CHAN SZE YUEN AND ANOTHER v. KAN WING YEE WENDY

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

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JUDGMENT

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1. I have before me a vendor and purchaser summons raising a question under section 12 of the Conveyancing and Property Ordinance, Cap. 219 (the Ordinance).

2. The parties entered into an agreement of sale of the property mentioned above (the property) on 23 December 1996. On 27 December 1996, the defendant's solicitors wrote to the plaintiffs' solicitors saying - "We now send you herewith the title deeds and documents as set out in the Schedule annexed hereto for your approval on behalf of your clients.". The schedule mentioned a document described as "Letter of Nomination Memorial No. 1736694". This letter is dated 25 June 1979, is signed by Poon Yui Man, is addressed to Madam Leung Fung King, refers to an agreement of sale of the property between them dated 8 May 1979, and requests that the assignment be executed in favour of Kong King Shan and Madam Chan Out-Chi as tenants in common in equal shares. It is accepted by Mr Chain, for the defendant, that this letter might be evidence of an interest in the property vested in Poon Yui Man from a resulting trust. The plaintiffs' solicitors asked for evidence to rebut the presumption of a resulting trust. This was not provided.

3. Mr Chain answers this problem in two ways: He says that the plaintiffs were not entitled to raise any requisition on the letter of nomination since it predates the intermediate root of title - the assignment dated 12 July 1979. And, he says, in any event, the defendant has shown good title because any claim by Mr Poon is time-barred under section 20(2) of the Limitation Ordinance, Cap. 347.

4. He argues his first point by relying on clause 6 of the agreement of sale. This clause says-

"The Vendor shall give good title to the Property in accordance with section 13 of the Conveyancing and Property Ordinance at his expense. The costs of verifying the title by inspection and examination including search fees shall be borne by the Purchaser who shall also, if he requires attested or certified copies of any documents in the Vendor's possession relating as well to the Property sold as to other property retained by the Vendor, pay the cost of such copies."

5. In the circumstances of this case, Mr Chain argues, section 13 of the Ordinance requires only that proof of good title be given back to the assignment of the whole estate and interest in the land not less than 15 years before contract of sale; that is, an assignment dated 12 July 1979.

6. Clause 30(b) of the agreement incorporates Part A of the Second Schedule to the Ordinance, subject to any conflict being resolved in favour of the specific terms of the agreement. Clause 9 of that Part says -

"The vendor shall give good title to the property. The vendor shall prove his title to the property at the vendor's own expense and shall at the like expense make and furnish to the purchaser such copies of any deeds or documents of title, wills and matters of public record as may be necessary to prove such title. The costs of verifying the title by inspection and examination, including search fees, shall be borne by the purchaser who shall also, if the purchaser requires 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 copies."

7. The difficulty with Mr Chain's argument resting on clause 6 of the agreement is that, although that clause says that the defendant "shall give good title to the Property in accordance with Section 13" of the Ordinance, section 13 has nothing to say about giving title, good or otherwise; that section is concerned with what a purchaser is entitled to require from the vendor as proof of title. I do not know how it is possible to articulate an obligation by reference to a statutory provision that has nothing at all to do with the obligation.

8. It is, however, in my view not necessary to resolve this conundrum. The fact of the matter is that, although the plaintiffs may not have been entitled to require the defendant to produce any document as proof of title earlier than the assignment dated 12 July 1979, she did produce a document that cast doubt on her ability to convey title unencumbered by the interest of a third party. Indeed, the defendant's solicitors were right to produce the letter of nomination; the defendant had a duty to do so. The defendant had actual or constructive knowledge of the possible defect - the document revealing the defect was in the possession of her solicitors - so she is not able to rely on any limiting clause.

9. Mr Chain's second point - that there is no defect because any possible claim by Mr Poon is time-barred - is also not a good one.

10. The property was assigned to Mr Kong King Shan and Madam Chan on 12 July 1979. On 19 June 1981, Madam Chan assigned her share to Mr Kong Shui Cheung. This would have been in breach of trust if Mr Poon was a beneficiary, but that was not the only breach of trust giving rise to a cause of action. On 20 June 1981, Mr Kong Shui Cheung assigned his share to Mr Kong King Shan. On 17 October 1994, the property was assigned to the executor who assigned it to the defendant on 25 March 1995. Another cause of action based on a breach of trust arose on 25 March 1995, and that cause of action is not time-barred.

11. It seems to me, therefore, that the plaintiffs were entitled to ask for evidence to rebut the presumed resulting trust in favour of Mr Poon. No such evidence was produced so the requisition was not properly answered. It follows that the defendant has not shown that she is able to give good title to the property. The plaintiffs are entitled to rescind the agreement and to the return of money paid by them. The plaintiffs claim interest on this money. If the parties are unable to agree on this point, I will hear them further. The plaintiffs have a lien over the property until repayment of this money. The plaintiffs are entitled to their costs incurred in investigating the title to the property.

12. I know of no reason why costs should not follow the event. Accordingly, I make an order nisi that the defendant pay the plaintiffs' costs.