HIGH WHEELER LTD. v. HA HOK CHIU AND ANOTHER

HEADNOTE

    Vendor and purchaser's summons - section 12 Conveyancing and Property Ordinance Cap. 219 - requisition on title - former sale and purchase agreement rescinded by vendor - registration of memorandum of rescission- whether vendor had sufficiently answered requisition and shown a good title.

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JUDGMENT

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Litton, J.A.:

1. This is a vendor and purchaser's summons taken out under Section 12 of the Conveyancing and Property Ordinance, Cap. 219. The relief sought by the purchaser is as follows

"For a declaration that the requisition on title contained in requisition 4 in a letter dated 6 July 1992 from the plaintiff's solicitors to the defendants' solicitors has not been answered or sufficiently answered by the defendants' solicitors and that good title has not been shown by the defendants."

Background

2. On 7th July 1992, the plaintiff, the purchaser, High Wheeler Limited, purchased from the defendants, Mr. Ha Hok Chiu and Mr. Cheung Kan Chun, a flat known as Apartment E on the 13/F Tower 1 of Park Towers for a total purchase price of $5,398,000 payable by instalments as follows $100,000 paid as an initial deposit, $439,800 to be paid on the date of the Sale and Purchase Agreement (to be held by the vendors' solicitors Messrs K.B. Chau & Co. as stakeholders on terms not relevant to these proceedings) and the balance of $4,858,200 on completion. Completion day was the 28th July 1992. Time was of the essence of the contract. On 6th July 1992, one day before the date of the Sale and Purchase Agreement, the purchaser's solicitors wrote a letter (dated 6th July) to the vendors' solicitors and raised a number of requisitions of which para. 4(b) is relevant. In their letter (para. 4) they referred to a previous sale and purchase agreement (dated 15th April 1992) made between the vendors and one Tu Yu Qing and asked the vendors' solicitors to let them have (a) necessary evidence that stamp duty payable thereon had been paid and (b) documentary proof that the previous agreement had been "cancelled by the former purchaser". They added :"In this regard, please note that the rescission unilaterally by your client is insufficient to show that the former purchaser does not have any interest in the property under the said agreement".

3. In answer, the vendors' solicitors (by letter dated 10th July 1992) said in effect (i) that the former agreement was not "cancelled" but had been rescinded by the vendors and that the former purchaser Madam Tu had no interest in the flat and (ii) they referred to a Memorandum of Rescission dated 2nd July 1992 which was registered in the Land Office by Memorial No. 5332710.

4. On 13th July 1992 the purchaser's solicitors wrote and maintained their view that "unilateral rescission of the agreement without more" would not by itself revest the beneficial interest in the flat to the vendors and asked for "further documentary evidence" that the beneficial interest had so reverted. On the same day the vendors' solicitors replied and said in effect they could produce no further evidence other than the Memorandum of Rescission. Then a week later on the 20th July the originating summons was taken out which I am hearing today.

Memorandum of Rescission

5. I now refer more specifically to the Memorandum of which was registered on or about 6th July 1992. It recites the former agreement with Madam Tu and says that under that agreement the day for completion was 9th June 1992 and that Clause 4 provided that time should in every respect be of the essence of the agreement. The Memorandum then goes on to recite Clause 14 of the agreement which provided that if Madam Tu failed to comply with any of the terms of the agreement the deposit money and any part payment of the purchase price would be absolutely forfeited to the vendors who might then rescind the agreement and either retain the property or resell the same and that on the exercise of the vendor's right of rescission under the agreement the vendor should have the right, if the agreement should have been registered in the Land Office, to register at the Land Office a memorandum signed by the vendor alone to rescind the sale. The Memorandum then went on to recite the fact that Madam Tu had failed to complete the purchase and that the balance of the purchase price had not been paid and that in the exercise of the vendors' right under Clause 14 the vendor had rescinded the agreement and forfeited the deposit paid by Madam Tu. The Memorandum then ends with these words:

"NOW THIS MEMORANDUM GIVES NOTICE to all persons dealing with the Property that the sale of the Property to the Purchaser in accordance with the Agreement has been duly rescinded by the Vendor pursuant to Clause 14 of the Agreement as a result of the Purchaser's failure to complete in accordance with the terms and conditions of the Agreement."

6. I would add here two observations: (i) It would have been apparent from the sale and purchase agreement of 15th April 1992 registered in the Land Office that Madam Tu had no Hong Kong identity card number she was identified by means of a PRC passport. (ii) It must have been apparent to the purchaser's solicitors, prior to their client entering into the sale and purchase agreement of 7th July, that the title deeds had been returned to the vendors, since the vendors were able to provide those title deeds to the purchaser's solicitors for inspection.

The Legal Proceedings

7. In answer to the plaintiff's summons the vendors' solicitors filed an affirmation on 26th August 1992. I do not propose to set out the whole of the affidavit. It repeats much of the material in the Memorandum of Rescission. The additional information, not previously given in the exchange of correspondence or in the Memorandum of Rescission, may be summarised as follows

(1) That Madam Tu resided in the PRC.

(2) That the address in the New Territories referred to in the agreement of 15 April 1992 was merely Madam Tu's "correspondence address".

(3) That since the return of the title deeds there had been no further contact with Madam Tu or her agent and she had effectively "disappeared".

I should add that the solicitors in their affirmation reiterated what in fact is stated in the Memorandum of Rescission namely that on the day fixed for completion Madam Tu had failed to pay the balance of the purchase price.

8. The first point which I need to resolve is this: Is this additional information, given after the date of completion namely 28th July 1992, material to the matter for my consideration? If it were, I would need then to determine whether in fact the day for completion had been extended by agreement between the parties. Here, I need to go into a diversion. There was tendered at the hearing this afternoon a letter dated 21st July 1992 written by the purchaser's solicitors which referred to a conversation between the parties' solicitors and said as follows

"We hereby confirm on behalf of our client that it is agreeable to our client that subject to an order or judgment being delivered by the court.... to the effect that your client does have a good title to the property, completion of the sale and purchase of the property will take place within 10 working days from the date of the delivery of such order or judgment.

Kindly confirm (on behalf of the client) your client's agreement to the above arrangement by signing and returning to us a copy of this letter."

In fact, from what I have been told by the vendors' counsel Mr. Yuen, no written reply was received, either by endorsement on a copy of the letter of 21st July or separately. But, according to Mr. Yuen, the parties proceeded on the "understanding" that the date for completion was governed by the terms of the letter: a proposition to which Miss Chan for the purchaser agreed to this extent: that it governed the proceedings on 11th September, the return date in the originating summons, but not the proceedings now on foot before me. What happened in fact was that on the return day the proceedings before Deputy Judge Chan were adjourned it is Miss Chan's position that the terms of the letter dated 21st July were binding on her client if Deputy Judge Chan had dealt with the matter on 11th September, but do not govern the parties rights as they exist today.

9. I am not prepared and it would not be proper for me to adjudicate upon the parties' contractual rights in this informal way. Counsel is not generally invested with authority as agent of his client to change his contractual rights arising from written instruments. Counsel have the conduct of proceedings but are not general agents for their clients. Since the letter of 21st July 1992 was not confirmed in writing, the provisions of sections 3 and 5 of the Conveyancing and Property Ordinance Cap. 219 apply and govern the rights and liabilities of the parties. The original date of completion 28th July 1992 had never been extended and it is that date which contractually binds the parties. The question for my determination then is: Does it matter? In my judgment the answer is NO. In the correspondence with the purchaser's solicitors the vendors' solicitor could have been more helpful. Their taciturn attitude does them no credit, but in the light of the information actually before the purchaser's solicitors, if they had applied their minds to it, they would have seen that the vendors' title as at 7th July 1992 was good and therefore would have been good on the date of completion. It was not, perhaps, in the language of Lord Hardwicke quoted in M.E.P.C. Ltd, v. Christian-Edwards [1981] A.C. 205 at 220B, "mathematically certain"; but the vendor had a good marketable title. If the vendors' solicitors had condescended to reassure the purchaser's solicitors, they could in the correspondence in mid-July have spelt out the background facts, in the way they eventually did by their affirmation of 26th August 1992. But, as I have found, most of the information was in fact stated in the Memorandum of Rescission and if the purchaser's solicitors had been more robust in their views they would have so advised their clients.

10. Miss Chan in argument this afternoon said this: The vendors could have and should have gone to the court some time after 9th June 1992 (the date of completion under the agreement with Madam Tu) and sought a declaration that the former agreement had been lawfully rescinded. But, I would ask rhetorically : Would the expense and, perhaps more relevant, the delay in the circumstances have been justified, particularly when the vendors' solicitors must have known that there would be problems with service of proceedings out of the jurisdiction? It would have been unrealistic to expect that, when requisition was raised on 6th July, such proceedings could have been completed before 28th July. In my view the vendors were entitled to rely on the contractual provisions in Clause 14 and, upon the exercise of their right of rescission, to avail themselves of the machinery provided for under Clause 14 to register as they did the Memorandum of Rescission.

Conclusion

11. The insistence by the purchaser's solicitors on bilateral agreement was totally unrealistic. Rescission is, by its very nature, a unilateral act. The attitude taken by the vendors' solicitors in their answers to the requisition was unhelpful, but in relation to the rights of the parties I have no doubt what the proper conclusion should be. In terms of the originating summons before me I therefore declare that the requisition on title contained in requisition 4 in the plaintiff's solicitors' letter dated 6th July 1992 had been sufficiently answered and that good title had been shown by the defendants. I would now hear counsel on the question of costs.