TANG JOSEPH YIU TIN AND ANOTHER V. MA KA CHUN AND ANOTHER

1993, MP No. 2890

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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D E C I S I O N

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1. On 25th August 1993, I heard a vendor and purchaser summons brought by the Plaintiff purchasers. At the conclusion of the hearing, I granted declarations that certain requisitions and objections in respect of title had not been sufficiently answered by the Defendants, and that the Defendants had failed to show a good title as they were bound to do under the agreement between the parties. I said that I would reduce my reasons into writing which I now do.

2. By a sale and purchase agreement dated 8th November 1978 and registered on 27th November 1978, the developer of land agreed to sell the flat, which is the subject of these proceedings, to one Teng Li Yun (Madam Teng). Completion was to be within 7 days of the developer giving written notice of the issue of the occupation permit; or where the purchase price was payable by instalments, upon the last instalment becoming due or on the date in a notice to be given by the developer upon issue of the occupation permit.

3. By agreement dated 1st September 1980, the agreement dated 8th November 1978 was cancelled. Madam Teng signed by her attorney. This agreement was registered on 16th September 1980.

4. By agreement dated 1st September 1980 and registered on 16th September 1980, the developer agreed to sell the property to another purchaser.

5. The occupation permit was issued on 29th September 1980.

6. The property was subsequently acquired by the Defendants.

7. By agreement dated 25th June 1993, the Plaintiffs agreed to purchase the property from the Defendants. Completion was to be on or before 31st August 1993. The Defendants were required to show a good title to the property in accordance with section 13 of the Conveyancing and Property Ordinance, Cap. 219. In relation to title, the Plaintiff's solicitors raised two requisitions or objections in relation to the power of attorney by which Madam Teng purported to execute the cancellation agreement. First, they asked for a certified true copy of the power of attorney. The Defendants' solicitors did not supply this, contending that it was not necessary. Second, they expressed doubt whether the power of attorney enabled the attorney to sign the cancellation agreement. The Defendants' solicitors contended that the scope of the power of attorney was sufficient.

8. Mr. Yu, who appeared for the Plaintiffs, said that they still wished to purchase the property and proceed to completion. He said that they required the assistance of the Court, however, to determine the doubt which had arisen about title. He said that in the circumstances his stance was essentially a neutral one.

9. It was not in dispute that, pursuant to section 13(1) of Cap. 219, a vendor must produce as proof of title the documents specified in that subsection. Subsection (2) provides that an attested or certified true copy of any such document shall be sufficient. If a necessary document or copy is not produced then, unless a contrary intention is expressed, the vendor is in breach of contract in that he has failed to show good title as stipulated. There is ample authority for that proposition. For example, Wong Wai-man v. Tang Chat-chi 1992 No. MP4172, a decision of Patrick Chan J. given on 15th February 1993 (unreported) and the cases cited therein.

10. It was also Mr. Yu's contention, and Mr. Chan for the Defendants did not seek to argue the contrary, that if all necessary documents have been produced but there remains an apparent blot on the title then, as a second and separate step, the Court will apply the principles laid down in M.E.P.C. Limited v. Christian - Edwards and Others (1981) AC 205. In an appropriate case, the court must grasp the nettle and determine whether the title is good on a view of the facts before it, notwithstanding the absence of a possible claimant to an encumbrance who will not be bound by the decision of the court. As Lord Russell of Killowen put it at page 220:

"If the facts and circumstances of a case are so compelling to the mind of the court that the court concludes beyond the reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the encumbrance, the court should declare in favour of a good title shown."

11. Again, I accept the proposition for which Mr. Yu contends. Authority may be found in Wong Wai-man v. Tang Chat-chi and in Chan Kam-sing and another v. Lam Ping-ping. Grace 1989 MP3276, a decision of Deputy Judge Findlay Q.C. given on 8th March 1990 (unreported). Assuming for the moment that the Defendants have complied with section 13 (1), I am satisfied beyond any doubt whatsoever that, in the circumstances of this case, Madam Teng has no prospect of obtaining a decree of specific performance against the developer. Only such a decree would have any impact upon the property and consequently upon the Plaintiffs were they to buy it. Even if, after this lapse of time, Madam Teng was successful in establishing the sale and purchase agreement with the developer to be extant, at best she would receive an award of damages which would affect the developer but not the property or the current owner. I am in no doubt on this basis that good title has been shown.

12. Mr. Chan's principle argument was in some respects to turn these two steps around. He said that only documents which are necessary as proof of title need be produced and only powers of attorney relating to those documents are required. As to that there was, I think, no dispute. The dispute centred upon what are documents of title, and how that issue can be resolved.

13. Mr. Chan said that a binding contract for the sale of land, which is enforceable by specific performance, operates to pass the beneficial interest in that land to the prospective purchaser. He submitted, however, that if for some reason equity would not enforce specific performance, or if the right to specific performance has been lost by the subsequent conduct of the party in whose favour such a decree might have been granted, the vendor either never was or has ceased to be a trustee for the purchaser in any sense at all. In other words, the interest of the purchaser in land is, in every case, commensurate only with what would be decreed to him in equity, that is, relief given by way of specific performance. He referred to Central Trust and Safe Deposit Company v. Harvey G. Snider and Others (1916) AC 266. In that case, a Miss Carleton conveyed certain property to her uncle, the testator. The testator covenanted to settle part of the property on her. He failed to do so but left her a legacy in his will. In delivering the judgment of the Privy Council, Lord Parker of Waddington said at page 271:

"In their Lordships' opinion Meredith C.J. put the matter on a surer ground. There being no question of setting the transaction aside, the only point to be determined is whether, by virtue of the testator's promise to settle the property given in the letter of May 9, 1900, for valuable consideration, the defendant Mabel Carleton became entitled in equity to any and what interest. The learned Chief Justice refers to the case of Freemoult v. Dedire (1781) 1 P. Wms. 428. as having decided that a covenant to settle lands makes the covenantor but a trustee for the parties who would be interested if the covenant were performed, and to a passage in Lewin on Trusts, 12th ed., pp. 160-161, where it is stated that if a person agrees for valuable consideration to settle a specific estate he becomes a trustee of it for the intended objects, and all the consequences of a trust will follow. Freemoult v. Dedire 1 P. Wms. 428 was undoubtedly a sound decision, and there is little fault to find in the statement in Lewin on Trusts as to the general equitable principle. But it must be remembered that this principle is but the logical consequence of the power of a Court of Equity to grant, and its practice in granting, specific performance of a contract to convey or settle real estate. It is often said that after a contract for the sale of land the vendor is a trustee for the purchaser, and it may be similarly said that a person who covenants for value to settle land is a trustee for the objects in whose favour the settlement is to be made. But it must not be forgotten that in each case it is tacitly assumed that the contract would in a Court of Equity be enforced specifically.

If for some reason equity would not enforce specific performance, or it the right to specific performance has been lost by the subsequent conduct of the party in whose favour specific performance might originally have been granted, the vendor or covenantor either never was, or has ceased to be, a trustee in any sense at all. Their Lordships had to consider this point in the case of Howard v. Miller [1915] A. C. 318 in connection with the law as to the registration of titles in the province of British Columbia, and came to the conclusion that, though the purchaser of real estate might before conveyance have an equitable interest capable of registration, such interest was in every case commensurate only with what would be decreed to him by a Court of Equity in specifically performing the contract, and could only be defined by reference to the relief which the Court would give by way of specific performance.

If, therefore, the defendant Mabel Carleton has any interest in the property it can only be because an action would lie for specific performance of the testator's contract to settle the property in her favour."

14. In effect, Mr. Chan's argument was that the M.E.P.C. principle can be used to determine whether or not a document is a document required under section 13(1). He said that in the instant case, on the facts, the developer either never was or has ceased to be a trustee for Madam Teng. Therefore, the sale and purchase and cancellation agreements made between them are not documents going to proof of title, consequently their production and the production of the power of attorney is not required.

15. Mr. Chan sought to draw a distinction between a mortgage or legal charge and a sale and purchase agreement. In the former case, he said, a legal or equitable interest is transferred, so that it must be shown that that interest has been reassigned or transferred to the vendor or the vendor's predecessor in title. The latter type of document, however, creates a mere equity or encumbrance which is enforceable only by specific performance, and is defeasible by conduct on the part of the prospective purchaser or by other circumstances.

16. Attractive though that argument is, I rejected it.

17. In my judgment, section 13 (1) does not admit of such an approach. Either a document passes or purports to pass an interest in the property, in which case it is a document of title and must be produced together with any related power of attorney; or it does not, in which case no further time need be spent upon it. I agree with Mr. Yu that it would lead to uncertainty and confusion in the practice of conveyancing if solicitors have first to determine the need to produce a document on the basis of whether a person, of whom nothing has been heard probably for many years, can assert a successful claim to an encumbrance. The correct approach is for the vendor's solicitors to produce the documents and leave the purchaser's solicitors to accept the title should there be any doubt about it, or apply to the court to declare that good title has been shown. If for one reason or another the documents are not available or give rise to a difficulty about which the vendor's solicitors cannot be confident, the solution is to provide in the contract that the documents need not be produced or if necessary for them to be accepted without further proof.

18. In the present case, with the greatest reluctance, I come to the conclusion that the agreements between the developer and Madam Teng are documents of title which, together with the power of attorney, must be produced. A true copy of the power of attorney not having been produced, the Defendants are in breach of contract because they have not shown title in accordance with the contract. I say 'with reluctance' because the power of attorney, of which an uncertified copy is available, is drawn in very wide terms and is plainly sufficient for the attorney to sign the cancellation agreement. And because, as I have already said, it is laughable to suppose that Madam Teng could obtain a decree of specific performance against the developer.

19. For these reasons, I granted the declaration that the requisition in relation to the production of a certified copy of the power of attorney had not been sufficiently answered and that the Defendants had failed to show good title.

20. I adjourned the Plaintiffs' applications for an order for refund of deposits with interest, and for costs of investigating title together with stamp duty and agent's commission.