ENWAY DEVELOPMENT LTD. V. ENWAY DEVELOPMENT LTD. AND ANOTHER

1993,M.P.1062

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is a vendor and purchaser summons. The 1st defendant Light Ocean Investments Limited is the vendor under an agreement made on 17th October 1992 under which it agreed to sell to the plaintiff Enway Development Ltd. ("the purchaser") certain land at Yuen Long, New Territories. The 2nd defendant Silver Wall Investment Limited is the vendor under another agreement dated 17th October 1992 under which it agreed to sell to the purchaser certain other land at Yuen Long, New Territories. (I shall refer to both defendants as "the vendors", and to the agreements of 17th October 1992 as "the principal agreements".)

2. The transactions with which the principal agreements were concerned were substantial transactions. The total consideration for the property which the purchaser agreed to purchase amounted to $152,974,080. The purchaser paid deposits which totalled $38,243,520. The completion date was to be, at the latest, 29th March 1993. Time was in every respect to be of the essence.

3. But the purchaser was concerned also to acquire certain other land, in the evidence and in the argument before me conveniently described as "the ancillary lots". In that connection each of the principal agreements contained, as Clause 32, a clause in the following terms (so far as material) :-

"32. The Vendor hereby warrants that ... the Vendor ... shall be able to enter into a binding Agreement for Sub-Sale and Purchase with the Purchaser for the sale of the properties ... to the Purchaser and shall do so .... within a period of six (6) months from the 29th September 1992. The Purchaser agrees to enter into the Agreement(s) for Sub-Sale and Purchase ... with the Vendor upon receipt of fourteen (14) days' prior written notice from the Vendor. The Purchaser shall pay 25% of the purchase price ... to the Vendor as deposit upon the signing of the Agreement(s) for Sub-Sale and Purchase. ... It is specifically provided that as the Vendor shall sell the said lots to the Purchaser as Confirmor, the completion for sale and purchase shall take place on the same day as specified in the principal agreement(s) between the Vendor and the registered owner(s). If the Vendor shall fail to produce sufficient documentary evidence showing that it is able to do so within the said period of 6 months .... this Agreement shall be absolutely terminated upon written notice served by the Purchaser on the Vendor ..."

4. This clause related to the ancillary lots. Of these, two of them were the property of a t'so; and that is what has given rise to the present dispute.

5. In this connection, s.15 of the New Territories Ordinance, Cap.97, is material. Section 15 applies to the registration of the manager of a "t'ong" etc. It applies to a t'so as well as to a t'ong. It reads as follows :-

"15. Registration of manager of "t'ong", etc.

Whenever any land is held from the Crown under lease or other grant, agreement or licence in the name of a clan, family or t'ong, such clan, family or t'ong shall appoint a manager to represent it. Every such appointment shall be reported at the appropriate New Territories Land Office, and the Land Officer on receiving such proof as he may require of such appointment shall, if he approves thereof, register the name of the said manager who shall, after giving such notices as may be prescribed, have full power to dispose of or in any way deal with the said land as if he were sole owner thereof, subject to the consent of the Land Officer, and shall be personally liable for the payment of all rents and charges and for the observance of all covenants and conditions in respect of the said land. Every instrument relating to land held by a clan, family or t'ong, which is executed or signed by the registered manager thereof in the presence of the Land Officer and is attested by him, shall be as effectual for all purposes as if it had been executed or signed by all the members of the said clan, family or t'ong, The Land Officer may on good cause shown cancel the appointment of any manager and select and register a new manager in his place. ..."

6. In the present case, the position, on 29th March 1993, was that the Land Officer had on 22nd March 1993 approved the appointment of three persons as managers of the relevant t'so, and these three persons had on 28th March 1993 agreed to sell the relevant land to Important Plan Limited, which had itself agreed to sell it on to the 1st defendant. However, these three persons had not, as at that date, been registered as managers of the t'so. After that date, on 1st April 1993, they were registered as managers. On the same day, 1st April 1993, they applied for the Land Officer's consent to sell. On 19th July 1993, they were granted such consent, valid for six months from that date.

7. The purchaser contends that, on 29th March 1993, the vendors were not "able to enter into a binding agreement for sale and purchase with the purchaser for the sale of "the relevant land. (If this is right, of course it follows that the vendors would have been unable on that day to produce sufficient documentary evidence that they were in fact able to do so.)

8. Accordingly, says the purchaser, it was entitled to terminate the agreements, as in fact it did; and it is therefore, it says, now entitled to the refund of all the deposits it has paid.

9. The question which I have, on these facts, to decide, is a question of construction. Whether, on 29th March 1993, the vendors were "able to enter into a binding agreement for sub-sale and purchase with the purchaser for the sale of " the relevant land, depends on what those words mean.

10. The vendors rely on the two agreements made on 28th March 1993 as agreements which, if completed, would have carried to the vendors the title to the relevant land.

11. However, it remains the fact that, on 29th March 1993, the appointment of the named managers of the t'so, although approved, had not been registered; and that the consent of the Land Officer to the sale had not been obtained.

12. In my judgment on its true construction, clause 32 required the vendors to have been able to demonstrate to the purchaser by 29th March 1993 at the latest that the persons from whom they were themselves purchasing had at that date a good title to the relevant land. If the condition was not, on that date, satisfied, it would be too late for the vendors to show that they could have satisfied the condition immediately after that date : compare Aberfoyle Planations v. Cheng [1960] AC 115.

13. The vendors contend that it was sufficient, for the purposes of clause 32, that they were able on 29th March 1993 to establish that they did have the benefit of a legally binding agreement with the vendors named in the agreements of 28th March 1993. The vendors were prepared to accept that, on 29th March 1993, they could not have obtained a decree of specific performance of their contracts to buy the relevant land; but say correctly that they could have issued proceedings for that relief (compare Marks v. Lilley [1959] 1 WLR 749; Hasham v. Zenab [1960] AC 316).

14. I reject the vendors' contention. It is clear on the face of the agreements (and I am not prepared to look further than this) that the purchaser was seeking to assemble a site for development, including the ancillary lots; and was anxious to ensure that the position would crystallize no later than 29th March 1993. On that day, however, no one could have been certain whether or when the registration of the managers of the t'so would be effected; and no one could be certain whether the Land Officer would, necessarily, consent to the sale by the managers (when registered) of the relevant land.

15. In my judgment, clause 32 contemplated that the vendors were to be able to show, on 29th March 1993, that they had a legal or equitable right to a good title to the relevant land, and to compel a conveyance or assignment of such a title to the purchaser. But in fact the ability of the vendors to show such a title was dependent (1) on the registration of the three approved persons as managers; and (2) on their having obtained the consent of the Land Officer to the relevant sale. In these circumstances, the title shown on 29th March 1993 was not on that date a good title, but one liable to be impeached if the registration or consent was not forthcoming.

16. It follows if that construction of clause 32 is correct that the purchaser was entitled to terminate the agreements, as it did; and is now entitled to the return of its deposits. I propose to make an appropriate declaration; and I propose to order that the costs of the purchaser of this application be taxed if agreed and paid by the vendors to the purchaser. If any difficulty arises as to the form of the order, or as to the order for costs which I have proposed, the case will have to be restored to the list for further argument.