YEUNG KWOK CHEUNG DICKY AND ANOTHER v. LAM YIN HA

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

-----------------

-------------------

-------------------

JUDGMENT

-------------------

1. This is yet another case in which the desire of both vendor and purchaser to complete the bargain between them has been frustrated by the misguided efforts of solicitors unwise enough to have accepted instructions to act for both parties.

2. By an Agreement dated 18th April 1989 made between the defendant vendor and the plaintiff purchasers, the vendor agreed to sell and the purchasers agreed to buy the following property: -

"ALL THAT one equal undivided 136th part or share of and in ALL THAT piece or parcel of ground situated lying and being at Kowloon Hong Kong and registered in the Land Office as KOWLOON INLAND LOT NO. 2078 And of and in the; Messuages erections and buildings thereon known and at the date hereof as "LA BELLE MANSION" ("the said Building") TOGETHER with the right to the exclusive use occupation and enjoyment of ALL THAT FLAT A on the MEZZANINE FLOOR of the said Building (which said Flat is more particularly shown and coloured Pink on the Plan annexed to an Indenture of Assignment registered in the Land Office by Memorial No. 480933)."

3. The vendor's address was given in the agreement as "Flat A on the Mezzanine Floor of La Belle Mansion, Nos.118-120 Argyle Street, Kowloon, Hong Kong". The purchase price of the property was to be HK$770,000.00. It was to be paid in the following manner: -

(The total amount of the deposit was therefore HK$80,000.00.)

4. The purchase was to be completed at the offices of the solicitors named in the Agreement on or before 15th May 1989. Time was in every respect to be of the essence of the Agreement. The vendor undertook to make a good title to the property at her own expense. The solicitors named in the Agreement were instructed to act both for the vendor and for the purchasers. The Agreement contained the following Clause 6, which is material to the problem I have to consider: -

5. The root of title offered (it was not specified in the Agreement) was an indenture dated 10th March 1965 and made between Lee On Construction Company Limited as vendor and Leung Hon Kit as purchaser. The building of which the premises, the subject of the Agreement, formed part, was a building built by the vendor. In the indenture the property thereby assigned was described in the following terms :

"ALL THAT one equal undivided one hundred and thirty sixth part or share of and in ALL THAT piece or parcel of ground situated Kowloon aforesaid and registered in the Land Office as KOWLOON INLAND LOT NUMBER TWO THOUSAND AND SEVENTY EIGHT And of and in the Messuage or tenements and other erections and buildings thereon known as "LA BELLE MANSION" Together with all rights of way (if any) and all other rights privileges easements and appurtenances thereto belonging And all the estate right title interest property claim and, demand of the Vendor therein and thereto except and reserved as n the said Crown Lease is excepted and reserved..... the premises were assigned to the purchaser or the residue then on expiry of the Crown Lease SUBJECT (except as regards FLAT A on the MEZZANINE FLOOR thereof) to the existing lettings and tenancies therein (if any) AND SUBJECT to and with the benefit of a Deed of Mutual Covenant dated 2nd November 1964."

The indenture further witnessed that, in pursuance of the agreement therein recited, the vendor granted to the purchaser: -

"full right and privilege to hold use occupy and enjoy to the exclusion of the Vendor and others the co-owners (if any) from time to time of the said Kowloon Inland Lot No. 2078 ALL THAT FLAT A on the MEZZANINE FLOOR of the said messuage or building which is more particularly shown and coloured Pink on the Plan hereto annexed."

The plan annexed to the indenture shows, under the reference KIL No. 2078, a plan of the upper ground floor of premises in Argyle Street described as follows:  "Flat A of Upper Ground Floor". The area was mentioned as 584 sq. ft. The area coloured pink is described on the plan as office A and constitutes the part of the floor on the Northeast corner of the building fronting onto Argyle Street. There are other units described as offices shown on the plan also fronting onto Argyle Street and bearing reference letters from B to F (inclusive).

6. The purchaser under the indenture of 10th March 1965 died on 23rd August 1967. Letters of Administration to his estate were granted to Tang Yuet Sim and Leung Hoi Shing on 31st March 1970. In the Schedule of property annexed to the Letters of Administration, there is included an Item 7 "Land & Buildings"; Item (e) of which is described in typescript as "No. 120-B, Argyle Steet, Mezzanine Floor". (There appears also an insertion in manuscript indicating in relation to this item that it refers to "136th part or share of and in Kowloon Inland Lot No. 2078".)

7. For some reason, there was a re-registration of the original grant in which the item (e) to which I have referred was similarly described.

8. On 11th June 1977, a Deed of Family Arrangement was entered into between (1) Tang Yuet Sim. (2) Leung Tit Shing, (3) Leung Hoi Shing, (4) Leung Kwei Shing, (5) Leung Yuet Shing, (6) Leung Kam Shing and (7) Leung Kwong Shing. In the Deed of Family Arrangement, it was recited as follows. Leung Hon Kit had died intestate on the 23rd August 1967, leaving Tang Yuet Sim, his widow and issue surviving. Letters of administration to his estate were granted to his widow and Leung Hoi Shing (the 2nd child) on 31st March 1970. It was recited that, at the date of his death, the deceased was the registered owner of, among other properties "1/136th part or share of and in Kowloon Inland Lot No. 2078 (No. 120B, Argyle Street, Mezzanine Floor, Kowloon, Hong Kong)." The Deed of Family Arrangement made provision for dealings with the properties therein mentioned with the details of which I am not concerned, but which were such as needed the consent of all those beneficially interested in the deceased's estate'. The Deed of Family Arrangement had the effect of confirming those consents.

9. Pursuant to the Deed of Family Arrangement, an Assignment was made on 4th July 1977 between Tang Yuet Sim, the widow and Leung Hoi Shing, the 2nd child, both of whom were the personal representatives of the deceased of the one part and Leung Hoi Shing of the other' part. The sale which this assignment effected was a sale by personal representatives to one of themselves. This explains the need for the Deed of Family Arrangement and the reason why the Deed of Family Arrangement is one of the documents of title.

10. In the assignment of 4th July 1977, it was recited that by virtue of divers mesne assignments acts in the law and events and ultimately by an Assignment dated 10th March 1965 (this is the root of title) all that one equal undivided 136th part or share of and in the said Lot and of and in the buildings thereon together with the full and exclusive right and privilege to hold use occupy and enjoy all that Flat  hereinafter more particularly described in the said buildings became vested in the deceased. The Deed of Family Arrangment was also recited and in particular, it was recited that it was agreed thereby that the said premises should be sold to the purchaser at the price of HK$80,000.00.

11. The assignment witnessed that the vendors therein named as personal representatives assigned to the purchaser "all that one equal undivided 136th part or share of and in all that piece or parcel of ground situated lying and being at Kowloon aforesaid and registered in the Land Office as Kowloon Inland Lot No. 2078 and of and in the messuage or tenements and other erections and buildings thereon now known as "La Belle Mansion" together with the full and exclusive right and privilege to hold use occupy and enjoy all that Flat A on the Mezzanine Floor of the said La Belle Mansion as shown and coloured pink on the plan annexed to the said assignment."

12. A memorial was duly registered of the assignment of 4th July 1977 and in this the property was described as follows :-

"One equal undivided 136th part or share of and in Kowloon Inland Lot No. 2078 (Flat A on the Mezzanine Floor of La Belle Mansion):"

13. On 21st February 1987, Leung Hoi Shing, the purchaser under the assignment of 4th July 1977, himself assigned the property to one Tai Lee Yung. In the Schedule to that assignment, the property was described as follows :-

"All that one equal undivided 136th part or share of and in all that piece or parcel of ground situate lying and being at Kowloon Hong Kong and registered in the Land Office as Kowloon Inland Lot No. 2078 and of and in the messuages erections and buildings thereon known at the date hereof as 'La Belle Mansion' ('the said building') together with the right to the exclusive use occupation and enjoyment of all that Flat A on the Mezzanine Floor of she said Building (which said Flat is shown and coloured pink on the Plan annexed to an Indenture of Assignment dated 10th March 1965 and registered in the Land Office by Memorial No. 480933."

14. By an assignment dated 5th January 1989, Tai Lee Yung, the purchaser under the assignment of 21st February 1987, himself assigned the property to Lam Yin Ha, the present vendor. In this assignment, the property was described in terms identical with those contained in the description of the property set out in the assignment of 21st February 1987. The last document (other than correspondence) to which I need to refer is a search made of the Registrar General's Department Land Office on 10th July 1989 in connection with the transaction with which the Court is now concerned. This is a computer printout which gives property particulars by reference to Lot No. Kowloon Inland Lot No. 2078, a share of the Lot as 1/136 and as the address "Flat A on Mezz. Floor La Belle Mansion, Nos. 118, 118A, 118B, 120, 120A and 120B, Argyle Street and Nos. 5, 5A, 7 and 7A, Julia Avenue, Kowloon". It is not entirely clear on the material before me why there is a reference here to Julia Avenue, Kowloon, but it does seem likely that the building La Belle Mansion was built on the site of the properties in Argyle Street and the properties in Julia Avenue bearing the numbers to which it refers.

15. It is against this background that I return to consider the dispute which has arisen in the present case. The dispute arises because the solicitors (who had, as I have said, been instructed to act for both parties) noticed that in the Letters of Administration to the estate of the original purchaser who bought when the building had been erected, and in the Deed of Family Arrangement under which one of the personal representative was authorised to purchase the property from himself and his fellow personal representative, the property had been described by reference to one of the buildings on Argyle Street, namely 120B, on which the building La Belle Mansion had been erected. There was, however, no reference to this property as being Flat A. It must, I suppose, have occurred to them that this might raise difficulties for their purchaser client in the future; for it might be that; some subsequent purchaser from him would take the point that the property agreed to be sold could not be sufficiently identified for convenyancing purposes with the property comprised in the root of title, there being this discrepancy in these two intermediate documents of title between the description therein contained and the original description given to the property;

16. In those circumstances, the solicitors thought it sensible to make inquiries and take steps to try and ensure that the property described as Flat A in the Agreement for sale to their purchaser clients was the same property as that described by reference to 120B in the two documents of title in question, namely, the Letters of Administration and the Deed of Family Arrangement. They made inquiries of other firms of solicitors in this connection; but got no satisfactory answer.

17. It will be recalled that the date for completion of the Agreement for Sale and Purchase was 15th May 1989. The difficulties envisaged by the solicitors appear to have been the reason for an extension of that date to 30th May 1989, which was subsequently arranged. However, even by the extended date, it had become apparent that the solicitors had made no progress in the process of identification which had apparently concerned them. In the result, they felt, no doubt, that the matter had to be brought to a head in one way or another. They wrote letters to the vendor and the purchaser in identical terms on 16th June 1989. They informed the vendor and the purchaser that there are "some requisitions raised in relation to the captioned property", which they described as Flat A Mezzanine Floor, La Belle Mansions, Nos 118-120 Argyle Street, Kowloon. They referred to the letters which they had sent and the replies which they had received and they told their clients, by which I mean both the vendor and the purchasers, "Your kind attention to this matter' shall be highly appreciated". What on earth it was that the vendor and the purchaser were supposed to do on receipt of this extremely unhelpful letter, I do not know.

18. On 30th June 1989, there having been (inevitably) no further progress in the matter, the solicitors took the bull by the horns. They wrote to the vendor, presumably in their capacity as solicitors acting for the purchasers. They referred to their letter of 16th June 1989 and told the vendor that the requisitions raised in relation to the property have not yet been clarified. They then added this :

"Under the Agreement for Sale and Purchase, completion of the sale and purchase is scheduled to take place on the 30th instant. Due to the fact that the title deeds and documents relating to the above property is defective and our requisitions in that regard unanswered, the Purchaser has decided not to complete the sale and purchase, and we would also like to put on record that you failed even to attend our office on the scheduled completion date. We are now instructed by the Purchasers to demand you to return forthwith the deposit money already paid by the Purchasers under the Agreement for Sale and Purchase dated 18th April 1989 (Part of HK$85,000.00 and the Supplementary Agreement dated 15th May 1989 (part of HK$150,000.00)(which had been the consideration for extending the date for completion) both made between your goodselves as the Vendor of the one part and the abovenamed as purchaser of the other part under clause 6(b) of the said Agreement for Sale and Purchase."

They again added, even more unhelpfully than before :-

"Your prompt attention to this matter shall be much appreciated."

What the vendor was supposed to do on receiving this letter, other than, of course, going to other solicitors (a suggestion not made in the letter of the 30th June 1989 itself) heaven only knows.

19. However, by this letter, the solicitors acting on behalf of the purchaser, did purport to rescind the Agreement for sale and purchase pursuant to the provisions of clause 6(b). The question I have to decide narrows down to this : Was the letter of 30th June 1989 effective to produce that result? If it was, then of course the purchaser is entitled to a declaration that the Agreement has been rescinded and to the return of his deposit. I am therefore brought back to a further consideration of clause 6(b) of the Agreement for sale and purchase.

20. I shall begin by referring briefly to clause 6(a) which I have set out above. It is, to my mind, perfectly obvious that the provisions of clause 6(a) are apt, and only apt, to deal with a case in which the vendor and the purchaser are represented by separate solicitors. The idea, that the purchaser is to make and insist on objections or requisitions with which the vendor might be unable or unwilling to comply and that the vendor should then be at liberty to give to the purchaser or his solicitors not less than 7 days' notice in writing to annul the sale, cannot work where the parties are represented by the same solicitors. Yet clause 6(b) contains a conscious recognition that the same firm of solicitors are going to act for both vendor and purchaser.

21. What is supposed to happen, as it seems to me, is this. First, the solicitors, acting as solicitors for the vendor, will receive the title deeds from the vendor. Second, they will consider the title. Third they will come to a view whether or not they are satisfied with the title. (They may be able to come to this view immediately, or they may find it necessary to make further inquiries of third parties before they can be so satisfied. In either event, sooner or later, they have to decide whether or not they are satisfied with the vendor's title.) Fourth, if they are not satisfied with the vendor's title, then they are to be at liberty so to inform the purchasers, who will have the rightf to rescind and to recover their deposit:

22. The notion of requisitions being raised by the solicitors which then have to be answered by themselves is so absurd that I fail to see how any workable construction can be placed on clause 6(b) in that connection. The case is not dissimilar in this respect from Smith v. Mansi [1963]l W.L.R. 26. In that case, the solicitors had acted for both purchaser and vendor. The solicitors appeared to be under the impression that although the parties were not separately represented, the contract, in order to be concluded, had to be "exchanged" between the parties. The idea was that, somehow, there would be an "exchange" of contracts although there was only one solicitor. As Danckwerts L.J. pointed out at pp.32, 33 : "Where there is only one document as the contract and only one solicitor, acting for both parties, the idea of exchange, in my opinion, can only be described as artificial nonsense". To my mind, exactly the same sentiment applies to the idea of requisitions on title raised by a solicitor against himself. It is artificial nonsense and, I would add, dangerous nonsense. Danckwerts L.J. prefaced his judgment by saying this (at p.30) : "This is a shocking example of the trouble and expense which can arise from the employment, under a mistaken idea of saving time and expense by the two parties to a sale, of a solicitor who is already the solicitor of one of the parties." Danckwerts L.J. said that nearly 30 years ago. It appears that there are solicitors practising in Hong Kong (and I suspect some practising in England and Wales) who have still not yet learned this lesson.

23. Giving clause 6(b) the best consideration that I can, and seeing how it is to operate in the present case, I come to the following conclusions. By the date of the solicitors' letter of 30th June 1989, they had advised the purchasers that they were not satisfied with the title offered by the vendor. (I refer in particular to the words the solicitors used "due to the fact that the title deeds and documents relating to the above property is defective".) Having arrived at that conclusion and there is no suggestion that they did so otherwise than in good faith, they were entitled, and, in my opinion, bound, to tell the purchaser that he would be unwise to complete the sale and purchase. This they appeared to have done. The purchasers, as a result, no doubt on the solicitor's advice, decided to rescind the contract. This the purchasers did. The letter of 30th June 1989 was, in my judgment, effective for that purpose. Accordingly, that letter brought an end to the contract; and the purchasers are now entitled to a declaration to that effect, and to the return of the deposit.

24. So far, I have not in this judgment, dealt with the question whether or not the solicitors were right to be concerned about the identity of the property which their purchaser clients were buying. It does not seem to me to be a question which I have to decide, because the solicitors, having come to the conclusion in good faith that the title was defective, were entitled to say so, and to bring about the result that the purchaser was entitled to rescind the contract. But if I did d have to consider the question whether the point as to the identity of the property was well-founded or ill-founded, I would not have the slightest hesitation in deciding that there was nothing in the point at all. It is, as it seems to me, as plain as a pikestaff that the property the subject of each of these instruments of title, including the Letters of Administration and the Deed of Family Arrangement were,and were obviously, one and the same property.  Minor slips or discrepancies of this sort should not be used by solicitors wanting, I suspect, mainly to cover their own position against a future charge of professional negligence, as an excuse for creating unnecessary difficulties in the conduct of conveyancing.

25. So I come to the conclusion that this action must succeed, not on the ground that there was anything in the point taken by the solicitors in relation to the title, but on the ground that, having satisfied themselves, however wrongly, that the title was indeed defective, they had no alternative but to advise the purchaser to rescind the contract and to act on his instructions so to do. I  will therefore make a declaration to the effect that, by the letter of 30th June 1989, the Agreement of sale and purchase dated 18th April 1989 was effectively rescinded; and that the purchaser is accordingly entitled to the return of the deposit. The form of the order should be settled by counsel for the plaintiff (because it does not follow exactly the form of the originating summons) and it should be approved by counsel for the defendant. When the form of order is lodged, I will approve it with such amendments as I think fit. If no further difficulty arises, there will be no need for the parties further to attend. But if the parties are unable to agree on the form of the order, or if the form of the order as settled by counsel does not meet with my approval, the case will be restored to the list for further argument so that the form of order can be finally settled.

26. I will of course hear counsel on the costs of the action, but it may assist if I indicate that as at present advised, I can see no answer to a claim by the purchasers that the costs of the purchasers of this action ought to be taxed if not agreed, and paid by the vendor to the purchasers. I say this not because I regard the vendor as having done anything wrong, which I do not, but simply because it is the usual practice to order, in hostile litigation, that costs must follow the event. Where this judgment leaves the vendor, who has acted perfectly properly, and is an innocent victim of the way in which this conveyancing transaction was handled, is not a matter for me to consider in this action. I will say no more. For the reasons I have endeavoured to state, the plaintiff succeeds.