TRIPLE WILL LTD. v. LION WILL INVESTMENT LTD.

IN THE COURT OF APPEAL

1992 No.200
(Civil)

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J U D G M E N T

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Power, V.-P.:

1. This is the judgment of the Court.

2. In this matter the plaintiff Lion Will Investment Limited, who is the respondent on this appeal and to whom I shall refer hereafter as the purchaser, took out an Originating Summons naming as defendant Triple Will Limited, to whom I shall hereafter refer to as the vendor. The summons was taken out pursuant to s.12(1) of the Conveyancing and Property Ordinance, Cap.219. This section provides:

"A vendor or purchaser of land may apply by petition or by originating summons to the court in respect of any question arising out of or connected with any contract for the sale or exchange of land (not being a question affecting the existence or validity of the contract or relating to compensation payable by the Crown or a public body), and the court may make such order upon the petition or originating summons and as to costs as to the court appears just."

3. The purchaser asked for a declaration that certain requisitions in respect of a property which was the subject of a provisional sale and purchase agreement dated 14th April 1992 and a formal sub-sale agreement dated 9th May 1992 had not been properly answered. Also sought was a declaration that good title had not been shown and an order that the amount of $788,000 being the sum of the initial and of the further deposit be repaid ("the additional relief").

4. The provisional agreement between the parties stipulated a purchase price of $7.88m and provided for the payment of the deposits and for the balance to be paid on completion on 19th June 1992 at 3 p.m.

5. The sub-sale agreement of 9th May adopted the terms of the provisional agreement and further stipulated, inter alia, in clause 16 as follows:

"(a) The Vendor shall give good title to the Property. The Vendor shall at his own expense make and furnish to the Purchaser such certified copies of any deeds or documents of title, wills and matters of public record to prove such title pursuant to Section 13 of the Conveyancing and Property Ordinance Cap.219. The costs of verifying the title by inspection and examination, including obtaining documents of title not in the possession of the Vendor and search fees, shall be borne by the Purchaser who shall also, if the Purchaser requires certified copies of any documents in the Vendor's possession relating to other premises retained by the Vendor as well as to the Property pay the cost of such certified copies. Should the Purchaser requires certified copies of the Crown Lease and/or other title deeds and documents to complete the chain of title extending to 15 years before the date hereof or extending to the Crown Lease (if the same shall be within the said 15 years period), the costs and expenses for obtaining such certified copies shall be borne and paid by the Vendor.

(b) Any requisitions or objection on title of the Property shall be delivered to the Vendor's solicitors within 7 business days after delivered to the Purchaser's solicitors ...."

This passage is corrupt but nothing turns upon that. It seems to be clear that the meaning is that requisition shall be delivered to the vendor's solicitors and within 7 days thereafter the answer shall be delivered to the purchaser's solicitors. It goes on:

"... The Purchaser shall be deemed to have accepted the Vendor's title if such requisitions or objection on title is not delivered to the Vendor's solicitors within the time stipulated above. If the Purchaser shall make and insist on any objection or requisitions as to title or any matter appearing on the title deeds or particulars or conditions or otherwise which the vendor shall be unable or (on the ground of difficulty delay or expenses or on any other reasonable ground) unwilling to remove or comply with or if the title of the Vendor shall be defective, the Vendor shall notwithstanding any previous negotiation or litigation be at liberty on giving to the Purchaser or his solicitors not less than 7 clear days notice in writing to annul the sale, in which case the Purchaser shall be entitled to the return of the deposit forthwith but without interest costs or compensation."

6. On 24th April the Vendor sent the title deeds and other documents to the purchaser's solicitors. The enclosures included the following documents:

"1. An agreement dated 20th November 1980 whereby one Bo Wai Company Limited, the development company responsible for building the Riviera, agreed to sell the Property to one Wong Che and one Kwan Wai Lin as joint tenants;

2. A document entitled "Nomination" dated 30th September 1981 whereby Wong and Kwan nominated the latter as the purchaser to take up the assignment of the Property;

3. An assignment dated 30th September 1981 whereby the Property was assigned by Bo Wai to Kwan;

4. An agreement dated 12th August 1985 and an assignment dated 29th August 1985 whereby Kwan respectively sold and assigned the Property to one Yorkbo Investment Limited ("Yorkbo"), one of the Defendant's predecessors-in-title"

A set of requisitions, one of which questioned whether a resulting trust on the property had arisen in favour of Wong Che ("Mr. Wong") and whether Madam Kwan Wai-lin ("Madam Kwan") had whole title to assign the property to Yorkbo Investment was sent to the vendor's solicitors. This requisition is dealt with in paragraph 6 of the affidavit of Mr. Pang Ka-kwong, an assistant solicitor of Messrs. S.K. Wong & Lee, filed on 28th of May 1992, which states that one of the requisitions queried:

"... whether a resulting trust of the said property has arisen in favour of a Wong Che and whether a Kwan Wai Lin had whole title to assign the said property to Yorkbo Investment Limited in view of the matters as follows:

(1) By an agreement Memorial No.98568 dated 20th November 1980 the Vendor therein agreed to sell the said property to Wong Che and Kwan Wai Lin as Joint Tenants;

(2) By a Nomination Memorial No.101917 dated 30th September 1981 the said Wong Che and the said Kwan Wai Lin purported to nominate the said Kwan Wai Lin as the Purchaser to take up the assignment of the said property;

(3) By an Assignment Memorial No.101918 dated 30th September 1981 the said property was assigned unto the said Kwan Wai Lin;

(4) By an Agreement dated 12th August 1985 and an Assignment Memorial No.111353 dated 29th August 1985 the said Kwan Wai Lin assigned the said property to Yorkbo Investment Limited;

(5) Apparently, Wong Che had paid certain money towards the purchase of the said property with the said Kwan Wai Lin as Joint Tenants and the benefit of which payment was taken up by the said Kwan Wai Lin upon the completion of the purchase of the said property."

7. On 2nd May the vendor's solicitors made answer to the requisitions. As regards the possibility of a resulting trust, the purchaser's solicitors stated that no presumption thereof arose as the suggested nominee was not a stranger and said that anyway the suggested nominee would, by virtue of the words of the nomination, be estopped from pursuing any such claim. The former contention rested on no more stable basis than that the "Nomination" stated Madam Kwan to have been a married woman and gave for her the same address as that which was given for Mr. Wong. By letter of 7th May the purchaser's solicitors expressed dissatisfaction with that answer. That letter concluded with the following words:

"We should be obliged if you would let us have your comments on the above within next 5 days.

Please also let us have your view on whether it is agreeable with you to take out a Vendor and Purchaser Summons to clarify the above requisition."

It appears that there was no reply to that letter and by a letter of 21st May the purchaser's solicitors stated:

"Unless we hear anything from you to the contrary forthwith by return, we shall take out a Vendor and Purchaser Summons to clarify our requisition on the Nomination Memorial No.101917.

In this connection please confirm with us before tomorrow 5:00 p.m. whether you have instruction to accept service. Or we shall serve directly the Originating Summons on the Vendor."

8. On 22nd May the Summons was issued. That summons was heard by Deputy Judge Fung Q.C. on 12th June 1992 and judgment thereon was handed down on 2nd September 1992.

9. It appears that the matter was fully argued before the Deputy Judge and that only towards the end of the vendor's argument did Mr. Fang, who appeared for the vendor, handed up a Marriage Certificate evidencing the marriage of Mr. Wong and Madam Kwan on 5th January 1976. Mr. So, for the purchaser, indicated that he regarded the production of the certificate which gave rise to a presumption of advancement as satisfactorily answering the requisition.

10. There then remained only the question of costs.

11. For the purchaser it was contended that it has been justified in issuing the summons and was entitled to costs. For the vendor it was contended that the statements on the face of the "Nomination" and the estoppel evidenced by the contents of the "Nomination" made the purchaser's fears fanciful and that they were not entitled to costs.

12. The Deputy Judge was satisfied that in order to rule properly as to the issue of costs, he had to determine which contention was correct. He was satisfied that, if there were no intervening factors, when Madam Kwan took a conveyance of the property a presumption would have arisen of her holding an interest therein on a resulting trust for Mr. Wong. He was, however, satisfied, relying upon the marriage certificate, that as Madam Kwan and Mr. Wong were married, the presumption of advancement would displace the presumption of a resulting trust. He was satisfied that there was nothing in the title deeds or the nomination to establish that Mr. Wong and Madam Kwan were man and wife and that there was, therefore, no basis for the contention that those documents established a presumption of advancement which displaced the presumption of a resulting trust. He made the following findings which are most pertinent to this appeal:

"Was the Plaintiff indulging in idle speculation or giving vent to unwarranted paranoia when it raised the above issue with the Defendant by way of a requisition on its title? Put another way, would a reasonable solicitor have advised his client to ignore the possibility of Wong emerging to claim an interest in the Property on the basis that any such occurrence was so remote as to be wholly fanciful?

Whilst I confess to harbouring some sympathy for the Defendant's solicitors who complained that they were being vexed by a somewhat unrealistic, not to mention pedantic, requisition, I am very far from persuaded that making and maintaining such a requisition was unreasonable. On the contrary, the conduct of the Plaintiff's solicitors reveals all the hallmarks of a truly competent and vigilant conveyancer."

He was also satisfied that no estoppel as has been suggested arose on the face of the nomination. He held, when dealing with the conduct of the vendor:

"In my view, the least they could have done to protect their client from the risk of an adverse order as to costs was to reply to the Plaintiff's solicitors' letter of 7th May to the effect that they were making relevant inquiries of the Marriage Registry to determine the relationship between Wong and Kwan or otherwise to indicate that they require a little time to answer the requisition as to the validity of their client's title. No doubt their failure to do that reflected by no means oversight but merely an understandable reluctance to concede that the Plaintiff's concern was a real one. Clearly, the Defendant wished to hedge its bets as to the result of the inquiries made of the Marriage Registry. As events turned out, the perceived defect was cleared but the costs of and incidental to such exercise, including in particular the costs of taking out and proceeding with this Summons, ought to be borne by the Defendant.

Another alternative open to the Defendant faced with such a requisition would have been to follow the suggestion made by Emmet, and offer the Plaintiff an indemnity against what the Defendant alleges to be the supposedly negligible risk of Wong emerging to make a claim which might well have rendered his title good and acceptable. Such a solution has, of course, the merit of entailing a vendor to put his money where his mouth is."

The judge, having been satisfied in the way as set out above, ordered that the costs of and incidental to the summons, including the cost of attending the hearing before him, be paid by the vendor to the purchaser.

13. The vendor now appeals from that judgment having been given leave so to do by the learned Deputy Judge. When giving that leave he said:

"Having said that, I should return to the single further point made by Mr. Fang which gives me pause in my considerations. This is that the plaintiff purchaser had jumped the gun in taking out the vendor and purchaser summons on 22nd May 1992 when the scheduled date for completion of the contract of sale of the property was 19th June 1992. This is compounded by the fact that the hearing of the summons took place on 12th June 1992, a week before the schedule completion date. While I do not accept Mr. Fang's characterization of all vendor and purchaser summonses taken out before the scheduled completion date as premature (since in many instances, it may well be sensible for the parties to sort out their differences prior to the completion date after a deadlock had arisen in the course of pursuing requisitions), there is force in Mr. Fang's point that a vendor's obligation to show good title may be discharged at any time up to and including the date of completion. Mr. So very properly accepts this proposition but maintains, nevertheless, that his taking out the vendor and purchaser summons was reasonable since his client's requisitions on the Defendant's title had not been properly answered.

Now whilst that would in my view justify the Plaintiff in pursuing Relief No.1 set out in the summons, namely, 'a declaration that the requisition set out in the Plaintiff's letter of the 1st May 1992 in respect of the property comprised in the above-mentioned Provisional Agreement for Sale and Purchase dated 14th April 1992 and formal Sub-Sale Agreement dated 9th May 1992 have not been properly answered', it would scarcely rescue Relief No.2 in his summons, namely: 'A declaration that a good title to the said property has not been shown in accordance with the said Provisional Agreement for Sale and Purchase dated 14th April 1992 and formal sub-sale agreement dated 9th May 1992' from the charge of prematurity."

14. Miss Cruden, who has argued the appeal before us today, referred to a number of matters. She submitted that the usual and proper order is that costs follow the event. She submitted that the purchaser did not succeed as the relief it sought was refused and that these justified the judge's failure to follow the usual and proper course. It seems to us clear, however, from the passages set out above, that the purchaser did succeed upon the real issue before the judge. That issue was "whether or not the requisition was a proper one which required an answer". Clearly the judge was satisfied that it was a proper requisition, that it did require to be answered and that no answer had been given. It is true that, at the eleventh hour, the marriage certificate was produced but, at the time of the commencement of the proceedings and during the trial before the judge, there had been no proper answer. The costs, while not following the event, did in a real sense, follow the decision of the judge on the material issue argued.

15. Miss Cruden also submitted that the judge had wrongly exercised his discretion because he had taken into account only and as the paramount matter the reasonableness of the actions of the purchaser. We cannot agree. We are satisfied that while this was a matter which the judge had in the forefront of his mind he was also mindful both of the unreasonableness of the acts of the vendor and of all of the background to the bringing of the Originating Summons.

16. Miss Cruden further suggested that the summons was premature. We cannot agree. The summons was, in our view, properly taken out. The purchaser was entitled to the declaration which he sought as to the requisition at the time when he took out the summons. It is true that the additional relief sought could not have been granted as if the judge had made a declaration that the requisition had not been properly answered the vendor would have been entitled to say that no declaration as to title and no order for the return of the deposit should be made as he had until the date of completion to show good title. It would, in the circumstances of the present case, have been open to the vendor, between the date of the completion of the hearing and the date of completion, to have produced the marriage certificate but he could not, by so doing, have resisted an order that he pay the costs of the application. The application was not, we are satisfied, premature as to the real relief sought.

17. Finally Miss Cruden suggested that in vendor and purchaser summonses costs generally are not awarded, the usual order being that there be no order of cost. That may be. However the trial judge here was facing an unusual situation. It was one where he was, we are satisfied, entitled to take the view he did that the actions of the vendor had been unreasonable, had precipitated the matter and that the vendor should pay the cost of the application. We are satisfied that the trial judge was right to make the order which he did and this appeal must be dismissed.

18. The costs of this appeal will be to the purchaser to be taxed.