Speedy Way Ltd v. Chan Ying Ying Crystal

HCMP 550/2016

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 550 OF 2016

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J U D G M E N T

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1.There is before the court a vendor and purchaser summons filed on 9 March 2016 (“Summons”). The plaintiff (“Speedy”) is the purchaser and the defendant (“Chan”) the vendor of a property known as Factory D, 6/F, Winner Factory Building, No 55 Hung To Road, Kowloon (“Property”).

Sale of the Property

2.By a Provisional Agreement for Sale and Purchase dated 16 December 2015 (“PASP”), Speedy agreed to purchase and Chan agreed to sell the Property at the price of HK$4,100,000. Speedy paid a deposit of HK$200,000 pursuant to the PASP.  Under the PASP, the transaction was to be completed on or before 29 February 2016.

3.On 30 December 2015, the parties entered into a Formal Agreement for Sale and Purchase (“Agreement”).  Speedy paid a further deposit of HK$210,000 pursuant to the same.  In the Agreement, it was provided, inter alia :

(a) Under Clause 7(a), Chan shall give title to the Property in accordance with s.13A of the Conveyancing and Property Ordinance, Cap 219 (“CPO”).  Chan shall further prove title in accordance with s.13 of CPO;

(b) Under Clause 27, Chan also “declares and confirms that no third party (whether related or otherwise) has any right or interest whatsoever ... [she] has the absolute right and interest in the Property ... In the event of any valid and legitimate third party claim to the Property which is not settled or cleared off before completion, [she] shall forthwith return the deposit(s) paid herein to [Speedy] ...”.

Devolution of title to the Property

4.By an assignment dated 22 October 1991, the late Mr Chan Siu Tung (“Deceased”) became the registered owner of the Property.

5.On 9 February 1998, the Deceased died intestate.  He was survived by his widow, the late Ms Lee Sau Fung (“Mother”), his daughter Chen Xian (“Daughter”), and his son Chan Kwai (“Son”).  The Property formed part of the Deceased’s estate (“Estate”), and the Mother, Daughter and Son were the only persons entitled to share in the Estate.

6.On 26 April 1999, the Mother became the Administratrix of the Estate pursuant to Letters of Administration granted to her.

7.By a Deed of Family Arrangement dated 28 June 2001 (“Deed”) and made between (a) the Mother as Administratrix and (b) Mother, Daughter and Son as beneficiaries, the parties entered into family arrangements in respect of the Property.  The Deed contained the following terms :

“1. [Mother] (one of the Beneficiaries), who is the widow of the Deceased and in such capacity, is entitled to one-half share of the Property (forming part of the [Estate]), and subject to Clause 2 hereof hereby renounces all her right title benefit and interest of and in the [Estate] and hereby releases the Administratrix from and against any claims or demands whatever which she has or may has (sic) in respect of the [Estate] in relation to the Property.

2. Upon the execution of this Deed, the Administratrix will concurrently make and execute in favour of [Mother] and [Chan] an Assent to the vesting of the Property in [Mother] and [Chan] as Joint Tenants and [Daughter] and [Son], shall join in and execute and accept and effectuate the said Assent.

3. The parties hereto and each of them shall execute and do all such acts deeds and things as may be necessary or expedient for more effectually carrying out the objects of this deed of Family Arrangement.

4. Save and subject as provided in Clause 2 hereof, the said [Daughter] and [Son] hereby releases the Administratrix from and against all claims or demands whatever which they have or may have in respect of the [Estate] or to share therein.”

[emphasis added]

8.On the same date, by an Assent made between (a) the Mother as Assignor and (b) the Mother and Chan as Assignee (“the Assent”), the Property was purportedly vested in the latter as joint tenants.

9.Para (5) of the preamble of the Assent stated that “All the debts due by, and funeral and testamentary expenses of the Deceased have been fully paid and satisfied (as the Assignor hereby declares and confirms)”.

10.On 11 February 2006, Mother passed away.  In about 2007, the Son became the Administrator of the Mother’s estate pursuant to Letters of Administration granted to him.  As a consequence of Mother’s death, prima facie, Chan has become the owner of the Property by survivorship.

Title requisitions

11.Like most cases of the present type, there were many exchanges of correspondence between the solicitors representing the parties in which requisitions were raised in respect of the title to the Property and answers were given to the same.  It is unnecessary, and unhelpful, to set out those correspondence.  Helpfully, the issues before the court have been reduced from 7 to 2 and agreed as follows :

(1) Whether Chan has satisfactorily answered the requisition that the vesting to the Mother and her under the Assent was for purpose of administration of the [Estate];

(2) Whether Chan has satisfactorily answered the requisition that the Assent was not effective in vesting the Property to Mother and her.  If the answer is in the negative, whether this can be remedied by way of a Confirmatory Assignment (“Assignment”).

The Assignment and other factual matters

12.The Assignment came about on 26 February 2016.  In an attempt to put an end to the arguments, Chan’s solicitors advised Speedy via its solicitors that Chan was ready and willing to arrange for the execution of the Assignment by the Son (as Administrator of Mother’s estate and as confirmor) and the Daughter whereby they respectively “assent assign and confirm to the vesting” of the Property to the estate of Mother and Chan.

13.Before analysing the issues, I should mention a few factual points.  Chan is the daughter of the Son.  It appears from the Deed and the Assent that the Mother, Daughter, Son and Chan were all staying at the same premises at the time when those documents were executed.  However, Chan’s relationship with the Son was only disclosed in the evidence filed in this application. 

14.In the Assent, it can be seen that the document was initially also executed by the Daughter and the Son.  However, for unknown reason(s), their signature clauses had been deleted and initialled.  Both the Deed and the Assent were prepared by the same firm of solicitors.  Both documents were interpreted by the same staff from that firm, who also witnessed all the executions.  The Assent was registered in the Land Registry on 5 July 2001. 

Analysis

15.Apart from the argument on the Assignment, the issues are actually concerned with the power of the Mother, acting as Administratrix of the Estate, to dispose of the Property in favour of herself and Chan.  The issues fall within a narrow compass. 

16.It is not disputed that the administration of the Estate had come to an end at the time of the disposal of the Property, because all the debts, funeral and testamentary expenses had been paid (see para 9 above). 

17.The completion of administration is an important event because henceforth the ascertained residuary estate (after payment of funeral and testamentary expenses and debts) would be held on trust for the persons beneficially entitled to the same.  Whereas before the completion of administration, a personal representative has very wide power over the disposal of the properties in the estate, and will generally confer good title upon the purchaser of any such properties. 

18.The law in respect of the power of a personal representative in disposing of the properties in the estate during the course of administration and after completion thereof, and the position of a purchaser from a personal representative was considered by the Court of Appeal in Chun Hon Wai & Anr v Junichi Takashima [2000] 2 HKLRD 482.  I need only refer to 485J to 486B of that judgment :

“..., the purchasers’ solicitors here were entitled to assume that the sale was for the purposes of administration. They need not and should not have inquired into that matter. However, they did so. The question then arises whether the answers to their inquiries disclosed that all debts, etc, had been paid; that the sale was not necessary for the purposes of administration; and that there were facts which put them on notice of a breach of trust by the vendor. If the answers gave the purchasers’ solicitors no reason to suppose that all the debts, etc, had been paid, or to suspect some breach of trust, there was no justifiable reason for refusing to accept those answers. ...”

19.In this case, the administration of the Estate was completed at the time of the Assent (or the Deed), and Speedy says that there were facts which put it on notice of a potential breach of trust by the Mother in transferring the Property to herself and Chan. 

20.Mr Leung, who appeared for Speedy, relied upon Sun Sek Haw & Ors v Au So Kum [1999] 3 HKLRD 12 in support of the propositions that in the field of conveyancing, the law has historically set a very high standard, and a man would be held to have constructive notice of matters which he would have discovered if he had made those enquiries which he ought reasonably to have made: at 20H-21B and 21E-22D, per Rogers JA.

21.Mr Leung submitted that there were 3 elements which gave rise to concern that there might have been breach of trust in the transfer of the Property to the Mother and Chan :

(1) Chan was a “stranger”;

(2) There was no renunciation by the Daughter and Son of their interest in the Property;

(3) The deletion of the signature clauses (see para 14 above).

22.Before I analyse those 3 elements, I shall refer to a dicta in the well-known case of Active Keen Industries Ltd v Fok Chi-Keong [1994] 1 HKLR 396 at 414, l.5 to 15 :

“In conclusion, I would echo the words of the judge, who is highly experienced in these matters, when he said:

‘... if those instructed to act for purchasers could be brought to realise that they would serve their clients better by exercising their common sense rather than by exhibiting their zealousness, matters would be ... improved.  The time has come for Hong Kong conveyancers to put an end to the practice of magnifying difficulties which are really non-existent, a practice which frequently operates to keep apart a vendor and a purchaser themselves eager to conclude their bargain ...’.”

23.It should also be pointed out that in a sale of a landed property the vendor is not required to show a perfect title.  See Sun Sek Haw, supra, at 19F :

“... but the vendor’s obligation was to show the purchasers a good title; not necessarily a perfect title, but one against which the purchasers could be sure that no adverse claim could successfully be made.”

24.It is unfortunate that Chan did not disclose her relationship with the Son at the time of the requisitions.  That piece of information might have lessened the concern of Speedy.  On the other hand, it was quite clear that Chan was a “stranger” in the sense that she had no entitlement to the Estate.  The beneficiaries of the Estate were identified in para (2) of the preamble to the Deed. As a matter of principle, I am unable to see why the relationship she has with the Son would have made any difference to the concern over any potential breach of trust.  Mr Leung has not suggested otherwise.  This court is no stranger, regrettably, to disputes between very close relatives for financial reasons.

25.In my view, the critical fact before Speedy was that there were only 3 beneficiaries to the Estate and they were parties to the Deed.  Clearly, the beneficiaries were quite entitled to dispose of the Property in the way they saw fit.  Appearing on behalf of Chan, Mr Cheung relied heavily upon the Deed as the source of the Mother’s power in disposing of the Property.  This brings me to the next two points (see para 21 above), which are closely associated. 

26.Speedy argued that there is a distinction between clauses 1 and 4 of the Deed in that the latter contained no renunciation of the rights of the Daughter and Son in the Property.  The release of the Administratrix from all claims as set out in clause 4 was subject to clause 2, and there was no compliance with the latter in that the Daughter and Son were not parties to the Assent. 

27.In answer, Mr Cheung submitted, firstly, that the Assent was an assignment which operated to assign all the estate, right and interest in the Property: ss.2 and 17 of CPO.  As a general proposition on the effect of an Assent, this was accepted by Mr Leung. 

28.Secondly, the purpose of the Deed was to give the Property to the Mother and Chan as joint tenants for no consideration (clause 2), and the parties agreed to do all such acts as may be necessary or expedient to fulfil that purpose (clause 3).  It is clear therefore that the Daughter and Son had no intention to retain any interest in the Property.   

29.Further, the Mother’s act of conveying the Property did not constitute any breach of her duties, whether as Administratrix or trustee.  The Assent was made pursuant to the Deed, by which all the beneficiaries empowered her to deal with the Property in that way.  The Daughter and Son had in clause 4 of the Deed released the Mother from and against all claims they might have in respect of the Estate or to share therein.  In the circumstances, there is no question of any breach of trust.

30.Furthermore, Mr Cheung argued that clause 4 was effective notwithstanding that the Daughter and Son did not join in the Assent as provided for in clause 2.  It would be strange if they could rely on their own non-compliance with clause 2 to make any claim in respect of the disposition of Property.

31.Mr Cheung relied on the authority of In re Stirrup’s Contract [1961] 1 WLR 449 in support of the proposition that the court looks to the substance of a transaction.

32.In that case, Mr Stirrup and Mr Evans held the property in question as personal representatives of Mrs Evans.  Mr Stirrup died, and later Mr Evans also died after having appointed the National Provincial Bank his executor.  The bank executed an assent in favour of one Ms Jones.  In the recital of the assent, Ms Jones was described as the beneficiary and entitled to have the property vested in her.  The operative part of the assent provided: “The bank as personal representative of [Mr Evans] deceased hereby assent to the vesting in the beneficiary of [the property] to hold the same unto the beneficiary ...”.  It was common ground that a conveyance should have been used by the bank in place of the assent.

33.In the judgment, Wilberforce J (as he then was) cited with approval (p 452) the following dicta of Plumer MR in Cholmondeley (Marquis) v Lord Llinton (1820) 2 Jac & W 1, 91 :

“if the meaning and intention of the grantor be clearly manifested on the face of the instrument, as to the person or character intended to be the object of grant, and if the words which he has made use of to convey his meaning will admit of an interpretation conformable to it, though contrary to their correct technical sense, there is no case or dictum to be found which requires the court to adopt the technical sense, in opposition to the actual meaning [of] the party: on the contrary, the authorities uniformly demand the preference to be given to intent, over technical import and form.”

34.Wilberforce J concluded at p 454 :

“I therefore feel on both those branches of the argument that the vendor here is correct in saying that, although the document is described as an assent, and although admittedly the case was not one for which an assent should be used, yet, nevertheless, on the intention to be ascertained from it and having regard to the statutory provisions, it was perfectly effective to pass the fee simple to the purchaser, and I propose so to declare.”

35.Guided by this authority, it must be clear from the Deed, either considered by itself or jointly with the Assent, that the intention of the beneficiaries was that the Property would be transferred to the Mother and Chan absolutely.

36.Properly analysed, the deletion of the signature clauses or the lack of joinder of the Daughter and Son in the Assent was no more than a defect in formality.  It is very difficult to see any breach of trust arising from the disposal of the Property or to conceive a viable claim by either the Daughter or the Son in respect of the same.  In the premises, I am of the view that Chan has shown good title to the Property. 

37.I make two further points in respect of the deletion of the signature clauses.  Firstly, it is not clear why it was thought necessary for the Daughter and Son to be a party to the Assent.  Neither counsel has suggested that there was any legal requirement to do so.  It might be the case that after the Assent was executed by the Daughter and Son the solicitor handling the matter had a second thought about the necessity of the same, and consequently deleted the signature clauses.

38.Secondly, the Assent was poorly drafted.  For instance there was no definition of “the Beneficiaries” (para (2) of preamble). Further, it is not clear from the Assent why the Daughter and Son would, as originally intended, execute that document without being a party thereto.  I have so say that the deletion of the signature clauses was not properly thought through because it would not be consistent with clause 2 of the Deed. 

39.In light of the defect in formality (see para 36 above) and the unexplained deletion of the signature clauses, it would not be right to be critical of the caution exercised by Speedy’s solicitors in the transaction.  However, one may be forgiven to think that the requisitions over the title to the Property might have been resolved if the parties had fully in mind the dicta of the Court of Appeal in Active Keen Industries Ltd (see para 22 above). 

40.Given the view that Chan has shown good title to the Property, I shall deal with the arguments on the Assignment briefly. 

41.Speedy complains that the Assignment was not furnished within reasonable time prior to the completion date.  I am not attracted by the argument.  Mr Leung has fairly accepted that Chan’s solicitors had been actively trying to answer the requisitions raised by their counterpart.  It is reasonably clear from the material before the court that the Assignment was offered by Chan as a last resort to try to overcome the impasse on the requisitions.  Speedy had never complained about the lateness of the Assignment until this hearing.  Indeed, as pointed out by Mr Cheung, its response at the material time was that the Assignment would not resolve the perceived problem with the title to the Property (see bundle C, p 76, para (16)).

42.There are merits in Mr Cheung’s submission that assuming that the Property remains in the Estate (because the Assent did not validly pass the Property to the Mother and Chan), such that it is held on a statutory trust under s.4(3) of the Intestate’s Estates Ordinance, Cap 73, the Assignment would effectively put an end to the trust.  By that document, the beneficiaries under the trust – Mother (by her Administrator), the Daughter and Son – would deal with the Property in the manner therein set out.  This would remove any doubt there may be on the authority of the Mother in executing the Assent and the validity of the Assent to convey the Property.

43.However, I can see the force in Mr Leung’s argument that the Son, notwithstanding his position as the Administrator of the Mother’s estate, is not in a position to deal the Property for the following reasons :

(1) If the Assent did not validly vest the title to the Property in the Mother and Chan, such title would remain vested in the unadministered Estate;

(2) The right to administer the Estate is still vested in the Mother as the Administratrix of the Estate.  The matter is complicated by her death in 2006;

(3) Although the Son has become the Administrator of the Mother’s estate, it is not shown that the Letters of Administration granted to him contain the unadministered property of the Estate (which is admitted);

(4) The Son requires a de bonis non grant in order to administer the unadministered Estate.  Such a grant can be issued to a person to enable him to administer the unadministered asset of a deceased person when all the persons to whom a grant of probate has been made have died without completing administration: see Re Estate of Li Wing Chun [2011] 3 HKLRD 523, §19.

44.I am inclined to the view that the Assignment would not have answered the defect in the title of the Property, if there were any.  On the other hand, given the willingness of the Daughter and Son to help to resolve the impasse, I have little doubt that it is a matter of finding the mutually acceptable way to so.

Conclusions

45.In the premises, I grant the alternative relief claimed under para 4 of the Summons that the sale and purchase of the Property should be completed within 21 days from the date of this Judgment, and time shall be of the essence (there is no dispute on this relief). 

46.I make an order nisi that the costs of this action be to Chan, to be taxed if not agreed.

47.Last but not least, I am grateful to both counsel for their assistance. 

Mr Desmond Leung, instructed by T Y Lam & Co, for the plaintiff

Mr Earnest W H Cheung, instructed by Cheung & Yip, for the defendant