HO SO YUNG v. LEI CHON UN

HCMP3476/1997

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. MP3476 OF 1997

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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 Plaintiff seeks declarations that the Defendant, the vendor, has failed to answer satisfactorily requisitions raised in a letter dated 17th April 1997 in respect of the title to the subject property and that good title to the property has not been shown in accordance with the Sale and Purchase Agreement between the Plaintiff and the Defendant dated 30th April 1997 ("the Agreement").

2. The Agreement provides for the sale and purchase of ALL THAT one equal undivided 6th part or share of and in ALL THAT piece or parcel of ground registered in the Sai Kung New Territories Land Registry as the Remaining Portion of Lot No.127 in Demarcation District No.258, Lot No.128 in Demarcation District No.258, Section A of Lot No.162 in Demarcation District No.258, Section B of Lot No.162 in Demarcation District No.258, Section C of Lot No.162 in Demarcation District No.258 and Lot No.222 in Demarcation District No.258 And of and in the messuages erections and buildings thereon known as "WELLDO VILLA" Together with the sole and exclusive right and privilege to hold use occupy and enjoy ALL THAT HOUSE 4 of the said Building ("the Property").

3. The material part of the Agreement regarding title reads as follows :

"7. Titles

The Vendor shall give good title to the Property in accordance with Section 13 of the Conveyancing and Property Ordinance, Cap.219, and prove at his expense and at the like expense shall make and furnish to the Purchaser such certified copies of any deeds or documents of title wills and matters of public record as may be necessary to prove such title..."

The First Requisition

4. The first complaint by the Plaintiff is that the Defendant has not produced the Crown Lease, being New Grant No.3268, or a certified true copy thereof despite the request by the Plaintiff's Solicitors by their letter of 17th April for same. It is not disputed by the Defendant that he has failed to produce New Grant No.3268 or a certified true copy thereof to the Plaintiff. The Defendant's case is that the original New Grant No.3268 is lost, presumably during the Japanese occupation of Hong Kong. The best that the Defendant can do is to produce a document from the Land Registry with the heading "SALES OF CROWN LAND BY PUBLIC AUCTION" and which bears a chop on the top left corner with the following words:

"The original copy of the New Grant was lost and untraceable. The information contained in the copy of this New Grant Register is not an official land record held under the Land Registration Ordinance and is for reference only. The Land Registry does not guarantee the accuracy of the information contained in this New Grant Register."

5. This document is objected to by the Plaintiff as being neither the original New Grant No.3268 nor a certified true copy thereof and the Plaintiff seeks reliance upon section 13 of the Conveyancing and Property Ordinance as well as clause 7 of the Agreement.

6. Mr Wong appearing on behalf of the Defendant accepts that the Defendant has not produced either the original nor a certified true copy of New Grant No. 3268, but argues the matter in this way. Firstly he submits that the copy of the New Grant Register produced by the Defendant is sufficient to answer the Plaintiff's requisition.

7. His argument takes this line. Firstly, he submits that the wording of clause 7 of the Agreement only says that the vendor has to "give good title". Therefore the title documents which the vendor has to produce are only those which are necessary to give good title to the property. In the present case, the Crown Lease having been renewed and extended by statute, namely by the New Territories (Renewable Crown Leases) Ordinance, Cap.152 and by the New Territories Leases (Extension) Ordinance, Cap.150, the new lease being a creation of statute, there is no tangible document which forms the new lease and therefore nothing to be produced by the vendor for the purpose of giving good title. Mr Wong further submits that once the old Crown Lease, namely New Grant No.3268, was deemed to be renewed by Cap.152 on 1st July 1973, from that moment onwards it was only the intangible new lease created by statute which became relevant for the purpose of passing title, not any more the old Crown Lease.

8. Furthermore, Mr Wong seeks to argue that the wording of section 13 of the Conveyancing and Property Ordinance, Cap.219 is such that the production of the Crown Lease is only for the purpose of proving title and he submits that there is no requirement under that section to produce a document (namely New Grant No.3268) which, although once the source of title has since become inoperable by reason of the fact that the old Crown Lease has been renewed and extended by statute.

9. In so submitting, Mr Wong has very fairly and properly pointed out to me that such an argument has already been advanced in the case of Gatewood Ltd. v Silver Noble Investment Ltd. [1992] 2 HKC 473 but has been rejected by Barnett J. in that case. Mr Wong deals with that by saying the judgment of Barnett J. in Gatewood's case is not binding on me and that I should decide the matter anew with regard to the wording of clause 7 of the Agreement and the wording of section 13 of Cap.219.

10. In Gatewood's case, which also concerned the sale of property relating to New Grant 3268, Barnett J. was faced with a similar problem of the lost grant as we are here. There Barnett J. held that it is implicit in section 13 that a purchaser is entitled to see a tangible document and that a new Crown Lease granted by operation of the New Territories (Renewable Crown Leases) Ordinance does not exist as a separate physical entity. The learned judge also held that a purchaser is entitled to see the document which, subject to section 13, contains complete particulars of the terms upon which he will hold land. That document is the old Crown Lease which effectively confers title to the land, although by effluxion of time and operation of law it is superseded by a new Crown Lease.

11. Moreover, Mr Wong says that there is evidence from the New Grant Register to prove not only the terms but also the existence of the lease. He says that the point taken by the Plaintiff is that the Defendant has not produced the Crown Lease, not that the Defendant has not proved its existence or its terms.

12. Let me say at once that having read the judgment of Barnett J. in Gatewood's case and having looked at the wording of both clause 7 of the Agreement as well as section 13 of the Conveyancing and Property Ordinance, I am in total agreement with the decision arrived at by Barnett J. in that case.

13. It cannot be disputed in our present case that clause 7 of the Agreement incorporates section 13. The effect of section 13 has been clearly explained by Patrick Chan J. (as he then was) in the case of Wong Wai Ming v. Tang Tat Chi [1993] 1 HKC 341 at 345 where he said :-

"The first question I have to decide is whether the plaintiff has complied with s.13(1) of (Cap 219). That subsection requires the vendor to produce, inter alia, the Crown Lease relating to the land sold unless the parties agree otherwise. By virtue of sub-s (2), a certified true copy is also acceptable. My understanding of the position is as follows. First, what is required by the subsection is, as Barnett J quite rightly held in Gatewood Ltd. v. Silver Noble Investment Ltd., supra, a tangible document. Second, that provision requires production of the Crown Lease or a certified true copy thereof, and not any other substitute, unless the contrary intention is expressed by the parties in the sale and purchase agreement. Thus, in Gold Check Investments Ltd. v. Star Investment Ltd., supra, Godfrey J refused to accept in lieu of the Crown Lease (or a certified true copy thereof) a copy of the memorial filed with the Land Office for the purpose of registration, even though it was plainly the case that the land in question was sold by auction to the original lessee. Third, notwithstanding the position at common law, s.13(1) imposes upon the vendor a statutory obligation to produce the Crown Lease unless otherwise varied by agreement. This obligation on the part of the vendor is related to and indeed part of his obligation to prove title. But the two obligations must not be confused. This point was made by Deputy Judge Findlay in Chan Kam Sing & Anor v. Lam Ping Ping (MP 3276/89, unreported). In that case, the vendor could not supply a certified copy of the Crown Lease because the original had been mislaid by the Land Office. An uncertified copy of a document purporting to be the Crown Lease was not accepted. The learned judge, distinguishing the Halifax case, held that the court could not dispense with the requirement under s.13(1), I would respectfully agree. While secondary evidence may be adduced to discharge the obligation to show good title if certain documents are lost, it cannot do away with the obligation to produce the documents if the statute so stipulates. The principle in the Halifax case therefore has no application when it comes to compliance with the statutory requirement. If the Crown Lease or a certified true copy thereof is not produced, no amount of secondary evidence can suffice for the purpose of complying with s.13(1)."

14. It is eminently clear from the above cited passage that under section 13 of the Conveyancing and Property Ordinance, Cap 219, the statutory obligation upon a vendor to produce the Crown Lease or a certified true copy thereof can only be dispensed with by agreement between the parties. Therefore where, as in our present case, clause 7 of the Agreement incorporates into the Agreement section 13, it is incumbent upon the Defendant to produce the Crown Lease. This coupled with the decision of Barnett J. in Gatewood's case, with which I have indicated my agreement, makes it such that the failure by the Defendant to produce New Grant No.3268 or a certified true copy thereof to amount to a failure to show good title to the Property in accordance with the said Agreement.

15. In this case, it must have been known to the Defendant or his then solicitors acting for him in the sale of the Property, that New Grant No.3268 has been lost and that a certified true copy could not be obtained. Clause 7 of the Agreement ought, in those circumstances, to have been drafted differently from the way that it actually was so as to show expressly a contrary intention than what is stated in section 13 thereby avoiding the obligation upon the Defendant to produce New Grant No.3268 or a certified true copy thereof. Had that been done, the Defendant would not be in the position he is in now.

The Second Requisition

16. The second complaint by the Plaintiff relates to the failure of the Defendant to produce reasonable proof of due execution of an Assignment dated 14th March 1977 (the Assignment) by Tsang Foun Investment Co. Ltd. ("the Company") relating to the Property.

17. Clause 49 (a) of the Memorandum and Articles of Association of the Company provides that all documents effecting the sale of any property of the Company or any mortgage or charge of any property of the Company and every document requiring the Seal of the Company shall be deemed to be properly executed if sealed with the Seal of the Company and signed by the Managing Director or any two Directors or one Director with such other person or persons as the Directors shall from time to time appoint.

18. The Assignment was sealed with the Seal of the Company and signed by a Mr Tsang Foun who was stated on the Assignment to be a 'director' of the Company but not described therein as the Managing Director.

19. By letter of 13th June 1997, the Plaintiff's solicitors, after pointing out the relevant facts relating to this matter of the execution of the Assignment and the provisions of clause 49 of the Articles of the Company, requested the Defendant's then solicitors for documentary evidence to prove due execution. The Defendant's solicitors replied by letter of 14th June 1997 stating that since the Assignment was over 15 years from the date of the Sale and Purchase Agreement signed by their respective clients, the same was deemed to be executed.

20. The Plaintiff's complaint is that even if the Defendant can prove due execution by the Company, which they have failed to do, that answer given by the Defendant's then solicitors is an insufficient answer. In that respect, says the Plaintiff, the Defendant has failed to prove a good title.

21. On the other hand, Mr Wong submits that the Plaintiff's complaint in this respect is wholly misconceived. He argues that once it is shown that clause 49 of the Articles of the Company gives the power to the Managing Director to sign alone, then it must be assumed that the Company has clothed Mr Tsang Foun with the authority of Managing Director to sign on behalf of the Company, notwithstanding that he was not so described in the Assignment, and therefore it was not open to the Plaintiff to challenge the internal management of the Company or Mr Tsang's authority.

22. I am unable to accept this argument advanced by Mr Wong for the following reasons. Firstly, section 23 of the Conveyancing and Property Ordinance, Cap 219 states:-

"An instrument appearing to be duly executed shall be presumed, until the contrary is proved, to have been duly executed."

The word "appearing" in that section must surely indicate that on the face of the instrument it should be shown to be duly executed. In the present case, the description in the Assignment of Mr Tsang Foun merely as director, does not, in the light of clause 49 of the Articles of the Company, make the Assignment appear to be duly executed. If anything, it makes it appear that the Assignment was not duly executed.

23. Secondly, the view that I have taken above is supported by the decision of Cheung J. in the case of Li Ying Ching v Air-Sprung (Hong Kong) Ltd. [1996] 4 HKC 418 where in a similar situation, a limited company, being the second confirmor to an assignment, executed the document by affixing its common seal onto it and having it signed by one Judy Hsu described therein as its director when its Articles of Association provides that every document should be deemed properly executed if sealed with the company seal and signed by the chairman of the Board singly or by any two directors jointly. Upon the plaintiff in that case taking out a vendor and purchaser summons contending that the assignment was not duly executed, the defendant argued that section 23 of the Conveyancing and Property Ordinance presumes due execution until the contrary is proved. It was held by Cheung J. that the assignment was not valid due to non-compliance of the memorandum and articles of association. Moreover Cheung J. held that section 23 had no application because Judy Hsu was not described as chairman of the board of the second confirmor in the assignment and that it would be stretching the ambits of section 23 to an unacceptable width to say that one is entitled to presume that she was qualified as chairman and in fact was appointed as chairman and the plaintiff was not entitled to raise requisitions on her appointment.

24. Coming back to our present case, if the Defendant says that Mr Tsang Foun signed as the Managing Director, it is for the Defendant to show by proper evidence that he signed as the Managing Director. This the Defendant has failed to do.

25. Moreover, the obligation on a vendor to show good title included the obligation to answer requisitions satisfactorily. If requisitions were not answered satisfactorily, it did not matter that the vendor had a good title to the property or not (see Active Keen Industries Ltd v Fok Chi Keong [1994] 2 HKC 67). The answer by the Defendant's then solicitors that the Assignment was over 15 years from the date of the Agreement is not a sufficient answer. It is clear from the decision by the Court of Appeal in Lo Shea Chung v Lo Hung Biu [1997] 2 HKC 723 that section 13 (1) of the Conveyancing and Property Ordinance did not preclude a purchaser from showing from a source other than the vendor that there was a possible defect in the pre-intermediate root of title, that the purchaser was entitled to raise requisitions as to title thereon, whereupon it became the duty of the vendor to show good title.

26. In the present case, nothing was done by the Defendant or his then solicitors to prove that Mr Tsang Foun was the Managing Director of the Company when he signed the Assignment or that he signed as such. Moreover the answer given by the Defendant's then solicitors did not sufficiently answer the requisition raised by the Plaintiff's solicitors.

27. For all the reasons given above, the Defendant has failed to answer sufficiently on both the requisitions raised by the Plaintiff and thereby has failed to show good title to the Property in accordance with the Agreement.

28. In the circumstances I make the following orders:-

1. A declaration that the Plaintiff is entitled to rescind the Agreement;

2. The Defendant do refund to the Plaintiff the sum of HK$750,000.00 being the amount of deposit and part payment paid by the Plaintiff to the Defendant pursuant to the Agreement and interest on the said sum of HK$750,000.00 at judgment rate from the date of service of the Originating Summons to date of payment;

3. The Defendant do pay to the Plaintiff the sum of HK$206,250.00 being the stamp duty paid by the Plaintiff in respect of the Agreement;

4. The Defendant do pay to the Plaintiff the legal costs for investigating the title of the Property by the Plaintiff's solicitors.

29. Mr Lin indicated at the end of the hearing that he wished to address me on the question of the Plaintiff having a lien over the Property as part of the relief sought. I adjourn this part of the relief sought sine die with liberty to the Plaintiff to restore should the Plaintiff still wish to pursue it in the light of the aforesaid orders.

30. I will make the usual costs order nisi that costs of the Originating Summons including the costs of the hearing before me be paid by the Defendant to the Plaintiff.

(A.R. Suffiad)

Judge of the Court of First Instance