SO MARIKO v. TSE CHUN CHUNG JOHN AND ANOTHER

CACV 212/2010

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO. 212 OF 2010

(ON APPEAL FROM HCA NO. 579 OF 2010)

________________________

BETWEEN

________________________

________________________

J U D G M E N T

________________________

Hon Fok JA:

Introduction

1.  This appeal arises out of a conveyancing transaction between the plaintiff purchaser and vendor defendants.  The issue is whether a requisition raised by the purchaser of the property in question was adequately answered by the vendors so as to show a good title.  The purchaser says it was not, the vendors maintain that it was.

The facts

2.  The property is a flat in Taikoo Shing, Hong Kong (“the Property”).  The parties entered into a provisional sale and purchase agreement dated 17 January 2010 in respect of the Property by the plaintiff as purchaser (“the Purchaser”) and the defendants as vendors (“the Vendors”).  A formal sale and purchase agreement was entered into dated 29 January 2010.  The purchase price was HK$4.68 million and a total deposit of HK$468,000 was paid by the Purchaser to the Vendors.  Completion was due to take place on or before 26 March 2010.

3.  The transaction was not completed.  Instead, a dispute arose between the parties as to whether a particular requisition of title had been adequately answered by the Vendors.  The Vendors, maintaining that it had, gave notice to rescind the sale and purchase agreement, to forfeit the deposit paid and to reserve their rights to claim damages against the Purchaser.

4.  The Purchaser, on the other hand, maintaining that the requisition in question had not been properly answered, claimed to annul the agreement pursuant to clause 14 of the sale and purchase agreement.

5.  The Purchaser commenced an action by writ claiming rescission of the agreement, return of the deposit paid and damages for breach of contract.  After acknowledgment of service of the writ by the Vendors, the Purchaser issued a summons under RHC Order 14A summarily seeking the relief claimed in the writ.  As the Judge rightly observed (at §8 of the Judgment), the better course in the circumstances would have been for the Purchaser to issue a vendor and purchaser summons.

The conveyancing history of the Property

6.  The Property was assigned to Mr Ho Kwai Lung on 7 May 1982.

7.  Mr Ho Kwai Lung died intestate on 10 May 1998 and letters of administration were granted to his widow, Madam Ho Suk Tak, on 19 August 1999.  It is material to note that, in her application for the grant of letters of administration, Madam Ho was represented by the firm of Messrs Laurence Pang & Co. (“LPC”).

8.  On 5 March 2001, the Property was assigned for nil consideration.  The assignment (“the 2001 Assignment”) was made by Madam Ho as assignor to Ho Tat Tak and Madam Ho as assignees, with three individuals named as confirmors, namely Yu Mei Hing, Ho Tat Tak and Madam Ho (“the Confirmors”).

9.  The 2001 Assignment was also prepared by LPC and Mr Edmond Yuen Kin Hong (“Mr Yuen”), a solicitor employed by LPC, attested to its execution.

10.  The following terms of the 2001 Assignment are material:

(1)   Recital 2 stated that Mr Ho died intestate on 10 May 1998 “leaving him surviving the Confirmors being the only persons entitled to share in his estate under the Intestates’ Estates Ordinance”.

(2)   Recital 3 stated that letters of administration to Mr Ho’s estate were granted on 19 August 1999 to Madam Ho.

(3)   Recital 4 stated that all funeral and testamentary expenses and debts which had come to the knowledge of Madam Ho had been duly paid and satisfied out of Mr Ho’s estate without having recourse to the sale of the Property.

(4)   Recital 5 stated that an arrangement had been made between the Confirmors “and the Confirmors have unanimously agreed that the Property be assigned to the Assignee for the Assignee’s use and benefit”.

(5)   Clause 1 contained the assignment of the Property by Madam Ho in her capacity as personal representative of Mr Ho and by the Confirmors “as the beneficiaries of the estate of the Deceased” to Mr Ho Tat Tak and Madam Ho as assignee.

11.  Ho Tat Tak and Madam Ho then assigned the Property to a Yep Siu Ngor by assignment dated 14 July 2001.

12.  Yep Siu Ngor then assigned the Property to the Vendors by assignment dated 8 May 2008.

The requisition in issue

13.  By letter dated 12 February 2010, the Purchaser’s solicitors (Messrs Bernard Wong & Co.) wrote to the Vendors’ solicitors (Messrs N.K. Tsang & Co.) raising the requisition: “Please let us have evidence that the Confirmors are the only persons entitled to the estate in Recital 2 of the Assignment.”

14.  It is accepted on behalf of the Vendors that this was a proper requisition to be raised.

15.  The Vendors’ solicitors responded to the Purchaser’s solicitors contending that: “Since the Confirmors in question had duly executed the Assignment and proved by the attesting authority, further evidence you called for does not require” (sic).

16.  Further correspondence ensued between the parties’ respective solicitors regarding this requisition.

17.  By letter dated 22 March 2010, the Vendors’ solicitors provided a statutory declaration (“the Statutory Declaration”) of Mr Yuen which reads as follows:

“1. On or about March 2001, I was under employ of Messrs. Laurence Pang & Co. solicitors (‘my firm’) for Ho Suk Tak to apply for the grant of Letters of Administration to estate of Ho Kwai Lung (‘the Deceased’) under Grant No.HCAG005149/1999 and registered in the Land Registry by Memorial No.UB8413457 (‘the said Letters of Administration’).

2. After the said Letters of Administration being granted by the Court, my firm were instructed by the said Ho Suk Tak in preparing the Assignment Memorial No.UB8399704 to vest the Property to Ho Suk Tak and Ho Tat Tak (‘the said Assignment’) and I was the solicitor who prepared the said Assignment.

3. According to the instructions given by Ho Suk Tak the Deceased died intestate, leaving him surviving the Confirmors in the said Assignment being the only persons entitled to share in the said Deceased estate.”

18.  In addition to this requisition, the Purchaser had originally also raised another requisition relating to the proof of payment of stamp duty but this was abandoned at the time of the hearing below (Judgment §10).

The Judgment below

19.  The Judge correctly identified the question that arose as the desire of the Purchaser’s solicitors to satisfy themselves that the Confirmors of the 2001 Assignment were the only lawful beneficiaries of the estate of Mr Ho Kwai Lung so that they could validly confirm the assignment of the Property to the two assignees.  And, as he noted, the Vendors’ counsel accepted that this was a perfectly proper requisition.

20.  The Judge identified the Statutory Declaration as being at the heart of the Vendors’ response to the requisition and noted that there was no dispute that a statutory declaration could stand as evidence of proof of title.  He said that the crucial question was to look to the contents of the declaration, particularly in relation to the proximity of the maker to the facts stated in it.

21.  The material conclusions of the Judge are set out in paragraphs 31 to 33 of his Judgment, in which he said:

“31. [Counsel for the Purchaser][1] has drawn attention to a number of other authorities, in an area of the law which is now very well-trodden. Once the general principles are understood, to which I have already made reference, the court is required to apply the particular facts of the case before it to those principles.

32. Although perhaps the statutory declaration does not add very much to the basic conveyancing facts as to the grant of the letters of administration and the assignment in 2001, the compelling evidence given on oath in 1999, when the letters of administration were granted, leaves me sure that in the absence of anything to the contrary or any other suspicious features emerging during the 12½ years following Mr Ho’s death, that there are no other beneficiaries lurking in the shadows who might appear to challenge the 2001 assignment.

33. Both the letters of administration and the assignment stand in proof of the assignees’ title, which in my judgment, amounts to a good title.  The prospect of any as yet unidentified beneficiary appearing is so illusory that it can be safely discounted.”

The Purchaser’s contentions on appeal

22.  Mr Leo Remedios, counsel for the Purchaser, submitted that the Judge was wrong in finding that the requisition in question had been adequately answered.  He submitted that proper conveyancing evidence to answer the requisition would be a certified copy or copy of the affirmation made by Madam Ho and filed in the Probate Registry in support of her application for letters of administration, showing the names of all the beneficiaries entitled to share in the estate of Mr Ho.

23.  He submitted that the Vendors’ solicitors were well aware that the affirmation would provide a satisfactory answer to the requisition as demonstrated by their letter dated 10 March 2010 stating that “production [of] the Affirmation is really not necessary”.

24.  Mr Remedios submitted that the Judge was in error in relying on “the compelling evidence given on oath in 1999” (Judgment §32) because that evidence was the affirmation of Madam Ho which was not provided in answer to the requisition.  He also submitted that the Judge was wrong to find that the recitals in the 2001 Assignment provided any basis for discounting the risk of an adverse claim from another unidentified beneficiary of Mr Ho.

25.  As regards the provision of the Statutory Declaration of Mr Yuen, Mr Remedios submitted that this was secondary evidence only and should only be resorted to instead of the best evidence available where there was an explanation as to why that primary evidence was not in fact available or was not being produced in answer to the requisition.

26.  In any event, it was submitted that the Statutory Declaration does not in fact provide any evidence to substitute for Madam Ho’s affirmation.  Mr Remedios submitted that Mr Yuen did not have personal knowledge of who the beneficiaries might be and that all his statutory declaration does is to recite his instructions.  That is doing no more than repeating the contents of the recital in the 2001 Assignment which gave rise to the requisition in the first place.

27.  Finally, Mr Remedios submitted that the Vendors never asserted, in purporting to answer the requisition, that the facts and circumstances were so compelling that the court would have no reasonable doubt that the Confirmors were the beneficiaries of Mr Ho’s estate and it was not open to the court to so find.

Was the requisition satisfactorily answered?

28.  It is trite that a vendor has an obligation to show a good title.

29.  It was also not in dispute that, where a purchaser has made a reasonable requisition as to title, the vendor is not entitled to enforce the contract if he has not satisfactorily answered the requisition (see Active Keen Industries Ltd v Fok Chi Keong [1994] 2 HKC 67 at p. 76)  and that, if the requisition is not answered satisfactorily, it does not matter if the vendor does in fact have a good title (see Kok Chong Ho v Double Value Developments Ltd [1993] 2 HKLR 423 at p. 432).

30.  The Vendors plainly cannot rely on the content of the recital in the 2001 Assignment itself to establish that the Confirmors are the only beneficiaries of Mr Ho’s estate. That recital was the very source of the requisition and, as Mr Remedios submitted, the date of the 2001 Assignment was not more than 15 years before the date of the raising of the requisition so as to bring the provisions of s. 13(4) of the Conveyancing and Property Ordinance, Cap. 221, into play.

31.  That, however, was not disputed by the Vendors and it was for that reason that it was rightly accepted the requisition had been properly raised.  The issue is whether it was properly answered.

32.  It is correct that the relevant form of affirmation that Madam Ho would have made in order to obtain the grant of letters of administration (Form No. L1.2b of the Forms Specified by the Registrar Pursuant to Rule 2A of the Non-Contentious Probate Rules, Cap. 10A) would have required Madam Ho to identify who were the only persons entitled to share in the estate of Mr Ho.  A copy of this affirmation would therefore have provided evidence as to the identities of the beneficiaries either to corroborate or contradict the statement in recital 2 of the 2001 Assignment and would have satisfactorily answered the requisition.

33.  It is not clear why a copy of this affirmation was not obtained and provided since it would have removed this bone of contention between the parties.  Mr C.Y. Li, counsel for the Vendors, informed the court that the Vendor’s present solicitors (not Messrs N.K. Tsang & Co.) had tried to obtain a copy from the Probate Registry but, as non-parties to the probate application, had no right to access the file.  He also informed the court that LPC had been dissolved and, hence, a copy could not be obtained from that firm.  Be that as it may, and since these explanations were not in evidence before the Judge, I proceed on the basis that the affirmation could have provided the most direct form of corroboration of recital 2 of the 2001 Assignment.

34.  I do not, however, accept Mr Remedios’ submission that the affirmation constituted the best and, absent an explanation as to why it was not available, only evidence that could have been supplied by the Vendors by way of answering the requisition.  In the first place, the affirmation is not conclusive as to the identities of the beneficiaries since it merely reflects a statement of Madam Ho as to the identities of the beneficiaries and there is always a possibility that she might have omitted, through oversight or otherwise, to name a beneficiary of the estate in her affirmation.

35.  Furthermore, whilst the best evidence rule may require an explanation to be given when a necessary document of title (such as a power of attorney necessary to prove proper authority to execute an assignment) is required to be produced to show a good title, that is not the position here.  The affirmation is not itself a necessary document of title to the Property but is merely evidence that might corroborate a statement in a recital contained in an assignment of the Property.

36.  For these reasons, it was open to the Vendors to provide some alternative evidence to corroborate the statement in recital 2 of the 2001 Assignment.  They sought to do so by, amongst other things, the Statutory Declaration of Mr Yuen, the material terms of which I have set out above.

37.  Mr Remedios made a number of criticisms of the Statutory Declaration.  First, he submits that Mr Yuen does not have personal knowledge of who the beneficiaries of Mr Ho’s estate are.  Next, it was submitted that the Statutory Declaration does not state that he saw a copy of Madam Ho’s affirmation and confirmed that the beneficiaries of the estate she identified there were the Confirmors.  Finally, it was said that the sum total of the Statutory Declaration was simply a recitation of what Madam Ho’s instructions were as to the identities of the beneficiaries of Mr Ho’s estate so that it was essentially a self-serving statement.

38.  It is the case that Mr Yuen does not claim in the Statutory Declaration that he has personal knowledge of the identities of the beneficiaries of Mr Ho’s estate and so it follows that he could not himself provide corroborating evidence as to the matters stated in recital 2 of the 2001 Assignment.  Furthermore, the other criticisms of the Statutory Declaration were, in my opinion, fairly made by Mr Remedios and were accepted by Mr Li.

39.  However, the question is not whether the Statutory Declaration could have been better worded to corroborate the fact that the Confirmors were the only beneficiaries of Mr Ho’s estate identified in Madam Ho’s affirmation in support of the grant of letters of administration.  The answer to that question is that it undoubtedly could.  The relevant question is instead whether there is proper conveyancing evidence to provide a satisfactory answer to the requisition.  In other words, are the facts and circumstances so compelling that the court can conclude beyond reasonable doubt that the Confirmors were all the beneficiaries of Mr Ho’s estate and there is no real risk of another beneficiary coming forward to assert a claim to the Property: see Active Keen at p. 83D-F applying the test laid down in MEPC Ltd v Christian-Edwards [1981] AC 205 at p. 220C-D.

40.  It is also necessary to keep in mind that, when approaching the question of whether a vendor has given good title, the court looks at the situation from the standpoint of a willing vendor and purchaser both possessed of reasonably robust common sense: see Mexon Holdings Ltd v Silver Bay International Ltd (2000) 3 HKCFAR 109 per Litton PJ at p. 117.

41.  In answering the question posed, it is important to bear in mind that the gravamen of the requisition is whether there might be any other person who still has a subsisting claim against the estate and thereby to the Property.  This was identified by the Purchaser’s solicitors as the concern underlying the requisition: see their letter dated 12 March 2010 (p. 73 of the Documents Bundle).

42.  With that in mind, the following facts and matters are, in my opinion, relevant to deciding whether the requisition was satisfactorily answered:

(1)   Mr Ho died on 10 May 1998 and in the intervening 12 years there is no evidence of any claim by a missing beneficiary of his estate.

(2)   LPC acted for Madam Ho in her application for letters of administration and she would have made an affirmation identifying the beneficiaries of Mr Ho’s estate in order to obtain the grant of letters of administration to her.

(3)   LPC also acted for Madam Ho in preparing the 2001 Assignment.  The purpose of that Assignment was to transfer the Property validly into the names of Madam Ho and Ho Tat Tak.  The confirmation of the Confirmors was required for that purpose and it would make no sense for Madam Ho to provide conflicting instructions as to the identities of the beneficiaries of Mr Ho’s estate to those which she gave in respect of her affirmation leading to the grant of letters of administration.  Unless LPC were in breach of duty to Madam Ho, there is no reason to think that LPC would not have confirmed the fact that the Confirmors were the beneficiaries of the estate by reference to Madam Ho’s affirmation.  This would have been an easy task since the firm had also acted in respect of the grant of letters of administration.

(4)   It is in this context that one must read the Statutory Declaration made by Mr Yuen.  He refers to the fact that LPC acted for Madam Ho in applying for letters of administration and that he prepared the 2001 Assignment.  Unless he was in breach of his duty to Madam Ho in the preparation of the 2001 Assignment, he would have checked his firm’s probate file to confirm that Madam Ho’s instructions to him as to the identities of the beneficiaries of Mr Ho’s estate were consistent with her affirmation leading to the grant of letters of administration.

43.  Mr Remedios submitted that this reasoning, which (as noted above) the Judge adopted, was not put forward in the answer to the requisition and therefore it was not open to the Vendors to rely upon it now.  In this regard, he relied on Kok Chong-ho & Anor v Double Value Developments Ltd [1993] 2 HKLR 423.  However, I am satisfied that a fair reading of the letters from the Vendors’ solicitors dated 22 February 2010 (p. 62 of the Documents Bundle), 22 March 2010 (pp. 77-78 of the same) and 23 March 2010 (p. 80 of the same) do put forward this answer to the requisition.  Furthermore, in my view, the position in this case is not like that in Kok Chong-ho where the vendor’s solicitors there never addressed the question of a real risk of enforcement action because they consistently denied that the extra flats in that case were unauthorised.  In contrast, in the correspondence in this case, the Vendors’ solicitors did address the question of whether there was a realistic risk of some other unidentified beneficiary coming forward to assert a claim against the Property.  In the letter dated 22 March 2010, they asserted:

“… there is no basis whatsoever to support your view that there may be other persons/beneficiaries entitled to share in the Intestate’s said property”.

44.  I also disagree with Mr Remedios’ submission that it was not permissible to have regard to the purpose of the 2001 Assignment since it was the assignment itself which gave rise to the Purchaser’s requisition.  Whilst I agree that recital 2 of the 2001 Assignment cannot be relied upon since that is the source of the requisition itself, the purpose of the 2001 Assignment is clearly one of the factors to be taken into account, together with all the other circumstances I have identified in paragraph 42 above, in answering the question of whether a sufficient answer to the Purchaser’s requisition was given by the Vendors.

45.  Applying the robust common sense this question calls for, and assuming a willing vendor and purchaser, I consider the Vendors did provide a satisfactory answer to the Purchaser’s requisition.  Although the wording of the Statutory Declaration could have been more explicit, for example in stating that Mr Yuen actually read the copy of Madam Ho’s affirmation in LPC’s probate file to confirm the contents of recital 2 of the 2001 Assignment, there is no evidence that the Purchaser raised any further questions about the Statutory Declaration in order to obtain comfort that the Confirmors were all the beneficiaries of Mr Ho’s estate.  In my view, a willing purchaser in receipt of Mr Yuen’s Statutory Declaration would, if concerned about the wording of that declaration, have asked for further clarification rather than simply assert that “[t]he declaration of the handling solicitor of the Assignment is not an acceptable secondary conveyancing evidence of the beneficiaries/confirmors”, as the Purchaser’s solicitors did by their letter dated 24 March 2010 (p. 82 of the Documents Bundle).

Disposition and costs

46.  For the reasons set out above, I do not consider that the criticisms of the Judge’s reasoning are substantiated and I would dismiss the appeal with costs to the Vendors.

Hon A Cheung J:

47.  I agree.

Hon Saunders J:

48.  I also agree.

Hon Fok JA:

49.  The appeal is therefore dismissed.  There will be a costs order nisi that the plaintiff pay the defendants’ costs of this appeal, to be taxed if not agreed.