("Lot No. 89 in DD No. 225").

12.  By way of a deed poll dated 14 October 1994 ("the Deed Poll"), Chun Wah divided Lot No. 89 in DD No. 225 into 4 sections, namely, Section A, Section B, Section C and the Remaining Portion of Lot No. 89 of DD No. 225 ("the RP Lot").   Attached to the Deed Poll is what described to be a coloured scaled location plan ("the Coloured Plan"), where the different divided sections (including the RP Lot) were supposedly coloured with different colours for identification purpose.  It must be pointed out that the copy of the Coloured Plan placed before the Court is a black and white copy.  The Coloured Plan was stated to be prepared by a chartered surveyor ("the Surveyor"), whose signature appeared thereon.  The Land was supposed to be coloured green according to the Deed Poll and the Coloured Plan.    However, notwithstanding the black and white copy, the various sections could still be identified.  For example, the RP Lot is identified by the letters "R.P." marked on the section of the entire Lot No. 89 of DD No. 225 of the Coloured Plan.  Further, on the Coloured Plan, the RP Lot was stated to have an area of 0.039 acre.

13.  By way of an assignment dated 19 January 1995 ("the 1^st Assignment"), Chun Wah assigned the RP Lot to one Yu Tin ("Yu"). 

14.  Apparently, after the 1^st Assignment, a 3-storey building was constructed on the RP Lot, where there was also a garden created for ground floor of the building.  A deed of mutual covenant dated 5 August 2005 ("the DMC") was entered into by Yu and the owners respectively of the ground, 1^st and 2^nd floors of the building.   According to the DMC, the Ground floor with the garden (that is, the Property) was assigned to the Defendants by way of an assignment dated 5 August 2005 ("the 2^nd Assignment").  The Defendants, with the other owners of the 1^st and 2^nd floors, also signed the DMC. A plan was also attached to the DMC, which includes the block plan of the RP Lot and the respective floor plans of the building.  

15.  By way of the PSA, the Defendants agreed to sell the Property to the Plaintiff.

The outstanding requisitions

16.  The Plaintiff's solicitors by way of various correspondences made between 23 September 2005 and the Completion Date raised various title requisitions with the Defendants' former solicitors.  The Defendants' former solicitors by way of various reply correspondences sought to answer these title requisitions.

17.  For the purpose of the present application, it is the Plaintiff's case that the Defendants had up to the Completion Date failed to answer the following outstanding requisitions:

(1)	As the land search record at the material times did not show that the 2nd Assignment and the sale and purchase agreement dated apparently also 5 August 2005 ("the S & P Agreement") in relation to the sale of the Property by Yu to the Defendants were registered, the Plaintiff's solicitors required the Defendants' former solicitors to provide proof that these had been duly registered ("the Land Registration Requisition").
(2)	As the Articles of Association of Chun Wah required a director to execute any documents on behalf of it, the Plaintiff's solicitors required the Defendants' former solicitors to provide proof that the person executing the Deed Poll, one Roger Lin-cheong Leung ("Roger Leung"), was at the time of execution of the Deed Poll a director of Chun Wah ("the Proper Execution Requisition").
(3)	The Plaintiff's solicitors required the Defendants' former solicitors to provide a colour copy of the Coloured Plan ("the Coloured Copy Requisition").
(4)	As there were allegedly ambiguity as to whether the total area of the Ground floor and the garden exceeded the area of the RP Lot as identified in the Coloured Plan and the other plans attached to the 2nd Assignment and DMC, the Plaintiff's solicitors required the Defendants' solicitors to have a written clarification from the Surveyor (who prepared the plans) to confirm that the total area of the Property did not exceed the area of the RP Lot ("the Surveyor Clarification Requisition").
(5)	As the land search records showed that there was a deed of right of way ("the Right of Way Deed") registered against the Property, the Plaintiff's solicitors requested the Defendants' solicitors to produce a copy of the Right of Way Deed to enable the Plaintiff to ascertain the location and area of the right of way ("the Right of Way Requisition").

18.  Having set out these outstanding requisitions, I will now deal with the question as to whether (a) these outstanding requisitions were properly raised as title requisitions, and (b) if so, whether they had been satisfactorily answered by the Defendants' solicitors.

The Land Registration Requisition

19.  Registration of documents under the Land Registration Ordinance (Cap. 128) ("the LPO") determines the priority of any competing interest to the subject matter property:  s. 3 of the LPO; Financial and Investment Services for Asia Ltd. v. Baik Wha International Trading Co. Ltd [1985] HKLR 103.

20.  Under s. 5 of the LPO, the date of registration of a document registered within a month of the date of the document would be backdated as the date of the document.

21.  The 2^nd Assignment and the S&P Agreement were both dated 5 August 2005.  Thus, if they were registered with the Land Registry by 5 September 2005, the Defendants' title and interest in the Property would not lose any priority to any competing interest in the Property obtained under a registrable document and created after 5 August 2004.  On the other hand, if the 2^nd Assignment and the S&P Agreement were only registered after 5 September 2005, the Defendants' title and interest in the Property would be subject to any interests registered before the actual date of registration of the 2^nd Assignment and the S&P Agreement.  In fact, given the one-month backdating provision in the LPO, any interest created by any registrable documents dated of even just 1 day before the actual date of registration of the 2^nd Assignment and the S&P Agreement would still have priority over the Defendants' interest in the Property, as long as such document is registered within a month of its date.

22.  Mr. Tam acting for the Defendants at the hearing fairly accepted that the Land Registration Requisition was properly raised.   His contentions were that the requisition had been sufficiently answered.  It is therefore necessary to look at these answers.

23.  After this Land Registration Requisition was first raised, there was practically no effective reply to it. It was only until 7 October 2005 that the Defendants' former solicitors, in answer to the requisition, provided to the Plaintiff's solicitors a copy of a search record of the Land Registry entitled "Unposted Memorial Information" ("the Record").  The Record showed that the S&P Agreement and the 2^nd Assignment were respectively delivered to the Land Registry for registration on 26 August 2005 and 3 September 2005 (i.e., within a month of the dates of these documents). However, registration of these documents was still pending.

24.  The Plaintiff's solicitors were not satisfied with this answer, as they were of the view that the Record did not show that the S&P Agreement and the Assignment had been duly registered nor did they demonstrate that they had been registered on the date of their respective delivery. 

25.  In Chan Guan Li Xia v. Fung Wai Hing and Fung Wing Kwong (unrep., HCMP 2891/1998, 4 July 2001), Deputy High Court Judge Muttrie held at paragraphs 46 to 48 of the judgment that a deed pending registration was not equivalent to a registered deed for the purpose of the LPO. 

26.  On the other hand, the combined effect of rules 5(1), 10 and 16 of the Land Registration Regulations ("LRR") is that the registration of a document "when completed" shall take effect from the date of the delivery of the document to the Land Registry, when a dated receipt will be issued to the person delivering the document.

27.  In light of these, in deciding whether the Record constitutes a sufficient answer to the Land Registration Requisition, the crucial question that I need to consider is whether, notwithstanding the pending registration, there was more than a fanciful risk that the registration of these documents could not be completed and be returned to the Defendants' former solicitors. 

28.  In my view, at the time when the Record was shown to the Plaintiff's solicitors, it was not unreasonable for the Plaintiff's solicitors to form the view that there was still a risk which is more than fanciful that the S&P Agreement and the 2^nd Assignment might not be completed and be returned.  My reasons are as follows.

29.  The procedure of registration is prescribed by r.14 of LRR as follows:

"	(1)	Subject to regulation 15, the Land Registrar shall in respect of every memorial, as soon as practicable enter the following particulars on a portion of the record of a register computer kept by him for the purpose of this regulation for the land and premises affected by the instrument to which the memorial relates, that is to say-
		(a)	the memorial number;
		(b)	the date of the instrument to which the memorial relates;
		(c)	the date of registration;
		(d)	the consideration (if any);
		(e)	the name or names of the party or parties in whose favour the instrument is made;
		(f)	in the case of an instrument particulars of which are entered as an encumbrance, the nature of the instrument; and
		(g)	any other matters that may seem to the Land Registrar to be relevant…
	(2)	When the requirements of paragraph (1) have been complied with the Land Registrar shall sign a certificate of registration on the instrument or have his printed signature on a certificate of registration affixed to the instrument, whereupon registration shall be deemed to be completed, and the instrument together with the memorial thereof shall then be recorded by him on 16 mm black and white microfilm or by the imaging method…" (my emphasis)

30.  Registration may, however, be withheld under r. 15 of LRR, which provides as follows:

"	(1)	Where, in respect of any memorial, plan or instrument delivered for registration, either-
		(a)	the Land Registrar is not satisfied as to any of the matters specified in section 23 of the Ordinance; or
		(b)	the person who so delivered the instrument requests the Land Registrar to do so,
	the Land Registrar shall withhold the instrument from registration.
	(2)	Where under paragraph (1) an instrument is withheld from registration, the Land Registrar shall-
		(a)	enter on a docket the reasons why such instrument has been withheld;
		(b)	keep a copy of the instrument, together with copies of the memorial and plans (if any) relating thereto, in such form and by such method as the Land Registrar thinks fit; and
		(c)	either-
			(i)	send by post the instrument together with the memorial and plans (if any) relating thereto and a notice that the instrument has been withheld from registration to the person by whom it was delivered; or
			(ii)	at the request of the person who delivered the instrument, permit the person to collect the instrument in accordance with paragraph (3).
	(3)	…
	(4)	If an instrument collected by or sent by post to the person by whom it was delivered under paragraph (2) or (3) is redelivered for registration, such instrument, together with the memorial and plans (if any) relating thereto shall be scrutinized by the Land Registrar, and the Land Registrar shall-
		(a)	if he is satisfied in respect of such instrument, memorial and plans (if any) as to the matters specified in section 23 of the Ordinance, proceed to register the instrument in accordance with regulation 14; or
		(b)	if he is not so satisfied, withhold the instrument from registration." (my emphasis)

31.  Therefore, when the requirements under s. 23 of the LRO are not complied with, the Land Registrar shall withhold registration under r. 15 of LRR.   S. 23 of the LRO provides for 3 requirements to be complied with before the Land Registrar can register the documents.  These requirements are:

(1)	The instrument is registrable;
(2)	The provisions under the LRO and other relevant regulations have been complied with.
(3)	The prescribed fees have been paid.

32.  Although there should not be any question that the S&P Agreement and the 2^nd Assignment are registrable instruments, at the time when the Record was provided to the Plaintiff's solicitors, there was nothing to show that the other 2 conditions set out in paragraph 31 above had been fully complied with. 

33.  In the circumstances, I accept the Plaintiff's submissions that Record did not amount to a satisfactory answer to the Land Registration Requisition.  The Record alone did not show that there could not be any doubt that the registration of the S&P Agreement and the Assignment would be completed.

34.  I therefore conclude that there are no triable issues raised by the Defendants in relation to the Plaintiff's claim that the Defendants had failed to answer the Land Registration Requisition satisfactorily.

The Proper Execution Requisition

35.  If Roger Lin did not have the proper authority from Chun Wah to execute the Deed Poll, the Lot No. 89 of DD No. 225 would not have been validly and legally divided in the sub-sections, including the RP Lot.  This would affect the question as to whether title to the Property (which is built on the RP Lot and assigned together therewith) had been validly assigned to the Defendants.

36.  I therefore accept that this requisition was a properly raised title requisition.

37.  In purportedly answering this requisition, by a letter dated 5 October 2005, the Defendants' former solicitors provided to the Plaintiff's solicitors copies of the annual returns of the Chun Wah dated both 7 September 2005 and 9 November 2004.  These therefore obviously did not show or support that Roger Lin was a director of Chun Wah at the time when the Deed Poll was executed in 1995.  In any event, Roger Lin was not even recorded as a director even in these annual returns.  This could not have been a sufficient answer to the Proper Execution Requisition.

38.  However, Mr. Tam acting for the Defendants at the hearing submitted that the Defendants' answer to this requisition contained in the letter dated 6 October 2005 ("the Reply Letter") amounted to a sufficient answer. In this letter, the Defendants' former solicitors, in purported answer to the requisition, referred to the case of Cheng Chun Chun v. Chow Chung Tao (unrep., HCA 12016/1999, 12 May 2000, Hon Cheung J) and stated that, even if the Deed Poll had not be properly executed, it had been "ratified and confirmed by the subsequent execution of the Assignment by the same lawful attorney".    It was Mr. Tam's submission that the 1^st Assignment executed by Chun Wah in assigning the RP Lot to Yu had clearly rectified and confirmed the Deed Poll.

39.  In Cheng Chun Chun, the defendants sought to set aside a default judgment obtained by plaintiff purchaser for the return of the deposit paid to the defendants vendor.  The plaintiff's claim was premised on the defendants' failure to show a good title to the property.  After ruling that the default judgment obtained was a regular one, the learned judge went on to consider the merits of the defence that the defendants had shown a good title to the property.  One of the issues that needed to be determined was whether a defective execution of the deed of mutual covenant in question would have affected the title of the property.   The learned judge came to the view, at paragraph 25 of the judgment, that there was a meritorious defence to this issue in that the defendant, by executing a subsequent assignment which expressly stated that it was subject to and with the benefit of the deed of mutual covenant, had expressly recognized the validity of the deed and its binding effect.

40.  In the Reply Letter, the Defendants' former solicitors was also referring to the "Assignment" executed by its "lawful attorney".  Objectively and strictly read, this might well be referring to the 2^nd Assignment but not the 1^st Assignment, as in the 2^nd Assignment, although it was an assignment of the Property by Yu to the Defendants, curiously at page 5 thereof, there is an execution page where Chun Wah executed it through its "lawful attorney".   If the Defendants' former solicitors were relying on the 2^nd Assignment, this would not have provided the basis to say that the Deed Poll was rectified and confirmed by Chun Wah subsequently.

41.  Although Mr. Tam accepted that the Reply Letter appeared to be referring to the 2^nd Assignment but not the 1^st Assignment, he submitted that the letter must be read as a whole and realistically.  Given that Cheng Chun Chun was referred therein, the Plaintiff's solicitors ought to have understood that the Defendants' former solicitors were in fact referring to the 1^st Assignment.

42.  I accept Mr. Tam's submissions.  In fairly looking at the circumstances, in my view, it is at least arguable that the Reply Letter was referring to the 1^st Assignment and thus provided a sufficient answer to the requisition.

43.  For these reasons, I have come to the view that the Defendants have raised a triable issue as to whether the Proper Execution Requisition was sufficiently answered.

The Colour Copy Requisition

44.  I can deal with this issue quickly. 

45.  The RP Lot was clearly identified in the Coloured Plan even in the black and white copy.  I repeat paragraph 12 above.   Even without a colour copy of the Coloured Plan, the Plaintiff's solicitors should have no difficulty in identifying the RP Lot in the Coloured Plan.  The same applies to the plan attached to the 2^nd Assignment and the DMC.   It is thus at least arguable that the Colour Copy Requisition was not properly raised or that it had been sufficiently answered by the Defendants' former solicitors.

46.  I accept that the Defendants have therefore raised a triable defence in relation to the Colour Copy Requisition.

The Surveyor Clarification Requisition

47.  In the plan attached to the 2^nd Assignment, it was stated that the saleable area of the Ground Floor Area was about 63.07sq.m and the Garden Area 118.6 sq. m.    In the Coloured Plan, the total area of the RP Lot was stated to be 0.039 acres.

48.  In the Plaintiff's solicitors' letter dated 28 September 2005, the Defendants' solicitors were requested to provide the Surveyor's clarification as to whether the Garden Area included the Ground Floor Area or not.  The Defendants did not provide such clarification but stated that the Plaintiff was purchasing the Property on an "as is basis".

49.  In my view, there is an arguable defence that the requisition as framed in this letter is either improperly raised or that it had been properly answered.  This is so because  under the PSA, the Plaintiff was contracted to purchase the Property on an "as is" basis.  Thus, whether the Garden Area included or excluded the Ground Floor Area does not affect what the Defendants had agreed to sell to the Plaintiff.  Moreover, whether the Garden Area included or excluded the Ground Floor Area does not affect the title to the Property. 

50.  However, in their letter dated 10 October 2005, the Plaintiff's solicitors' requisition was reframed as follows:

"The total area of the Garden, Ground Floor and yellow area shown on the plan (118.6 sq.m. + 63.07 sq.m. = 181.67 sq.m.) could exceed the area of Lot 89RP in DD 225 (0.039 ac. = 169.884 sq.m.) shown on the Division Plan annexed to the Deed Poll Memorial No. 227536.  We require the surveyor (Thomas K.K. Tsang) who prepared the plans to clarify."

51.  The requisition framed as such is effectively a boundary requisition, which does relate to the title of the Property:  if the Garden Area together with the Ground Floor Area does exceed the RP Lot area, it is doubtful whether the Defendants could validly assign those areas which exceeded the boundary of the RP Lot.

52.  However, the requisition framed in this manner was only raised on the Completion Date.  There is thus a question as to whether the Defendants had been given reasonable time to answer the requisition: Active Keen Industries Ltd v. Fok Chi-keung [1994] 1 HKLR 396, 406 per Litton JA (as he then was).  It is to be noted that the Plaintiff had by way of its solicitors' letter dated 12 October 2005 purported to accept the Defendants breach of the PSA and demanded the return of the Deposits. 

53.  In the premises, the Defendants have an arguable defence to the question as to whether they have failed to answer this requisition satisfactorily.

The Right of Way Requisition

54.  Under clause 2 of the 2^nd Assignment, the Defendants as purchaser had covenanted with Yu as vendor to enter into a deed of right of way as agreed in the S&P Agreement.   At clause 3(i) of the 2^nd Assignment, the Defendants as purchaser further agree that they shall enter into a deed of mutual grant of right of way in the form prepared by Messrs. Vincent T K Cheung, Yap & Co, with the other owners.

55.  By their letter dated 6 October 2005, the Plaintiff's solicitors requested the Defendants' former solicitors to confirm that the copy of the Right of Way Deed provided to the Plaintiff's solicitors was the same as the one registered in the Land Registry by memorial no. 05091400860058.

56.  In reply, the Defendants' former solicitors by their letter dated 7 October 2005 stated that they were prepared to, upon completion, provide a certified copy registered instrument "in the substantial similar format of the previous photocopy [sic] one tendered by us to your client's retention after the registration of its original in due course".

57.  Mr. Jim for the Plaintiff submitted that this was not a satisfactory answer as the Defendants' former solicitors only undertook to provide a certified copy of the deed of right of way "in substantially the same form" as the copy provided to the Plaintiff's solicitors.

58.  Mr. Tam submitted that the requisition was improperly raised, as it did not relate to the title of the Property. Moreover, the Plaintiff was purchasing the Property on an "as is" basis.

59.  I accept Mr. Tam's submissions.  It is at least arguable that, given that the Plaintiff was purchasing the Property on an "as is" basis and that the Property was assigned to the Defendants subject to this right of way, the requisition does not relate to the title of the Property and is thus not properly raised.

The Defendants' further contention

60.  Mr. Tam also submitted that, even if the Defendants had failed to answer any of the outstanding requisitions satisfactorily, they were not liable to repay the Deposits or to damages as it was the Plaintiff who was in breach of the PSA first.  His submission was premised on the contention that, as a purchaser had a concurrent obligation to tender the purchase price at completion, the Plaintiff was in breach of this obligation as she had not so tendered the purchase price on the Completion Date. 

61.  I reject this submission.   The obligation to tender the purchase price only arises when the vendor has sufficiently and satisfactorily shown and proven good title to the subject matter property.   In failing to answer the requisitions properly, the obligation to tender the purchase price simply does not arise, as the vendor is already in breach of the terms (implied or express) of the sale and purchase agreement.

Conclusion

62.  As it is my conclusion that the Defendants have not raised any triable defence to the claim that they had failed to answer the Land Registration Requisition, I will give judgment in favour of the Plaintiff for the declarations as qualified below and the return of the Deposits.

63.  However, as the Plaintiff has not provided any evidence on the payment of the stamp duty and the registration fee in the respective sums of HK$35,250 and HK$210, I am not prepared to give summary judgment on these sums.

64.  In the premises, I make the following orders:

(1)	There be final judgment in favour of the Plaintiff for:
	(a)	a declaration that the Defendants have failed to prove good title to the Property;
	(b)	the Defendants do pay the Plaintiff the sum of HK$235,000, with interest at 1% above prime rate on the principal sum of HK$235,000 from date of writ to today, and at judgment rate thereafter until payment;
	(c)	a declaration that the Property is subject to a lien for the Plaintiff's claim for the sum of HK$235,000 and the interest thereof as ordered in subparagraph (b) above ;
(2)	There be interlocutory judgment against the Defendants for damages to be assessed .

65.  I further make an order nisi that costs of this application be to the Plaintiff, to be taxed if not agreed.