RECALL INTERNATIONAL LTD v. PANTEN LTD

HCA 1896/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO 1896 of 2012

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D E C I S I O N

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A. INTRODUCTION

1.  This is a dispute concerning a property known as Workshop A, 7^th floor, Morlite Building, 40 Hung To Road, Kowloon, Hong Kong (“the Property”).  I shall call Morlite Building “the Building” herein.

2.  In 2012, there was a series of sales and purchases of the Property:

(1)   From Gold Era Enterprise Limited (“the Head Vendor”) to the defendant.  The provisional sale and purchase agreement was dated 7 February 2012.

(2)   From the defendant to the plaintiff.  The provisional sale and purchase agreement was dated 23 February 2012.

(3)   From the plaintiff to Top Fantasy Limited (“the Sub‑Sub‑Purchaser”).  The sale and purchase agreement was dated 30 August 2012.

The latter two were “confirmor” sales.

3.  Of course, in strict legal terms, the subject of the sales and purchases is certain undivided shares in the Building, with the owner of those shares subject to and having the benefit of the rights and obligations contained in the Deed of Mutual Covenants of the Building dated 31 December 1977 (“the DMC”).  One of those rights is the right to occupy the Property exclusively.  A co‑owner of the Building would also have, and the purchaser would therefore be also purchasing (in the words of the Second Schedule to the DMC):

“Full and free right and liberty to go pass and repass over along the entrances, lobbies, staircases, landings and passages in the said building for all purposes connected with the proper use and enjoyment thereof”.

4.  Under the provisional sale and purchase agreement between the defendant (as the vendor) and the plaintiff (as the purchaser) (“the Agreement”):

(1)   The sale price was stated as HK$13,000,000.

(2)   Completion was to take place before noon on 5 October 2012.  This was also the completion date under the other two agreements for the sale and purchase of the Property.

(3)   “The Purchaser’s solicitors shall have seven working days to peruse the title deeds upon receipt of the same and to raise requisitions or object in respect of the title to the said Premises”.

5.  A total of HK$1,300,000 was paid by the plaintiff to the defendant as deposit.

6.  Title deeds were provided, and requisitions were raised and answered, between solicitors acting for the defendant and the plaintiff (“SHC” and “TYTW” respectively).  No issue arises thereon.

B.    THE REQUISITION

7.  On 12 September 2012, Wealth Treasure Corporation Limited (“WT”), a co‑owner in the Building, commenced an action in the Court of First Instance (HCA 1658/2012) (“the 1658 Action”) against the other co‑owners (including the Head Vendor as the 7^th defendant) and “Persons entering or remaining at the plaintiff’s property without the consent of the plaintiff and other persons trespassing on the said property and preventing the plaintiff from reinstating the external wall” as the 9^th defendant.  The Incorporated Owners of the Building (“the IO”) was not named as a defendant.

8.  In the Statement of Claim specially endorsed on the writ in the 1658 Action, WT alleged that:

(1)   It was a co‑owner of the Building having the right to the exclusive possession of inter alia the external wall of the Building facing Hung To Road (“the External Wall”), and “all those areas not meant for common use of the Building (‘the non‑Common Area’)”.

(2)   In breach of the approved plans of the Building, and/or the DMC, part of the External Wall had been pulled down to create a void (“the Void”), which was being used as an illegal, unnecessary and extra exit of the Building, when it always had a proper, useable entrance/exit.  The pulling down of the External Wall and the creation of the Void was illegal as being a contravention of the approved building plans and/or the Buildings Ordinance.

(3)   Land to which it had the right to exclusive possession, being non‑Common Area, thus became exposed by the creation of the Void and being used as a corridor thereto.  (I shall call the Void and the corridor as “the Subject Entrance”.)

(4)   It wanted to reinstate the External Wall because of inter alia the illegality of the Void but its attempts were being obstructed by the defendants or their agents.

9.  WT therefore asked for an injunction restraining the defendants (and their agents etc) from entering remaining or trespassing on its property at the Building.

10.  On 3 October 2012, i.e. after the period for the raising of requisitions or objections provided for under the Agreement had expired, and two days before the completion date, TYTW sent a letter to SHC as follows:

“We refer to the Property and given to understand from our client that The Incorporated Owners of the captioned Building is involved in a legal proceeding HCA No. 1658/2012 which may result in the owners of the captioned building becoming liable to pay loss or damage or legal costs.

Please give particulars of such litigation including the nature of the claim, the amount involved, the legal opinion on the likely outcome of such litigation and the amount of legal costs that may have to be borne by the owners of the said Building.

All our client’s rights are reserved”.

It seems clear that TYTW’s description of the 1658 Action was not wholly accurate, as the IO was not involved in that action.

11.  On the same date, TYTW received a letter from solicitors acting for the Sub‑Sub‑Purchaser (“TKC”) as follows:

“Meanwhile, it has just come to our notice that a Write [sic] of Summons being Action No. 1658 of 2012 was issued by [WT] and the Head Vendor is the 7^th Defendant. A copy of the said Writ is enclosed herewith. Please inform us how your client is going to resolve the claim before completion so the Property will be assigned to our client free from such claim by [WT].

We reserve our right to raise further requisitions and enquiries”.

12.  It is not very clear to me what was the sequence of the two letters of 3 October 2012 referred to in §§10 and 11 above.  The letter from TYTW did not say that it was told of the 1658 Action by TKC, but by its client.  Further, although the letter from TKC enclosed the Writ, the letter from TYTW did not.  Also, if TYTW had received the letter from TKC when it sent out its letter to SHC, it would have a copy of the Writ which would have informed TYTW that the IO was not a party, but its letter suggested that it was. These matters suggest to me that the letter from TYTW might have been sent out before it received the letter from TKC.  In its Statement of Claim herein, the plaintiff appears to suggest that the letter from TKC came first.  However, nothing turns on this.

13.  On 4 October 2012, the following day, TYTW sent another letter to SHC as follows:

“Further to our letter dated 3^rd October 2012, we now send you herewith copy of Write [sic] of Summons being Action No.1658 of 2012 was issued by [WT] and the Head Vendor is the 7^th Defendant. Please inform us how your client is going to resolve the claim before completion so that the Property can be assigned to our client free from such claim by [WT].

We reserve our right to raise further requisitions and enquiries”.

14.  SHC replied by fax at 7:32 pm on the same date as follows:

“We enclose herewith a copy 3^rd letter of even date from Vendor’s Solicitors, the content of which is self‑explanatory, for your consideration.

We write to put on record that we have not received your draft Assignment and Undertaking up to this moment. As the completion is scheduled on 5^th October 2012. Kindly let us have your draft Assignment and form of undertaking for our approval on behalf of our client without any further delay.

Finally, we stress that our client has proved good title to the Property. Please note that time is of the essence in the Provisional Agreement for Sale and Purchase signed by our respective clients dated 23^rd February 2012 and your client is requested to complete the purchase of the Property on or before 5:00 p.m. 5^th October 2012.

We hereby reserve all our client’s rights under the said Agreement.”  [original emphasis]

15.  The copy of the letter from the solicitors of the Head Vendor (“CL”) to SHC enclosed by the latter’s letter was also dated 4 October 2012 and stated as follows:

“We refer to your fax to us enclosing a letter from [TYTW] of even date. We would like to remind your client that there is no privity of contract between our client and your client’s sub‑purchaser. Our client is not obliged to address on the matters raised by the said solicitors.

Without prejudice to our previous replies to your requisitions and our client’s stance and legal position, we set out the followings for your kind reference:‑

We note that the said solicitors are still dragging on the only outstanding point relating to the case HCA No. 1658/2012. We repeat our previous reply. We stress that the said case comprises only personal claims against the defendants. There does not involve any issues relating to the Property title. On a close review of the pleadings, you would note that the Plaintiff is asking for injunction order against the defendants personally restricting them to use the subject entrance, etc.. There does not give rise to any issues affecting the Property title. For the said reasons, with due respect, we view the said solicitors’ allegations in their said letter are simply groundless.

We repeat the last paragraph of our first letter to you of even date. Your client is contractually bound to complete the present Property purchase by 5:00 p.m. on 5 October 2012.

All our client’s rights are hereby expressly reserved”.

16.  TYTW replied to SHC on the same date as follows:

“We refer to your letters respectively dated 3^rd and 4^th October 2012, the contents whereof are noted.

No doubt you will appreciate that the prerequisite of the subject sub‑sale and purchase is that your client shall sub‑sell to ours the Property free from encumbrances (clause 3 of the Provisional Agreement for (Sub‑)Sale and Purchase dated 23^rd February 2012 duly signed by our respective clients). In view of the legal proceedings HCA No. 1658/2012 as mentioned in our 1^st Letter of even date, it clearly in itself amounts to an incumbrances at law. That being the case, please advise what steps your client/the Head Vendor would take to remove such incumbrances.

In such circumstances, we are not in a position to advise our client to complete the purchase as scheduled until and unless you can give us a satisfactory answer to our requisition. Meanwhile, all our client’s rights are reserved”.

17.  On the following day, 5 October 2012, at 10:24 am, SHC sent to TYTW copies of three letters from CL to SHC “for your reference, the contents of which are self‑explanatory”. 

18.  The first letter from CL was dated 4 October 2012 and stated as follows:

“We refer to your fax letter dated 4 October 2012 and reply as follows:‑

We are instructed that the subject matter in this legal proceeding concerns about the use of one of the main entrances of Morlite Building by individual owners. The Plaintiff claims that it is the external wall owner and in effect, asks for the subject entrance to be enclosed. The Incorporated Owners is not a defendant. Our client together with other individual owners who are defendants have been defending the claim vigorously. We are instructed that the Plaintiff’s case is unmeritorious. Put it to the highest, it is a personal claim against the Defendants relating to the use of the subject entrance but not relating to the Property title at all.

We also repeat that it is cardinal rule for conveyancing practice that a vendor should not be called upon to prove a negative. It is not within the scope of a vendor’s duty to rule out the risk of unmeritorious litigation against him. Based on the aforesaid, we view that the Property title shall not be affected by this legal proceeding and that our client is not obliged to deal with your request.

We trust that all your requisitions have been answered by us satisfactorily.  Our client is willing, ready and prepared to proceed for completion.  Your client’s failure to complete the present sale and purchase in accordance with the Provisional Agreement entered into by our respective clients herein by 5:00 pm on 5 October 2012 would amount to breach of the said Agreement on the part of your client, and in which case, our client shall be entitled to forfeit all deposits paid and claim further damages, etc..”  [original emphasis]

19.  The second letter from CL is not relevant to present purposes.  The third letter from CL is in fact the same as the one copy of which SHC had sent to TYTW on 4 October 2012 (§15 above).

20.  TYTW replied to SHC on 5 October 2012 as follows:

“We refer to your letters dated 4^th and 5^th October 2012 together with their 3 letters and the enclosures addressed to you from the Head Vendor’s Solicitors, [CL].

We would like to draw your attention to the cases of Yeung Sau Chuen Sammy v. Chung Chun Ting (1993) MP No. 4080/92 and Join Winner Investment Ltd. v. Po Wai Ching HCA 10169/97, our client is entitled to have 7 working days after the date of our receipt of the relevant/outstanding title documents/reply to peruse and consider the same. Pursuant to the case of Active Keen Industries Ltd. v. Fok Chi Keong [1994] 1 HKLR 396(CA), your client is also obliged to answer our title requisitions within a reasonable time to enable us to consider your replies and to enable our client to satisfy as to the title offered, get money ready and complete on the date fixed for completion.

In view of the above, completion of the sub‑sale and purchase of the Property cannot take place on today and our client have no alternative to postpone the date of completion UNTIL AND UNLESS you can give us a satisfactory answer to our requisition.

We reserve our right to raise further requisitions on title and all our client’s rights hereunder are hereby reserved”.

21.  At 12:11 pm on 5 October 2012, SH faxed a letter to TYTW in the following terms:

“We refer to your letter dated 5^th October 2012 and enclose herewith copy letter from [CL] dated 5^th October 2012 for your reference, the contents of which are self‑explanatory”.

22.  The letter from CL a copy of which was so enclosed, and dated 5 October 2012, stated as follows:

“We regret that we have not yet received your draft Assignment and Completion Undertaking Letter up to present. We hereby give you this ultimatum. We demand you to honour your firm’s undertaking to return all title deeds and documents of the Property to us by 5:00 p.m. today unless we receive your draft Assignment and Completion Undertaking Letter by 1:30 p.m. today.

Without prejudice to our previous replies to your requisitions and our client’s stance and legal position, we set out further comments on [TYTW’s] letter dated 4 October 2012 for your kind consideration:‑

1. Without disrespect to the said solicitors, we must point out that their present allegations are groundless. You could see that they have no legal authority in support of their case. Their client shall not be entitled to rescind from the present sub‑sale and purchase of the Property.

2. The case of HCA No. 1658/2012 (“the Case”) is now only at the preliminary stage where there being freshly issued the Writ on 12 September 2012 by the Plaintiff therein. There is no Court decision or judgment at all.

3. As shown in the Statement of Claim, the Plaintiff’s prayers are only relating to personal claims against the Defendants. The lawsuit does not affect the Property (i.e. Workshop A, 7/F, Morlite Building) and does not involve any claim to the Property or any right or proprietary interest over it.

4. On reviewing closely the Plaintiff’s prayers, you would note that the Plaintiff’s cause of action is trespass to the Plaintiff’s private property.

5. A lawsuit or lis pendens affecting land must be one that involves a claim to the land or some right or proprietary interest over it. There are ample of legal authorities upholding this legal position. For instances, the case of Lau King Ting v Cheng Miu Har [2008] 4 HKLRD 563, Heung Yuk Han v Winnie Choi [2009] 2 HKLRD 233, Photo Production Ltd v Securicor Transport Ltd [1980] AC 827, 849 and Re Ching Yue Chong (decd) [1997] 3 HKC 548. In law, the Case is not qualified as any lis pendens affecting the Property.

6. Even if the Case was such lis pendens, which is denied, it is not registered in the Land Registry against the Property, as shown on the update land search of the Property. It is trite law that any lis pendens which is not registered will not bind any purchaser of mortgagee of the estate intended to be thereby affected. Please refer to Judith Sihombing and Michael Wilkinson: Hong Kong Conveyancing Law and Practice 1(A) VI[61], Butterworths.

Based on the aforesaid, the only outstanding point which relates to the Case as concerned by the said solicitors shall not constitute any valid requisition on the Property title.

We repeat that all your requisitions have been answered by us satisfactorily. Our client is willing, ready and prepared to proceed for completion. Your client’s failure to complete the present sale and purchase in accordance with the Provisional Agreement entered into by our respective clients herein by 5:00pm on 5 October 2012 would amount to breach of the said Agreement on the part of your client, and in which case, our client shall be entitled to forfeit all deposits paid and claim further damages, etc..

All our client’s rights are hereby expressly reserved”. [original emphasis]

23.  At 12:41 pm on 5 October 2012, SHC faxed another letter to TYTW, enclosing a copy of another letter from CL “for your reference, the contents of which are self‑explanatory”. The letter from CL, also dated 5 October 2012, was as follows:

“We refer to your letter to us dated 5 October 2012.

Firstly, we repeat our 1^st Letter sent to you on even date.

The present Property sale and purchase shall take place today. We stress that all your requisitions have been answered by us satisfactorily at reasonable time before completion. Our client is ready and prepared to proceed for completion as scheduled.

Kindly be reminded that your client is not entitled to any extended completion time unless with our client’s consent. Your attention is drawn to the legal authority of Summit Link Limited and Sunlink Group (Hong Kong) Company Ltd (HCMP No. 2439/1998). Quoting the said Summit Link case, the Court commented that the Purchaser therein ‘begs unwarranted litigation and cannot expect sympathetic hearing’.

All our client’s rights are hereby expressly reserved”. [original emphasis]

24.  TYTW then wrote to SHC on 5 October 2012 as follows:

“We refer to your letters of 4^th and 5^th October 2012 and [CL’s] three letters all dated 4^th October 2012 which were received by us on 10:24 a.m. this morning.

We do not agree with [CL’s] view that it is a personal claim and does not affect title. At common law, title over the land/property, include all rights, interest, privilege, easements or appurtenants over or appertaining to that land/property. Clearly one of the main entrances and the pavement passing through the main entrances are privileges, easements or appurtenants (as the case may be) and the right to use the same is unfettered right of the owner. When the litigation in question if successful against all the owners of the above building, our client will be deprived of the use of such privileges, easements or appurtenants (as the case may be) and therefore the enjoyment of the Property. There is clearly the existence of a risk of losing such privileges, easements or appurtenants (as the case may be) and therefore it does affect title.

That being the case, we hold it that the present proceedings do affect title. We therefore ask your goodselves to propose what remedy your client is prepared to make to rectify the situation.

No good title so far has been proved to our client’s satisfaction. We hereby reserve all our client’s rights in the matter”.

25.  At 3:34 pm on the same date, SHC replied to TYTW as follows:

“We refer to your 2^nd letter of 5 October 2012.

By our letters of 4 October 2012 and 5 October 2012 (enclosing therewith letters from [CL], in which [CL] set out their answers to your requisitions, which we fully adopted), we trust that we have satisfactorily answered all your requisitions. Without prejudice to the aforesaid, we disagree that the alleged privileges, easements or appurtenants, rights, etc. to use the alleged main entrances and the pavement through the same as alleged in your said letter would affect title to the Property. Further or alternatively, we disagree that the said requisition is one which goes to the root of the title.

In the circumstances, should your client still fail or refuse to complete the purchase of the Property by 4:30 p.m. today (time is of the essence), we are instructed that our client would regard yours as having wrongfully repudiate the Provisional Agreement for Sale and Purchase dated 23 February 2012.

Meanwhile, we specify the split cheque instructions as follows ...”  [original emphasis]

26.  TYTW replied on the same date to SHC as follows:

“We refer to your letter of 5^th October 2012 which was received by us on 15:34 this afternoon.

We are of the view that you have failed to prove title or propose anything to rectify the present position with regard to the HCA No. 1658/2012 which case was only discovered by us on 4^th October 2012.

We also put on record that the Vendor/Confirmor has failed to inform us the said proceedings when clearly the action was bought [sic] up as early as on 12^th September 2012.

All our client’s rights are expressly reserved”.

27.  Completion of the sale and purchase of the Property did not take place between the plaintiff and the defendant on 5 October 2012.

28.  On 8 October 2012, SHC sent the following to TYTW:

“We refer to your 3^rd letter dated 5 October 2012.

We are adamant that we had satisfactorily answered all your requisitions properly raised. Without prejudice to the aforesaid, we deny your allegation that we had failed to prove title with regard to the proceedings under HCA No. 1658/2012. The proceedings did not affect the title to the Property. Further or alternatively, the requisition did not go to the root of the title.

Given that your client has unreasonably insisted on the said requisition and refused to complete the purchase of the Property by the time stated in the Provisional Agreement dated 23 February 2012 (‘the Agreement’), as extended to 4:30 p.m. on 5 October 2012 by our letter on the same day, your client has wrongfully repudiated the Agreement. We are therefore instructed to accept your client’s repudiation of the Agreement and forfeit the deposit paid thereunder.

Meanwhile, in order to honour your undertaking please return all title deeds and documents relating to the Property to us forthwith”.

29.  On 12 October 2012, the plaintiff commenced the present action, and, by Summons dated 22 June 2016 (“the Summons”), the plaintiff applies for summary judgment under Order 86 for specific performance of the Agreement.  This is the hearing of the Summons.

C.    DISCUSSION

30.  Mr Warren Chan SC, appearing for the plaintiff with Mr Liu Man Kin, submits that two possible title defects relating to the Subject Entrance were raised by way of requisition, by reference to the Statement of Claim in the 1658 Action:

(1)   In the Statement of Claim, WT claimed to have the right to the exclusive possession of the Subject Entrance.  That is, the Subject Entrance was said not to be part of the common area of the Building, and this affects the extent of what the plaintiff was purchasing (“the Common Area Issue”).

(2)   In the Statement of Claim, WT alleged that the Void was illegal. There was thus a risk of enforcement by the Government (“the Illegality Issue”).  If the External Wall and the related area are common areas of the Building, such action by the Government would affect all co‑owners, including the owner of the undivided shares in relation to which the right to possess the Property attaches.

31.  Mr Jonathan Chang, appearing for the defendant together with Ms Cherry Xu, takes five points against the plaintiff[1]:

(1)   The requisition regarding the Common Area Issue did not relate to the title to the Property and the defendant was not obliged to answer it.  Further, no requisition relating to the Illegality Issue had been raised in the letters from TYTW. 

(2)   The requisition was raised out of time, being later than 7 days of the receipt of the title deeds by the plaintiff.

(3)   The plaintiff had reasonable time to consider the defendant’s answer to the requisition, and there was no basis to extend the completion date to beyond 5 October 2012.

(4)   The plaintiff had not shown that it was ready, willing and able to complete the transaction in October 2012, when the writ was issued.

(5)   There was substantial and unjustified delay by the plaintiff in prosecuting its claim, rendering it unjust and inequitable for the court to decree specific performance.

32.  I shall deal with each point in turn.

C1a   The Common Area Issue

33.  Since a purchaser of undivided shares of a building is buying not just the right to exclusive possession of his own unit, but also the right (in common with the other co‑owners) to enjoy the common parts (such as the rights mentioned in the Second Schedule to the DMC here), in my judgment the true extent of the common area of the building is a matter that goes to title, as that affects the nature and extent of what the purchaser is buying, and a requisition on exactly what the purchaser is buying, and what the vendor is able to convey, is a proper requisition on title.  If by the sale and purchase agreement, the purchaser is buying the right to the exclusive possession of area A, as well as the right to use area B as a common area, and a question properly arises as to whether the vendor is able to convey those rights, for example, that the area to which the right to exclusive possession is attached may in fact be smaller than area A, or that area B may in fact not be a common area, then a proper requisition may be asked, and the requisition goes to title.  If indeed the right to exclusive possession is for an area smaller than area A, and that part of area A is in fact a common area, then the vendor will be unable to convey a good title as bargained for, i.e. the exclusive right to occupy area A, and cannot show a good title if requisitions relating thereto are not answered properly (which it cannot): see for example Green Park Properties Ltd v Dorku Ltd (2001) 4 HKCFAR 448.  The position is a fortiori, in my judgment, where the subject matter of the sale includes a right to use area B as a common area but it in fact is subject to the right of exclusive possession of another person. 

34.  Mr Chang seeks to draw a distinction between the case where the common areas are defined by the relevant deed of mutual covenants by for example a plan attached thereto, and those that are not, if a co‑owner comes out and claims that part of what has been considered a common area is in fact not. In the former case, he says, the co‑owner would be seeking to take away a part expressly identified as common area, and in the latter case, since the common area is not expressly defined, the co‑owner’s action serves only to identify what is, and what is not, common area which is left undefined by the deed of mutual covenants.  The purchaser is always buying only the right to use whatever is in fact the common area of the building, and the co‑owner’s action is not going to take anything away.  In the former case, it is a question of title, and in the latter case, it is not.

35.  I think this argument in fact is an acceptance that the question of the extent of the common area, the right to use of which the purchaser is buying, is indeed a matter that goes to title.  But in each case the question is what is the extent of the common area the right to the use of which the vendor has agreed to convey, and whether the vendor can show that he can in fact do so.  The difference between the two cases referred to by Mr Chang is that in the former case it is most likely that the common area the right to the use of which the vendor has agreed to convey is that expressly defined, and in the latter the common area, since it is not expressly defined in the deed of mutual covenants, would likely to be “whatever it is under the deed of mutual covenants”.  But it is always, in a given case, a question of what is the common area on a proper construction of the sale and purchase agreement the right to use which is the subject matter of the sale and purchase, and whether the vendor has shown that he is able to convey such a right.  And, in construing the agreement, which is of course an objective exercise, the factual matrix known to both parties is to be taken into account.  If, on a proper construction of the agreement, even in the latter kind of cases Mr Chang refers to, the vendor has agreed to convey the right to use a certain part of the building as common area but a legitimate doubt then arises whether he can do so, because a claim is made by someone to that area as his exclusively to possess and enjoy, then a proper requisition may be asked, that being a requisition on title.  Subject to the question of whether it is too late for the purchaser to raise the requisition, which I deal with in section C2 below, the vendor is obliged to answer it.

36.  The relevant factual matrix, which is not in dispute, and to which Mr Chang in fact prays in aid, is that the Subject Entrance had been used as a common area for over 30 years.  In the circumstances, it is clear to me that the Subject Entrance must, objectively, be part of the common area a right to use of which was intended to be conveyed by the defendant to the plaintiff under the Agreement.  As the Statement of Claim in the 1658 Action claimed a right to exclusive possession of the Subject Entrance, the requisition raised by TYTW as set out above, in particular as elaborated in the letter dated 5 October 2012 (§24 above), is in my judgment a proper requisition as to title.

37.  The fact that the 1658 Action claimed only a personal remedy (i.e. an injunction) against the defendants there (being the co‑owners) is in my judgment neither here nor there.  It must be the substance of the claim which matters, and in substance a co‑owner was claiming a right to the possession of the Subject Entrance to the exclusion of all other co‑owners, including the Head Vendor, which WT must make good in order to succeed, thereby affecting the title of the matter to be conveyed to the plaintiff. 

38.  I note that in or about November 2013, WT discontinued the 1658 Action.[2]   Thus, it may be suggested that WT had abandoned its claim to exclusive possession of the Subject Entrance.  But this is not relevant as the question of whether the requisition was properly raised by the plaintiff and whether it was sufficiently answered by the defendant must be judged at the time of the question and answer: Polyson Jewellery Co Ltd v Liu Song Carlos [2002] 2 HKC 183 at §34 per Rogers VP.

C1b.  The Illegality Issue

39.  As to the question of illegality, Mr Chang argues that the letters from TYTW did not mention the question of illegality and so no requisition thereon was properly raised at all.

40.  I agree with Mr Chang.

41.  The illegality point was never expressly raised or mentioned in the letters from TYTW.  Even though the Statement of Claim in the 1658 Action had been enclosed and referred to, in its letters TYTW referred to “such claim by [WT]” (letter of 4 October 2012: §13 above; my emphasis), and to the fact that the 1658 Action itself being the incumbrance (letter of 4 October 2012: §16 above), which must mean the claim by WT itself in the Statement of Claim, and the elaboration in the letter of 5 October 2012 (§24 above) only referred to the right to use Subject Entrance as an owner.  Those letters did not raise any possible claim by the Government against WT(and possibly other co-owners) by reason of the alleged illegality.  On a reasonable reading of those letters, in my judgment the question of illegality had not been raised.

42.  In the premises, there is no need for me to deal with the further point raised by Mr Chang that any risk of enforcement action by the Government was fanciful because the Subject Entrance had been there for more than 30 years.  The point is that the defendant did not deal with it, as it did not have to.

43.  Mr Chang accepts, quite rightly in my view, that if the requisition on the Common Area Issue related to title, it had not been answered properly.  Thus, subject to the point on whether the requisition was raised too late, the defendant had failed to show good title by the completion date, was itself in breach of the Agreement, and was not entitled to terminate it on 8 October 2012.

C2.    Requisition too late?

44.  Mr Chang submits that the requisition on the Common Area Issue was only raised after the period allowed under the Agreement.  He argues that a late requisition can only be raised if (i) it goes to “the root of title” and (ii) it is not discoverable within time with reasonable diligence. This is of course correct as a matter of law: Lucky Dragon Corp Ltd v Speedy Vantage Ltd [2009] 5 HKLRD 501 at §20 per Le Pichon JA. Since the 1658 Action was only commenced after the period allowed had expired, he accepts that the second condition was satisfied.  So that leaves only the first condition.

45.  Mr Chang submits that the first condition was not satisfied since the requisition on the Common Area Issue did not go to title at all. 

46.  In the current looseleaf edition of Emmet and Farrand on Title at §5.064, it is stated: 

“If the requisition goes to the root of the title, that is, the power of the vendor to sell or to give to the purchaser what is intended, by the contract he shall have, a condition limiting the time will not preclude the purchaser from making it after the time has expired”.

47.  This passage in an earlier (19^th) edition of that work was cited with approval by Deputy High Court Judge Cruden in Giant River Ltd v Asie Marketing Ltd [1990] 1 HKLR 297 at 310I‑311D.  I respectfully agree.

48.  For the reasons I gave at section C1a above, it is clear that the requisition on the Common Area Issue went to the root of the title, and the plaintiff was entitled to raise it out of time.  Indeed, Mr Chang accepts that this ground stands or falls together with the first ground, and I reject both.

49.  It is not necessary, in the light of the above, to deal with the other point raised by Mr Chan SC on the time limit issue, namely that the defendant had, by SHC’s answering the requisition, waived the time limit. 

C3.    Reasonable time to consider answer

50.  Mr Chan SC, referring to Guo Jianjun v Dragon Fame Investment Ltd (CACV 131/2014, 23 September 2015)[3], submits that a purchaser is entitled to a reasonable time before completion to consider any answers given by a vendor.  He suggests seven days as the reasonable time, referring to Smart Max Enterprise Ltd v Speedy Way Ltd [2011] 3 HKLRD 675, Yeung Sau Chuen Sammy v Chung Chun Ting [1997] 4 HKC 34 and Join Winner Investment Ltd v Po Wai Ching (HCA 10169/1997, 15 April 1999).  Since the answers were only provided by SHC to TYTW on 4 and 5 October 2012, it is argued that the defendant was not entitled to demand completion by the plaintiff by 4:30 pm on 5 October 2012.

51.  However, in my judgment, the short answer is that, whether the plaintiff was entitled to more time to consider the answers or not, the fact is that TYTW did consider and reject the answers by its letters sent before the deadline for completion: see the letters I quoted at §§16, 24 and 26 above.  While the letter dated 5 October 2012 from TYTW which I quoted at §20 above did refer to the right to have more time to consider the answer, in subsequent letters TYTW did give a definite rejection of the answers, showing that it was able to, and did, come to a view to the answers by then. In the premises, there is no question of the plaintiff still being entitled to more time to come to a view of the answers by the time of the completion: they already did. 

52.  I do not agree with Mr Chan SC that because the letters contained an express reservation of rights by TYTW, it had thereby reserved more time to consider.  Rather, it had unequivocally stated that it had considered and concluded that the answers were not good enough.

53.  So, the position was “crystallised” by 4:30 pm on 5 October 2012, and the plaintiff was not entitled to more time to consider the answers. Either TYTW was right, in which case the defendant would be in breach (by failing to show good title), or it was wrong, in which case the plaintiff would be in breach (by failing to complete).  For reasons stated above, TYTW was right.

C4.    Ready, willing and able to complete

54.  The principles regarding the readiness, willingness and ability of a party seeking a decree of specific performance of a contract were stated by Lord Millett NPJ in Lau Suk Ching Peggy v Ma Hing Lam (2010) 13 HKCFAR 226 as follows:

(1)   The plaintiff must show, both at the date of the writ and the date of the decree, that he is ready, willing and able to do at the proper time in the future whatever the contract requires him to do.  The contractual completion date having passed, the proper time in future would be the date fixed by the court for completion: §§48‑51 and 54.

(2)   As to what is meant by ready, willing and able to complete, Lord Millett said at §55:

“The threshold which a plaintiff must surmount is not a high one: ‘he does not have to prove a great deal’[4]. As Dixon J said Psaltis v Schultz in the passage previously cited:[5]

It is enough that he is not presently incapacitated from future performance and is not indisposed to do, when thetime comes, what the contract requires.[6]

In Rawson v. Hobbs[7]Dixon CJ cautioned against too lightly finding that a plaintiff had not been ready, willing and able to perform his contractual obligations. He observed that one:

... must be very careful to see that nothing but a substantial incapacity or definitive resolve or decision against doing in the future what the contract requires is counted as an absence of readiness and willingness.[8]”

55.  Thus, the question is whether there is any evidence to suggest that there is any triable issue that the plaintiff in this case was, at the date of the writ, and now is, substantially incapacitated from completing or had determined not to do so at the indeterminate time in the future when a time for completion is fixed: see Lau Suk Ching Peggy v Ma Hing Lam at §56. 

56.  In my judgment, there is no such evidence.  The very fact that the plaintiff commenced this action, and seeking a decree of specific performance, suggests that it was and is ready, willing and able to complete in the sense explained by Lord Millett.  The Statement of Claim herein asserts that the plaintiff has been and remains ready, willing and able to complete, and this is confirmed by the affirmation of Ms Hui Yee Kan Erica, a director thereof.  There is no reason for me to reject this.

57.  I reject this argument by Mr Chang that the plaintiff had not shown that it was ready, willing and able to complete the transaction at the date of the writ, or now.

C5.    Delay and laches

58.  Mr Chang argues that, because of the plaintiff’s delay in the prosecution of this action, it would be unjust that it should now be awarded the decree of specific performance, because:

(1)   The defendant had caused substantial improvements on renovations, repairs and maintenance, while the plaintiff had been sitting on its claim for over four years holding the defendant unfairly in suspense, without the need to incur any costs of financing or sharing the possibility of the loss in value of the Property.

(2)   The defendant was deprived of the benefit of the purchase price for four years, and was also prevented from selling or mortgaging the Property because of the registration of the Writ. 

59.  Mere delay is not sufficient to defeat a claim for specific performance.  The question is whether the delay renders the grant of the decree practically unjust, or inequitable: Ng Kee v Attorney General [1977] HKLR 587 at 590‑591 per Pickering JA; Spry, The Principles of Equitable Remedies (9^th ed, 2014), at 238. 

60.  Regarding the improvements, repair and maintenance, the evidence from the defendant is that it had spent HK$405,442 on those matters in 2013, HK$258,000 in 2014, and HK$87,060 in 2015, totalling HK$751,402. 

61.  These expenses were incurred by the defendant at times when this action, and the claim for a decree of specific performance, was, to its knowledge, pending.  Unless there was some reasonable basis for the defendant to consider that the action would not be proceeded with by the plaintiff, and on that basis such expenses were incurred, then I do not see how they would be relevant as an unjust factor.

62.  Substantial expenses were incurred already in 2013, the year after this action was commenced in late 2012, at a time when there had not been any delay to speak of, and I do not see how, in the absence of any positive acts by the plaintiff to show to the defendant that it would not be proceeding with this action (and there are no such acts alleged), the defendant can reasonably say that it incurred those expenses in the belief or on the basis that this action would not be proceeded with.  While the time lapsed had increased by 2014 and 2015, that was in my judgment at least equally, if not more, consistent with a continuing trend of the defendant incurring those expenses for reasons of its own rather than on some such basis arising in those years.

63.  Further, as Mr Chan SC points out, there is evidence of a continuing attempt to settle the matter by way of negotiations and mediation from May 2013 to December 2015.  This suggests that the defendant could not have thought that the plaintiff was abandoning or giving up the claim, but rather explains the inaction for quite some time, which also answers the defendant’s point that it had unfairly been held in suspense for some time.

64.  There is also no evidence that the defendant would want to resell at any time, but that in fact there is evidence (not refuted) that it had managed to mortgage the property in October 2012. 

65.  The other points raised, such as being kept out of money, etc, are in my judgment points arising from a mere delay without showing anything unjust or inequitable.  The defendant is to be compensated by interest on the balance of purchase price payable in any event.

66.  I am therefore not satisfied that the defendant had suffered any prejudice, or that it would otherwise be unjust or inequitable to order specific performance, on the ground of delay or laches.

D.    DISPOSITION

67.  I am satisfied that no arguable defence has been shown to the plaintiff’s claim for a decree of specific performance, and I see no reason not to so order.

68.  The plaintiff has attached to the Summons draft “Minutes of Judgment” setting out the orders I am asked to make, to which Mr Chang does not have any real comments.  I shall make the orders as per the draft “Minutes of Judgment”, save for the following adjustments regarding costs and interest:

(1)   Following Wise Think Global Ltd v Finance Worldwide Ltd (No 2) (2014) 17 HKCFAR 190 at §§25‑29, I order that the plaintiff shall pay the defendant interest at 4% on the balance of purchase price from 5 October 2012 to the date of completion.

(2)   I make an order nisi that the defendant is to pay the costs of the plaintiff of this action, including this application with a certificate for two counsel, to be taxed if not agreed.  Since I am awarding the costs of the action to the plaintiff, I do not propose summary assessment, and, following Wise Think at §32, I do not order that costs be taken into account in calculating the balance of the purchase price payable on completion.

I set out the Minutes of Judgment as revised as per above, together with other minor revisions, which I order, in the Annex hereto (subject to any variation of §3 thereof in the event that the defendant does apply successfully for a variation of the costs order nisi that I make above).

69.  I thank counsel for their assistance.

ANNEX

Minutes of Judgment

1. The Provisional Sale and Purchase Agreement dated 23 February 2012 (“the Sub Sale Agreement”) entered into between the plaintiff and the defendant concerning Workshop A, 7^th Floor, Morlite Building (豐明大廈), No.40 Hung To Road, Kowloon, Hong Kong (“the Property”) mentioned in the Writ of Summons be specifically performed and carried into execution.

2. The following Accounts be taken:

(a) an Account of what is due to the defendant for the balance of the purchase money and interest (to be calculated at the rate of 4% per annum and payable for the period from 5 October 2012 to the date of completion (both dates inclusive));

(b) an Account of the rents and profits from the Property and received by the defendant or by another person or persons by its order for the use and benefit of the defendant.

3. The defendant do pay the plaintiff the costs of this action, including this application with a certificate for two counsel, to be taxed if not agreed.

4. What shall be found due upon the said Account of rents and profits be deducted from the amount of purchase money and interest when so computed and the balance certified.

5. The defendant do execute a conveyance of the Property free from all incumbrances as an escrow to be delivered to the plaintiff.

6. Upon the plaintiff, at a time and place to be agreed, and in default of such agreement to be fixed by the Court, paying to the defendant the balance so certified, the defendant at the same time and place do deliver to the plaintiff:

(a) the said conveyance so executed and all other deeds and writings in his possession or power relating solely to the Property, and verified the same by an affirmation made by a director of the defendant;

(b) vacant possession of the Property.

7. There be liberty to apply.