CHOI KAR YIN AND ANOTHER v. WONG SIU HUNG

HCMP 1728/2006

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1728 OF 2006

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REASONS FOR DECISION

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Introduction

1.  This is a vendor and purchaser summons taken out by the Plaintiffs (the purchasers) against the Defendant (the vendor) seeking a declaration that the Defendant, as vendor, has failed to prove and/or make good title of a flat in Wing Fok Centre in Fanling (“Property”) to be sold under a formal agreement for sale and purchase dated 12 May 2006 (“Formal Agreement”).  The purchase price was $972,000.  The Plaintiffs paid an initial deposit of $50,000 upon signing of the provisional agreement and a further deposit of $47,200 upon signing of the Formal Agreement.  Completion was to take place on 23 June 2006.  The Defendant acquired the Property on 21 July 2005 for $680,000 in an auction pursuant to an Order for Sale of the District Court.

2.  The Plaintiffs’ case is that the Defendant failed to answer two sets of requisitions, one in respect of the title deeds (“Missing Title Deeds Requisitions”) and the other in respect of two charging orders registered against the Property (“Charging Orders Requisitions”), while the Defendant argues that the requisitions have been satisfactorily answered and that the Missing Title Deeds Requisitions were raised out of time. 

The background of the Property

3.  A land search in respect of the Property revealed the following facts.  The Property was formerly acquired by Hera Yeung in 1993 without any mortgage.  Two charging orders (the “Charging Orders”) were made against four properties belonging to Hera Yeung, including the Property in question.  One charging order was in favour of Guardian Property Management Limited (“Guardian PML”) for a debt in the amount of $119,496.64 with interest in 2003 (“Guardian Charging Order”) and another charging order was in favour of the incorporated owners of Wing Fok Centre where the Property was located in the amount of $26,366.80 (“IO Charging Order”) in 2005.  On 8 June 2004, the District Court issued an Order for Sale of the Property. 

4.  On 21 July 2005, the Defendant purchased the Property for $680,000 at an auction from Guardian PML as chargee exercising power of sale under the Order for Sale.  Under Clause 15.0 (b) of the General Conditions of Sale applicable to the Property, the vendor was not obliged to provide or procure the production of title deeds or related documents in respect of the Property, which were not in the vendor’s custody or possession.  That clause provides:

“The Vendor shall not be called upon or be bound to produce or procure the production of any muniments of title plans, deeds, instruments or writings whatsoever not in the Vendor’s custody or possession nor to procure attested certified or other copies of or extracts from such other muniments of title plans, deeds, instruments or writings nor to give any information in relation thereto and no objection or requisitions shall be made in respect thereof.”

The vendor of the Property was not identified in the General Conditions of Sale.  For reasons as given in paragraphs 43 to 45 below, the vendor was Hera Yeung.

5.  It is not disputed that under the General Conditions of Sale, neither Guardian PML nor Messrs Chan & Chuk who had the conduct of the sale was obliged to provide the Defendant as purchaser with title deeds of the Property if the same were not in their custody or possession.  It is also the Defendant’s case that he was thus not provided with the title deeds of the Property.

The Missing Title Deeds Requisitions

The requisitions and exchange of correspondence between the parties

6.  It is convenient to deal with the two sets of requisitions separately.  The following exchanges took place between the Plaintiffs’ solicitors, Messrs Terry Yeung & Lai (“TYL”) and the Defendant’s solicitors, Messrs Li, Kwok & Law (“LKL”) in respect of the Missing Title Deeds Requisitions. 

7.  On 26 May 2006, TYL requested originals of four documents which relate exclusively to the Property. There is no dispute that this requisition was raised within time.  LKL replied on 19 June 2006 that the Defendant acquired the Property from Guardian PML, the manager of the building in which the Property was situated and the chargee under the Guardian Charging Order and hence the original of the requested documents were not in the Defendant’s possession.

8.  On 21 June 2006, TYL pointed out that the name of the vendor in the assignment to the Defendant was Hera Yeung and not Guardian PML and that irrespective of from whom the Defendant acquired the Property, the Defendant was obliged to give good title to the Property by providing the Plaintiffs with the original title deeds.  On 22 June 2006, LKL replied repeating that the Defendant acquired title from Guardian PML as chargee and alleged that the requisition, being formulated in an entirely different form from the earlier one, was made out of time.  LKL, however, quoted Clause 10 of the Formal Agreement and offered to arrange for the Defendant to make a statutory declaration to the effect that the requested documents were not in the Defendant’s possession.

9.  On 27 June 2006, TYL refuted the allegation that the requisitions were raised out of time and pointed out the fact that the original title deeds were not in the Defendant’s possession did not absolve him from his duty to prove title.  TYL explained that Clause 10 of the Formal Agreement only provided for a statutory declaration to account for the loss of any document.  A statutory declaration to the effect that those documents were never in the Defendant’s possession would not serve the purpose.

10.  On 28 June 2006, LKL forwarded a letter from Messrs Chan & Chuk stating that Guarding PML had not been in possession of the original title deeds and a draft statutory declaration to be made by the Defendant stating that he never had possession of the original title deeds because he forwent that right to under the conditions he purchased the Property.

11.  In a letter of 3 July 2006, LKL acknowledged that the Defendant acquired the Property from Hera Yeung instead of from Guardian PML.  By a second letter of the same date, LKL stated that LKL had been tentatively informed by Messrs Chan & Chuk that they had no objection to amend the name of the assignor in the assignment to the Defendant from Hera Yeung to Guardian PML.

12.  On 4 July 2006, TYL pointed out that according to the decision in Yiu Ping Fong & Anor v Lam Lai Hing Lana [1998] 4 HKC 476, a statutory declaration as to the loss of original title deeds has to be made by the person who last had custody of the missing title deeds explaining the circumstances in which the title deeds were lost and declaring that it would be unlikely for them to re-emerge and that a person, such as the Defendant, who never had possession of the missing title deeds was not in a position to make a statutory declaration to that effect.

13.  On 6 July 2006, LKL forwarded a statutory declaration made by the Defendant stating that pursuant to the Memorandum of Agreement for Sale and Purchase, whereunder the Defendant acquired title to the Property, the vendor in that sale would not be called upon to produce any documents not in his possession and hence the Defendant never had possession of the original title deeds.  LKL also exhibited a letter from Messrs Chan & Chuk dated 28 July 2005 stating that save for a selection of court orders, Guardian PML had not been in possession of any title deeds and documents of the Property.

14.  On 7 July 2006, TYL reiterated that the statutory declaration was not sufficient because the Defendant was not in a position to account for the loss of the missing title deeds. 

15.  On 19 July 2006, LKL quoted the decision of Court of Final Appeal in the case of Leung Kwai Lin Cindy v Wu Wing Kuen, FACV No 14 of 2000 to support the argument that the statutory declaration provided by the Defendant was sufficient.  On 21 July 2006, TYL pointed out that Leung Kwai Lin Cindy v Wu Wing Kuen was distinguishable from the present case as the person who made the declaration had custody of the missing documents.  TYL expressly rejected LKL’s argument based on Leung Kwai Lin Cindy v Wu Wing Kuen and maintained that the requisitions have not been satisfactorily answered.  On the same day, LKL wrote back maintaining their view that the statutory declaration was a cogent and clear account for the loss of title deeds but advanced no new arguments.

16.  On 9 August 2006, TYL stated among other things that the Missing Title Deeds Requisitions had not been answered.  On 12 August 2006, LKL replied that the requisitions raised in TYL’s letter of 9 August 2006 were time-barred.

Whether the Defendant’s statutory declaration was sufficient

17.  A purchaser of property is entitled to both the interest in the property purchased, the original title deeds of the property and vacant possession of the property if the property is sold with vacant possession.  He is entitled as a matter of proprietary right to possession of the original title deeds, which is the best evidence of his interest in the property acquired.  He is entitled to insist upon this right even if there is no real risk of any adverse claim to the title: Williams, Contract for Sale of Land and Title to Land (4^th edn) 547.  Thus handing over of original title deeds and documents (or at least those which relate exclusively to the property being sold) is a necessary and integral part of the vendor’s obligation in a conveyancing transaction.  This right, however, may be excluded by agreement, as in the case of the Defendant’s purchase from Hera Yeung, under the terms of the General Conditions for Sale. 

18.  In the present case, the Defendant’s obligation under the Formal Agreement was to give, prove and show good title to the Property in accordance with section 13 of the Conveyancing and Property Ordinance, Cap 219 (“CPO”).  Under section 13(1), the Plaintiffs as purchasers are entitled to require production as proof of title to the Property the title deeds in question.  Under section 13(2), it is sufficient to produce an attested or certified copy.  However, as explained by Yuen J, as she then was, in Yiu Ping Fong & Anor v Lam Lai Hing Lana at 482, the effect of section 13(2) is to facilitate the proving of title and does not exonerate the vendor from producing at completion the originals of such title deeds and documents.  I entirely agree with that view and emphasise the importance that handing over of title deeds is a necessary and integral part of a conveyancing transaction. 

19.  The Defendant relies on Clause 10 of the Formal Agreement as relieving him of the obligation to produce the original title deeds by producing a statutory declaration accounting for their loss.  That clause provides as follows:

“Such of the documents of title as relate exclusively to the Property shall be delivered to the Purchaser.  But if the Vendor cannot produce the originals of the documents of the title relate exclusively to the Property a statutory declaration accounting for the loss shall be produced to the Purchaser before completion.”

Under this clause the basic obligation of the Defendant was to hand over the original title deeds to the Plaintiffs.  If he cannot produce the originals of the title deeds, he has to explain their loss by a statutory declaration.  The statutory declaration made by the Defendant only stated that apart from the various orders listed therein, Messrs Chan & Chuk, the solicitors who had conduct of the sale pursuant to the Order for Sale could not obtain any other title documents from Hera Yeung.  It does not give an account of the steps taken by Messrs Chan & Chuk in seeking to obtain the title deeds from Hera Yeung.  It does not even allege that Hera Yeung had lost or destroyed the title deeds or to the best of the knowledge of Messrs Chan & Chuk or the Defendant that the title deeds had been lost or destroyed.  In short, the Defendant simply says he bought the Property without the title deeds that he did not have possession of the title deeds and did not know where they are. 

20.  The present case is essentially similar to, if not on all fours with, Yiu Ping Fong & Anor v Lam Lai Hing Lana.  In that case, the title of the property was first assigned by the developer to Lin, who in turn assigned the property to her daughter Chiu.  Chiu then assigned the property to the defendant.  Chiu made a declaration in Taiwan to the effect that she purchased the property from her mother and deposited all title deeds with her brother but discovered later on that it only contained a copy of a 1986 assignment but not the original which was requisitioned by the purchaser.  The defendant also made a statutory declaration in Hong Kong that she did not have the original of the 1986 assignment.  Yuen J refused to consider Chiu’s declaration as it was not made in Hong Kong.  She rejected the defendant’s argument that the defendant’s statutory declaration made in Hong Kong was sufficient.  She held at 484 E:

“I cannot accept that proposition.  The purpose of the statutory declaration accompanying a missing title deed is to explain the circumstances in which the deed was lost and to show how the person who ought to have custody of it could not find it despite proper endeavours.  The vendor here can only say that she personally never had the original 1986 assignment.  She cannot of her own knowledge explain the circumstances of the loss because she was not the person who had custody of it.  That was Chiu, and as I have held, there was no valid statutory declaration made by Chiu.”

21.  In England, if the original of a document is destroyed or lost, the vendor is permitted instead to produce secondary evidence of the contents of the documents, its due execution, and the fact that the documents have been lost: see Emmet on Title (19^th edn)at paragraph 5.147; Sihombing & Wilkinson at paragraph VI [100]-[105] and Yiu Ping Fong & Anor v Lam Lai Hing Lana at 484C-D.  This is permissible because if the missing title deeds are proved to have been lost or destroyed, then ex hypothesi the vendor will have delivered all documents of title to the purchaser.  Hence, firstly, the purchaser’s proprietary right to all the title documents in respect of the property will be satisfied.  Nobody else in the world is holding documents which truly belong to the purchaser.  Secondly, and more importantly, there is no risk of the documents of title having been pledged in favour of a third party so as to create an equitable interest which ranks prior to the purchaser’s rights.  If the statutory declaration is made by someone who did not even last had possession of the documents of title, it will achieve neither of these objectives.

22.  Mr Yip, counsel for the Defendant, argues that as the Defendant purchased the Property from Hera Yeung pursuant to an Order for Sale, there is no real risk of any adverse claim against the title of the Property arising from the missing title deeds.  I cannot agree with that submission.  A vendor’s failure to produce title deeds is a suspicious circumstance which calls for enquiry.  A purchaser is deemed to have notice of all prior interests which a reasonable enquiry would have revealed.  He will hold the property subject to these prior interests.  In the absence of an explanation for the missing title deeds, there is always a possibility that the missing title deeds are with somebody else.  Then obviously somebody else is holding the title deeds which should belong to the purchaser and there is a potential risk that the missing title deeds might have been pledged to another person before the sale to the Defendant.  This risk is accentuated by the fact that on the face of the land search record, Hera Yeung purchased the Property in 1993 without any mortgage, yet he was unable to discharge his debts in the order of $150,000 in 2003 and 2005.  He was most likely not in a good financial position.  The risk that he might have pledged the missing title deeds is a very real one.

23.  Furthermore, the risk of adverse claim to the title of the Property is only a minor point.  The right to title deeds upon a conveyance of property is a proprietary right.  Handing over the original title deeds is a necessary and integral part of a conveyancing transaction.  As was held in Yiu Ping Fong & Anor v Lam Lai Hing Lana at 484I-485A, if the purchasers were told that the title deeds would not be handed over on completion, the purchasers were entitled not to complete unless provided with satisfactory evidence that the missing title deeds were lost and unlikely to re-emerge.  The approach of a willing purchaser and a willing vendor, both possessed of reasonably robust common sense and intending to see the transaction through to completion as in Mexon Holdings Ltd v Silver Bay International Ltd [2000] 2 HKC 1 at 8G-H has no application when the vendor cannot even fulfil his basic obligation of producing the title deeds which is a necessary and integral part of a conveyancing transaction.  A purchaser of a property is entitled to the interest in the property purchased and the original title deeds as evidence of that interest and nothing less.

24.    Accordingly, I am satisfied that this set of requisitions has not been satisfactorily answered by the Defendant. The Defendant acquired the Property (probably well below the market price) and contracted to waive his proprietary right to the original title deeds.  He has acquired the Property with a title which may not necessarily be defective but is one which he may have difficulties in showing and proving to his subsequent purchasers.  He cannot force such a title on the Plaintiffs who have not forgone that proprietary right to the title deeds by saying that he did not have the title deeds. 

Whether the requisitions were raised out of time

25.  I have outlined the exchanges between TYL and LKL in paragraphs 7 to 16 above.  LKL alleged that TYL’s requisitions were raised out of time in their letters dated 22 June 2006 and 12 August 2006.  The Defendant relied on Clause 18(a) of the Formal Agreement which provides as follows:

“Any requisitions or objections in respect of the title or request for production of certified copies of documents referred to in Clause 9 shall be in writing and delivered to the Vendor’s solicitors within seven (7) working days after the date of receipt of the title deeds by the Purchaser’s solicitors. Any requisitions or objections further to replies of the Vendor’s solicitors shall be in writing and delivered to the Vendor’s solicitors within seven (7) working days after the date of receipt of Vendor’s solicitors’ replies by the Purchaser’s solicitors otherwise the Purchaser shall be deemed to have waived all requisitions and objections of title (in which respect time shall be of the essence).”

26.  There is no dispute that when the Missing Title Deeds Requisitions were first raised on 26 May 2006, they were made within time.  Within two days of LKL’s reply of 19 June 2006 that the Defendant acquired the Property from Guardian PML and did not have the original title deeds, TYL objected.  TYL replied on 21 June 2006 as follows:

“First of all, the name of the Vendor in Assignment Memorial No 05102500660088 (“the Assignment”) is Yeung Wai Yin Hera but not Guardian Property Management Limited (“the Manager”).  Please clarify.  Secondly, it is expressly provided in Clause 8 of Agreement for Sale and Purchase dated 12th May 2006 that your client shall give good title to the above property.  It does not matter if your client acquired the above property from the registered owner or from the Manager.  We repeat and maintain our requisition.”

On 22 June 2006 LKL replied to TYL as follows:

“First of all, your requisitions raised (formulated in an entirely different form from your previous one) are new requisitions raised out of time and therefore will not entertain.  Guardian Property Management Limited, as chargee exercising power of sale had been empowered by the Court (through Mr Chan Siu Fan, Guardian’s solicitors) to conduct the sale (including execution of the Assignment on behalf of Yeung Wai Yin Hera) pursuant to the Order for Sale dated 8th June 2004 (“the said Order”).  With due respect, your purported requisitions to us is neither here nor there.  Secondly, pursuant to clause 10 of the Agreement for Sale and Purchase dated 12th May 2006 made between our respective clients, we will arrange our client to make a statutory declaration that the requested documents are not in our client’s possession.  Hence, we are not duty bound to produce the original title deeds to you.”

27.  The clarification sought on 21 June 2006 in respect of the identity of the vendor was a follow up requisition from LKL’s answer dated 19 June 2006.  That was made within seven days of LKL’s answer.  The second objection that irrespective from whom the Defendant acquired the Property, the Defendant was obliged to give good title to the Property is a repetition of the requisition first raised on 26 May 2006.  I am quite unable to see how either of the requisitions was raised out of time under Clause 18(a) of the Formal Agreement or how the second requisition could be said to have been raised in a different form.

28.  In respect of TYL’s letter dated 9 August 2006, TYL was not raising any requisitions but repeating their position that the LKL had not answered the Missing Title Deeds Requisitions by their letters relying on the decision of Leung Kwai Lin Cindy v Wu Wing Kuen.  It was not a new requisition.  Thus, insofar as the Defendant is alleging that TYL’s requisition raised in their letter of 9 August 2006 was time-barred, it is clear that the Defendant is relying on the second sentence of Clause 18(a).  That sentence, in my view, only applies to any subsequent new requisitions or objections further to the replies of the vendor’s solicitors.  For example, if the Defendant proffered a statutory declaration from Hera Yeung explaining the circumstances of the loss, then requisitions in respect of those circumstances should be raised within seven working days of the reply, otherwise the Plaintiffs shall be deemed to have waived the right to further requisitions and objections.  TYL unequivocally rejected LKL’s argument based on Leung Kwai Lin Cindy v Wu Wing Kuen and maintained that LKL had not satisfactorily answered the requisitions on 21 July 2006.  LKL replied on the same day maintaining their views but advanced no new arguments.  It is absurd to argue, as the Defendant suggests, that every time the answering party repeats its previous answer which had already been unequivocally rejected by the requisitioning party, the requisitioning party must repeat its objections or repeat its requisitions, otherwise he is taken to have accepted the answers or waived his right to object to the answers or that his renewed objections shall be taken to be new requisitions raised out of time.  To do so would be a meaningless waste of time and legal costs. Accordingly, I reject the Defendant’s argument that the Missing Title Deeds Requisitions were raised out of time.

Conclusion

29.  For the above reasons, I find that the Missing Title Deeds Requisitions were not satisfactorily answered. 

THE Charging Orders Requisitions

The requisitions and exchange of correspondence between the parties

30.  This set of requisitions was first raised by TYL on 26 May 2006.  On 19 June 2006, LKL answered that the Property was acquired from Guardian PML and is therefore free from the Charging Orders.  This is, of course, factually incorrect (see paragraphs 43 to 45 below).

31.  On 21 June 2006, TYL observed that nowhere in the assignment by Hera Yeung to the Defendant did it state that the Property had been freed from the Charging Orders and no order vacating or discharging the Charging Orders were found in the documents sent by LKL to TYL.  On 22 June 2006, LKL replied that since the Guardian Charging Order had been enforced, Guardian PML could no longer retain any right to the Property and that all charges due to Guardian PML relating to the Defendant’s purchase had been settled.  There was no mention about the IO Charging Order.

32.  On 27 June 2006, TYL observed that there was never any order discharging the Charging Orders and the Property was sold in the name of Hera Yeung and not Guardian PML. Hence, TYL took the view that Hera Yeung’s title was encumbered by the Charging Orders which remained attached to the Property.  On 28 June 2006, LKL replied that since the Guardian Charging Order had been enforced, both the Guardian Charging Order and the IO Charging Order were discharged by operation of law.

33.  On 3 July 2006, LKL informed TYL that they had been tentatively informed that Messrs Chan & Chuk would have no objection to amend the name of the assignor in the assignment to the Defendant from Hera Yeung to Guardian PML. 

34.  On 4 July 2006, TYL wrote back that they did not agree that the Charging Orders had been automatically discharged by operation of law and requested LKL to provide legal authority for this proposition.  On 6 July 2006, LKL argued that the sale from Hera Yeung to the Defendant was a mortgagee sale under sections 2 and 53 of the CPO and has the effect of assigning Guardian PML’s estate in the Property and discharging the Charging Orders under which the Property was sold.  LKL also referred to its earlier offer to amend the assignor’s name from Hera Yeung to Guardian MPL and said that the offer was deem rejected.

35.  On 7 July 2006, TYL reiterated that no reliance could be placed on sections 2 and 53 of the CPO as the sale from Hera Yeung to the Defendant was not a mortgagee sale and pointed out that the parties to the assignment from Hera Yeung to the Defendant could not be amended.

36.  On 11 July 2006, LKL stated that after the assignment to the Defendant, neither Guardian PML nor the incorporated owners of Wing Fok Centre could retain any interest in the Property.  On 15 July 2006, LKL forwarded to TYL a letter from Messrs Chan & Chuk showing that save for the costs of the discharge, there was no outstanding debt due under the Guardian Charging Order and IO Charging Order.  On 18 July 2006, TYL pointed out that since the costs of the discharge were still secured by the Charging Orders, the Charging Orders were not discharged.

37.  The parties exchanged further arguments.  On 21 July 2006, LKL offered on a without prejudice basis that the Defendant was prepared to discharge the Charging Orders if the Plaintiffs would complete the purchase of the Property.  On 9 August 2006, TYL insisted that the Defendant should prove a good title to the Property rather than to make the discharge conditional upon the Plaintiffs’ undertaking to complete.

38.  On 12 August 2006, LKL informed TYL that the Missing Title Deeds Requisitions raised in TYL’s letter of 9 August 2006 had been time-barred.  But it made a revised offer to discharge the Charging Orders on condition that the Plaintiffs would complete the purchase within seven days upon the delivery of the relevant discharges to TYL.

39.  On 16 August 2006, TYL demanded LKL to prove good title to the Property on or before 18 August 2006 and made time of the essence.  On 18 August 2006, LKL forwarded copies of their exchanges with Messrs Chan & Chuk demanding the costs for discharging the Charging Orders, but no document in respect of the releasing or discharging of the Charging Orders was produced.  On 21 August 2006, TYL stated that the Defendant had been in wrongful repudiation of the Formal Agreement.

40.  The issues raised in these requisitions are whether the Charging Orders had been discharged as at 18 August 2006 after TYL had made time of the essence and, if they were not, whether they were discharged by operation of law under sections 2 and 53 of the CPO.

Whether the Charging Orders had been discharged

41.  The Charging Orders have been registered against the Property which have not been removed by a subsequent discharge as at 18 August 2006.  They clearly constituted a classic encumbrance and a paradigm defect in title.  The question is whether they were discharged by operation of law under sections 2 and 53 of the CPO.

42.  LKL’s argument which is repeated by Mr Yip is as follows.  Under section 52AB(2) of the District Court Ordinance (Cap 336), the Charging Orders shall be treated as equitable charges created by the judgment debtor, i.e. Hera Yeung, by writing under his hand.  Mr Man, counsel for the Plaintiffs, does not seek to differ from that view.  Mr Yip argues further that when Guardian PML exercised its power of sale as a mortgagee section 53(1)(b) of the CPO has the effect of discharging the Property from the equitable charges under which the sale is made.  Sections 2 and 53(1) of the CPO provide as follows:

“	2.	In this Ordinance, unless the context otherwise requires –  …
		‘mortgage’ means a security over land for securing money or money’s worth.”
“	53.	Sale by mortgagee
		(1)	Where a mortgagee or receiver sells under an express or statutory power of sale, the assignment shall operate –
			(a)	to assign to the purchaser the mortgagor’s estate in that land, subject to any other mortgage having priority to the mortgage under which the sale is made; and
			(b)	to discharge that land from the mortgage under which the sale is made and any subsequent mortgage.”

Section 53(1)(b) would have the effect Mr Yip contends if the sale by Hera Yeung to the Defendant was a mortgagee sale.

43.  The Property was sold pursuant to the Order of the District Court.  Paragraph 1 of the Order for Sale required Hera Yeung to deliver vacant possession of the Property to Guardian PML unless he paid all sums due and secured by the Charging Order Absolute within 28 days of the service upon him of the Order.  Obviously, the sums due and secured had not been paid, vacant possession of the Property was delivered to Guardian PML and the auction was conducted.  Paragraph 3 of the Order committed the conduct of the sale to the solicitors of Guardian PML.  Paragraph 4 of the Order is pertinent.  It provides:

“Upon such sale of the said Property, the Defendant [Hera Yeung] shall do all acts and things and execute all documents necessary for the vesting of and for conveying the title of the said Property in the purchasers thereof, its or their successors, failing which Mr Chan Shiu Fan, Senior Partner of Messrs Chan & Chuk or the Registrar of the District Court or such other person(s) as may be appointed by the said Registrar be authorized to do all acts and things and execute all conveyancing papers in the Defendant’s place to give effect to this Order.”

44.  Thus pursuant to paragraphs 3 of the Order, the conduct of the sale of the Property was committed to Messrs Chan & Chuk as solicitors of Guardian PML.  Neither Guardian PML nor Messrs Chan & Chuk was vendor of the Property.  They were only authorised to conduct the sale of the Property.  Pursuant to paragraph 4 of the Order, Hera Yeung shall execute all documents to give effect to the Order for Sale, i.e. to give effect to the sale; and if he should fail to execute the necessary documents, Mr Chan Shiu Fan, Senior Partner of Messrs Chan & Chuk or the Registrar of the District Court or such other person(s) as may be appointed by the Registrar shall be authorized to execute the documents.  It is clear from this paragraph that the vendor of the Property was Hera Yeung.  When Mr Chan Shiu Fan of Messrs Chan & Chuk executed the documents necessary to give effect to the sale, he did so not as vendor but as the person authorised by the Registrar of the District Court pursuant to the statutory power of the District Court.  In fact, the Order for Sale did not vest any interest in the Property to Mr Chan Shiu Fan of Messrs Chan & Chuk or anybody.  Mr Chan could have no interest in the Property to convey to the purchaser.  Only Hera Yeung had the interest in the Property to convey to the purchaser.  It is trite law that a charge merely gives the chargee certain rights over the property charged as security for a debt, it does not convey any interest in the property charged and does not involve any change in ownership of the property either at law or in equity: see Megarry & Wade, The Law of Real Property (6^th edn) at paragraphs 19-005 and 10-040.  Thus the effect of paragraphs 3 and 4 of the Order for Sale read together is that the sale of the Property committed to Mr Chan Shiu Fan of Messrs Chan & Chuk pursuant to the Order for Sale was a sale by Hera Yeung, the judgment debtor in that action as owner of the Property and was not a mortgagee sale. 

45.  Furthermore, the Memorandum of Agreement for Sale and Purchase dated 21 July 2005 in respect of that sale was signed by the Defendant as purchaser and by Mr Chan Shiu Fan of Messrs Chan & Chuk, pursuant to the Order for Sale.  Messrs Chan & Chuk also acted as stake holder for the vendor.  Hera Yeung was named as the vendor in the subsequent assignment memorial of the Property to the Defendant.  In view of all these, it is beyond dispute that Guardian PML and Messrs Chan & Chuk only had conduct of the sale pursuant to the terms of the Order for Sale, the vendor of the Property was, nevertheless, Hera Yeung, i.e. the chargor and not the chargee, Guardian PML.  This is further evidence that the sale to the Defendant was not a mortgagee sale.  Section 2 and 53(1)(b) of CPO are therefore inapplicable.

Conclusion

46.  In the circumstances, I am driven to the conclusion that the Charging Orders were not discharged by operation of law as contended by LKL.  I find that the Charging Orders Requisitions were not satisfactorily answered.  The stance taken by LKL was inexplicable.  They were wrong about the law and the facts.  They knew that the Charging Orders had not been discharged.  They knew that there were costs to be paid before the Charging Orders would be discharged.  Yet they persisted in arguing that the Charging Orders were discharged by operation of law.  Until the very last moment, they were still forcing the obligation to discharge the Charging Orders on the Plaintiffs. 

Conclusion

47.  For the above reasons, I am satisfied that the Defendant has failed to answer the Missing Title Deeds Requisitions and the Charging Orders Requisitions satisfactorily.  I therefore grant the Plaintiffs the declarations and orders sought in paragraphs 1 to 7 of their Originating Summons dated 25 August 2006.

48.  Mr Yip argues that the Plaintiffs’ claim is well within the jurisdiction of the District Court and any costs awarded to the Plaintiffs should be taxed on District Court scale.  However, I think it is equally open to the Plaintiffs to adopt the vendor-purchaser summons proceedings in the High Court which offer a speedier, more efficient and possibly cheaper means of disposal.  More costs would probably have been saved by these proceedings than to allow the action to run its full course in the District Court.  Accordingly, it is appropriate for the costs to be allowed on the High Court scale.