Kingdom Miles Ltd v. Ever Crystal Ltd

CACV 89/2017

[2018] HKCA 967

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF APPEAL

CIVIL APPEAL NO 89 OF 2017

(ON APPEAL FROM HCMP 3069/2015)

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J U D G M E N T

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Hon Lam VP (giving the Judgment of the Court):

1.On 14 March 2017, Recorder Whitehead SC [“the Judge”] determined a vendor and purchaser summons in favour of the Plaintiff purchaser. The sale and purchase was in respect of the property known as House 5, 50 Stanley Village Road, Hong Kong [“the Property”] situated on the Remaining portion of Rural Building Lot No 243 [‘the Lot”]. By an agreement of 16 April 2015, the Plaintiff agreed to purchase the Property from the Defendant at the price of $128,592,000.

2.The Judge granted the following declarations:

“ IT IS DECLARED that: -

1. The requisitions numbered 3(a) & (b) in the letter dated 7^th August 2015 from Wong & Poon, the then Solicitors for the Plaintiff, to Mayer Brown JSM, Solicitors for the Defendant, in respect of the title to the Property have not been sufficiently answered by the Defendant.

2. Good title to the property has not been shown and given at or before 5 p.m. on 19^th November 2015 in accordance with the Formal Sale and Purchase Agreement dated 16^th April 2015 (“the Agreement”).

3. The Defendant has acted in breach of the Agreement by purporting to determine the Agreement under clause 17 of the Agreement and/or common law by the letter from Mayer Brown JSM, Solicitors for the Defendant, to the Plaintiff dated 27^th November 2015.

4. The Plaintiff is entitled to a lien on the Property for the amounts claimed under paragraphs 5 and/or 6 below.”

3.In addition, the Judge ordered the Defendant vendor to return the deposit paid by the Plaintiff with interest and the costs of investigating title.  He also dismissed the Counterclaim of the Defendant.

4.This is the Defendant’s appeal against the Judge’s decision.  After hearing counsel, we reserved our judgment. 

5.We now give our judgment in the appeal.

Background

6.The background to the dispute was set out in the judgment of 14 March 2017.  For present purposes, we gratefully adopt [5] to [12] of that judgment:

“ 5. Dr Robert Hormus Kotewall became the first owner of the property pursuant to an Assignment dated 5 May 1928.  The Vendor became the owner of the property pursuant to an Assignment dated 19 September 2007. 

6. On 9 April 2015 the Vendor and the Purchaser entered into a preliminary sale and purchase agreement in respect of the property known as House 5, 50 Stanley Village Road, Hong Kong, situated at the Remaining Portion of Rural Building Lot 243 (“the Property”).

7. On 16 April 2015 the parties entered into a formal sale and purchase agreement in respect of the property with completion scheduled to take place on or before 6 October 2015, later extended to 19 November 2015 (“the Agreement”).

8. On 3 August 2015 the Vendor’s solicitors delivered the title deeds to the Purchaser’s (then) Solicitors, Wong & Poon.

9. On 7 August 2015 Wong & Poon raised requisitions on the property’s title.

10. On 6 October 2015 the Purchaser failed to pay the balance of the purchase price pursuant to Clauses 3(i) & 5(i) of the Agreement.  On 29 October 2015 the Vendor’s solicitors served a notice in writing on the Purchaser pursuant to Clause 17(i) of the Agreement demanding payment of the balance of the purchase price within 21 days. The balance was not paid.

11. On 17 November 2015 the Purchaser issued the Originating Summons in these proceedings and on 27 November 2015 the Vendor’s solicitors served a Notice of Determination on the Purchaser, accepting the Purchaser’s repudiation and terminating the Agreement.

12. The Outstanding Requisitions relate to the absence of two letters, the first dated 22 November 1923 and the second dated 29 December 1924 (“the Lost Letters”).  The Purchaser’s solicitors took the view that the Lost Letters affected the terms of the Government Lease and formed part of the ultimate root of the title, and that the Purchaser was therefore entitled to tangible copies of the Lost Letters.”

B. The requisitions

7.In light of the focus placed by Mr Chan SC (appearing with Mr Chong, Ms Leung and Mr Kwok for the Plaintiff) on the alleged failure of the Defendant to show a good title, we must also set out the course of correspondence between the solicitors on the relevant requisition.

8.The title deeds were supplied on 3 August 2015 by solicitors for the Defendant [“MBJSM”] to the solicitors for the Plaintiff [“W&P”].  Item 1 of the Schedule of Title Deeds was “certified copy Conditions of Grant No.UB1453” [“the CG”]. 

9.By a letter dated 7 August 2015 (actually received on 10 August), W&P made the following request at paragraph 3 of the letter:

“ 3. Assignment M/N UB256981

Please let us have the following letters relating to the C/G referred to in the above Assignment:

a. Letter dated 22^nd November 1923;

b. Letter dated 29^th December 1924; and

c. letter dated 21^st March 1930.”

10.The letter of 21 March 1930 was included in the set of the CG.  Hence, the later requisition was confined to the two letters of 22 November 1923 and 29 December 1924 [“the 2 Letters”].  

11.MBJSM responded by a letter of 21 September 2015 at paragraph 3 as follows:

“3. a.&b. We rely on Section 13(3) and (4) of the Conveyancing and Property Ordinance, Cap 219 and are of the view that the requested documents are not required to be produced for proving title.

c. The Letter dated 21^st March 1930 has been annexed to the Conditions of Grant No. UB1453.”

12.In the same letter, MBJSM also indicated to W&P they would send a certified copy of the CG obtained from the Land Registry, which would be the best certified copy they could obtain.  That certified copy was supplied on 23 September 2015. 

13.On 29 September 2015, W&P insisted on the production of the 2 Letters.  The requisition was put as follows:

“3. a.&b.  As these two letters relate to change of the terms of the Conditions of Grant No. UB1453 and are also referred to in the Deed of Covenant M/N UB126758. We shall insist our view to production of the two letters.”

14.MBJSM replied on 2 October 2015 repeating their earlier answer:

“ 3. a.&b.  We repeat our previous reply to requisitions and rely on Section 13(3) and (4) of the Conveyancing and Property Ordinance, Cap. 219 that the requested documents are not required to be produced for proving title.”

15.W&P disagreed and stated in a letter of 5 October 2015:

“ 3. a.&b.  With respect, we do not agree with your view that Section 13(3) and (4) of Cap. 219 should apply in the circumstances. We consider that our client is entitled to production of the requested documents pursuant to Section 13(1)(b) of Cap.219.”

16.On the same date, MBJSM made a more substantive reply as follows:

3. a.&b.  We repeat our previous reply to requisitions.

Without prejudice to the foregoing but only as a gesture of goodwill, we would like to mention that:-

(i) Under the recitals of the Assignment Memorial No. UB256981 and the Deed of Covenant Memorial No. UB126758, it is mentioned thereunder (inter alia) -

“WHEREAS by two several letters dated respectively the 22^nd day of November 1923 and the 29^th day of December 1924 and addressed to the Hon. Dr. Hormus Kotewall by the Hon.  the Director of Public Works the Government of Hong Kong agreed to sell to the said Hon. Dr. Robert Hormus Kotewall and Li Yau Tsun, Fung Ping Shan and Li Wing Kwong (hereinafter called “the Lessees”)  All Those pieces or parcels of ground situate lying and being at Stanley in the Colony of Hong Kong and known and registered in the Land Office as Rural Building Lots Nos. 238, 239, 240, 241, 242, 243, 244 and 252 under and subject to the terms and conditions therein contained.

AND WHEREAS the said terms and conditions were duly accepted and were deposited in the Land Office as Conditions and Grant No. 1453 [emphasis added] … …”

(ii) We hold the view that although the two Letters respectively dated 22 November 1923 and 29 December 1924 are not physically attached to the documents comprising the Conditions of Grant No. UB1453, the several memoranda, letters and documents exchanged with or issued by the Government at the material times have denoted the essential terms of the Conditions of Grant No. UB1453.

(iii) As an alternative argument, since the said two Letters are not found in the certified copy of Conditions of Grant No. UB1453 obtained from the Land Registry (formerly the Land Office), the Government should be estopped from relying on the said two Letters.

(iv) We trust that the most material term which a purchaser of a leasehold land will be concerned to know about should be the duration of the lease term.  Under paragraph (2) of the Conditions of Exchange No. 11169 contained in the letter of the Land Office dated 22^nd December 1977, it is provided that -

“… Such Crown Lease will be for the same term and commence from the same date as is laid down in the Conditions of Grant No. 1453 under which Rural Building Lots Nos. 238 to 244 are held …”

(v) You will also see from the land search record that the lease term is “75 years renewable for 75 years” and the commencement of lease term being “12/1/1924”.

(vi) To further ease your concern, we send you a copy letter dated 11 July 2011 from the Rating and Valuation Department which, among other things, states the term of the Government lease and also the assessment of the Government rent.

(vii) In summary, the non-production of the said two Letters which are not obtainable from the Land Registry will not deprive of the purchaser’s right to ascertain the lease term of the Property.  Further, as mentioned above, as the said two letters cannot be obtained from the Land Registry, the Government shall be estopped from relying on the said two Letters.”

17.Completion had been scheduled to take place on 6 October 2015.  Thus, W&P contended in a letter of 6 October that they should have more time to consider the answer in the latest letter from MBJSM. Later on, on the same date, W&P wrote another letter to maintain that the 2 Letters had to be produced to prove title.  It was said as follows:

“ 3. a.&b.  We do not agree with your view that you can rely on Sections 13(3) and (4) of Cap 219 for not producing the requested documents, i.e. Letters dated 22^nd November 1923 and 29^th December 1924 relating to change, alteration or modification of the terms of the Conditions of Grant No.UB1453.

Section 13(3) and (4) of Cap 219 only concern with the correctness and truthfulness of the recital, statement and description contained in the produced documents. They do not exonerate your client’s duty to prove title by producing documents required under Section 13(1) of Cap 219.

As regards your observation, we would comment as follows:

(i) According to the recitals of the Assignment Memorial No.UB256981 and the Deed of Mutual Covenant Memorial No. UB126758, the said two letters contain terms and conditions relating to the said Conditions of Grant. They do form part of the government lease and are required to produce under Section 13(1)(a) of Cap 219. Further, the recitals also state that they are deposited in the Land Office. The Government must have record of the said two letters. Your client should be able to obtain their certified copies from the Government.

(ii) Unlike the letter dated 21^st March 1930, it is clear that the said two letters are not attached to the produced certified copy of Conditions of Grant. That is why we do not insist on production of a certified copy of the Letter dated 21^st March 1930 but still require you to produced certified copies of the said two letters. If you read the notes on the 6^th pages of the Conditions of Grant, you may notice that the terms and conditions were still not concluded in August and September 1923. Thus, we do not agree with your view that the produced certified copy of Conditions of Grant would show any contents of the said two letters.

(iii) You have not explained to us why the certified copies of the said two letters cannot be produced. Your mere assertion that they are not found in the produced certified copy of Conditions of Grant is no answer to our requisition. Your argument of estoppel against the government is not sound and is bound to fail.

(iv)–(vi) Our requisition is not on the duration of the lease term. We are asking for production of the certified copies of the said two letters. Please let us have a positive and relevant reply.

(vii) From your previous letters, you have not mentioned the said two letters are not obtainable from the Land Registry.  You basically rely on Sections 13(3) and 13(4) of Cap 219 to answer our requisition.  Please let us know why the Land Registry or other government authority cannot produce the certified copies of the said two letters before we further consider your answer.”

18.MBJSM replied on 15 October 2015:

3. a.&b.  We reiterate that the vendor is entitled to rely on Section 13(3) and (4) of the Conveyancing and Property Ordinance, Cap 219 and that the requested documents are not required to be produced for proving title.

Having said that, we would respond to your comments as follows: -

(i) Without prejudice to the foregoing but only as a gesture of goodwill, we have written to the District Lands Office, Hong Kong West and South and asked if they have in their possession of the two letters respectively dated 22 November 1923 and 29 December 1924 (collectively the “Letters”).  A Mr Ngai of the District Lands Office verbally replied to us that they should not have kept the Letters.

(ii) We clarify and reiterate that the certified copy Conditions of Grant No. UB1453 (the “Conditions of Grant”) produced to you which are comprised of the several memoranda, letters and documents have already denoted the essential terms of the Government grant.

(iii) We do not understand your requisition.  The fact is that the Letters are not found in the certified copy Conditions of Grant. We hold the view that it should be the Government who will enforce the terms under the Conditions of Grant.  If the Letters are not found in the Conditions of Grant, it seems that the Government will have no record of the Letters.  In this regard, we do not see the Government can have any chance to rely on the Letters and enforce them.  We are of the view our argument that the Government should be estopped from relying on the Letters are sound, strong and valid.

(iv)-(vi) Please refer to our reply as aforesaid.

(vii) Although we have not expressly mentioned under our previous letters that the Letters are not obtainable from the Land Registry, we trust you should be aware of this by reviewing the land search record under which the Letters are not shown to have been registered in the Land Registry.”

19.On 16 October 2015, MBJSM wrote to W&P to enclose its correspondence with the District Lands Office which confirmed that the latter did not have record of the 2 Letters.

20.W&P advanced a further argument on the need to have the 2 Letters in a letter of 19 October 2015:

“ 3. a.&b. What about rights which the Leasees [sic] may enforce against the Government which may be stipulated in the two letters.”

21.MBJSM replied on the same date taking the following view:

“ 3. a.&b. We are of the view that what you have mentioned under your said letter is illusory. We repeat our previous replies to requisitions and have nothing to add.”

22.On 23 October 2015, MBJSM reiterated that the 2 Letters could not be provided and there should not be a blot on title.  They requested W&P to send the draft assignment and draft undertaking letter for approval.

23.W&P refuted that on 28 October 2015:

“ We refer to your letter dated 23^rd October 2015.

We disagree with your allegation that our request for certified copy of the two letters respectively dated 22^nd November 2013 and 29^th December 2014 is meaningless. We must stress that the two letters affecting the terms of the Government Lease do form part of the ultimate root of title. It is held in the decisions of Gatewood Limited v Silver Noble Investments Limited (1992) and Wong Wai Ming v Tang Tat Chi (1993) that unless otherwise provided in the contract, the purchaser is entitled to a tangible copy of the Government Lease. Our client is therefore perfectly entitled to tangible copies of these two letters.

Your mere answer that the District Land Office does not have any record cannot exonerate your client’s duty to produce certified copy of the two letters under Agreement for Sale and Purchase dated 16^th April 2015 and Section 13(1) of the Conveyancing Property Ordinance. Even if the two letters were lost, our client shall be entitled to other documentary evidence to show the contents of the two letters. However, you have failed to provide us with such evidence nor show us the terms of the two letters.

In the circumstances, our requisitions remain unanswered.  We must stress that our client is not bound to complete unless and until good title is proven and shown to us.”

24.MBJSM maintained their stance in a letter of 29 October 2015:

“ 3. a.&b.  We clarify what we meant is that, having known the two letters respectively dated 22 November 1923 and 29 December 1924 (the “Letters”) cannot be provided but still repeatedly request for certified copies is meaningless.

A tangible Government Lease has already been provided to you.

A reply letter from the District Lands Office dated 16 October 2015 has also been provided to you.

The Letters are neither obtainable from the Land Registry nor obtainable from the District Lands Office.  If you have other possible ways to obtain the Letters, please enlighten us.

We hold the view that there should not be a blot on title as the Government should be estopped from relying on the Letters.  We repeat all our previous replies to your requisitions.”

25.On the same date, by another letter, MBJSM demanded payment of the balance of purchase price with interest pursuant to Clause 3(6) of the Agreement within 21 days.

26.W&P replied on 30 October 2015 reiterating that the requisition regarding the 2 Letters had not been properly answered and the Plaintiff was not obliged to complete.  The following contention was made in the letter:

“ 3. a.&b. With respect, the mere production of Conditions of Grant No.UB1453 cannot discharge your client’s duty to show and prove the ultimate root of title. The term of “Government Lease” is clearly defined in Section 3 of Cap 1, which covers “any instruments whereby the term of a government lease may have been extended or the provisions thereof varied and any agreement for a government lease”. This means that your client as vendor must produce the original or a certified copy of the two letters which are instruments, modifying, varying or altering the government lease. Our client is entitled to a tangible certified copy of the two letters.

Your failure to produce the same amounts to a breach of the contractual duty to show and prove good title and the statutory duty under Section 13(1) of Cap 219.

We must stress that no other evidence has ever been adduced by you to show the terms of the two letters.  Our client would not accept your assertion of the estoppal without any knowledge to the contents of the two letters.”

27.MBJSM replied on 3 November 2015 repeating their previous stance and replies.  They also offered to show W&P an opinion by a senior counsel on whether the CG was sufficient and could be taken as a Government Lease for the purpose of Section 13(1) of the Conveyancing and Property Ordinance Cap 219.

28.W&P asked for a copy of the opinion but MBJSM was only willing to show the opinion to them at its office. 

29.By then, the completion date had been re-scheduled to 19 November 2015.  The Plaintiff maintained the view that it was not obliged to complete because a good title had not been shown. 

30.In the wake of the lack of substantive progress, the Plaintiff instructed another solicitor firm [“KMLL”] to take out a vendor and purchaser’s summons on 17 November 2015.

C.  The title deeds

31.Before we address the issues raised in this appeal, it is also necessary to set out the physical condition of the CG in respect of the Property.  A copy of the CG was produced as exhibit TKKJ-2.  The front page is a pro-forma front cover for government lease bearing the Grant No.  1453, the lot no. of the land (RBL 238-244) and the names of the grantees (R.H. Kotewall and others).  The term of the lease was left blank as were the amount of Crown Rent and Premium.  The contents of the CG are not in the format of a set of General Conditions and Special Conditions as the terms of the lease with a memorandum bearing the signatures of the parties.  Instead, it is a bundle of documents[1], starting with the minutes from the Director of Public Works to the Colonial Secretary of 25 August 1923, C.S.O 1394/23 which set out the terms of a proposed sale to Mr Kotewall.   The minutes were followed by written endorsements of the approval to such a sale by private treaty by the Council, signed by the clerk of council on 27 September 1923 and 23 October 1923.  According to the last endorsement:                   

“ Council approved the recommendations of the Director of Public Works with regard to the sale of land by private treaty to the Honourable Mr Kotewall and his associates with the substitution of minimum of 25 houses to be built on the lot instead of 20.”

32.The next document in the CG was a letter of 12 January 1924 from the Director of Public Works to Mr Kotewall.  It was a reply to a letter from Mr Kotewall of 29 November 1923, informing him that the land referred to in an earlier letter of 22 November 1923 from the Director of Public Works was at Mr Kotewall’s disposal.  Mr Kotewall was requested to pay $84,751 as premium and the Lot Nos as well as the Crown rent for the land were also set out. 

33.The letters of 22 and 29 November 1923 were not in the CG.  The letter of 22 November 1923 is one of the 2 Letters.

34.The next document in the CG is a pro-forma record of the state of compliance with the building covenant in respect of RB Lot Nos 238/44.  However, there are parts of the record that are not legible. The date of sale was stated as 12 January 1924 and the owner’s name was R.H. Kotewall.

35.The next document in terms of dates in the CG is a letter of 21 March 1930 from the Director of Public Works to Dr Kotewall.  It referred to an earlier letter of 23 December 1929 (not in the CG) from Dr Kotewall and it informed him that the Government had approved the amendments of the terms and conditions in respect of RB Lot Nos 238-244 & 252 in the manner set out in that letter. 

36.By a letter of 25 March 1930, also in the CG, Dr Kotewall wrote to the Director of Public Works agreeing those amended terms and conditions. 

37.There are other documents in the CG which we do not find necessary to recite in this judgment.  These documents were of diverse dates and some of them concerned only a specified portion of a specified lot. The whole bundle of documents in the CG was deposited in the Land Registry and apparently documents were added to the CG so deposited over the years as the latest document was a letter of 6 December 1994 concerning RP of Section B of RB Lot No 244.

38.As mentioned, a certified copy of the CG was included in the title deeds supplied by MBJSM to WP.

39.Another title deed supplied by MBJSM[2] was a Deed of Covenants of 7 May 1931, memorial No.UB126758.  This Deed was executed between Mr Robert H Kotewall and the various persons named in the First Schedule as co-developers of RB Lot Nos 238-244 and 252 to set out their mutual rights and obligations.  The history regarding the acquisition of the lots and the obligations of the grantees under Grant No 1453 was set out in the Recitals. 

40.For our purposes, these two recitals are material:

“    WHEREAS by two several letters dated respectively the 22^nd day of November 1923 and 29^th day of December 1924 and addressed to the party hereto of the first part by The Honourable The Director of Public Works the Government of Hong Kong agreed to sell to the party hereto of the first part and Li Yau Tsun, Fung Ping Shan and Li Wing Kwong (hereinafter called “the Lessees”) All Those pieces or parcels of ground situate lying and being at Stanley in the Colony of Hong Kong and known and registered in the Land Office as Rural Building Lots Nos 238, 239, 240, 241, 242, 243, 244 and 252 under and subject to the terms and conditions therein contained.

AND WHEREAS the said terms and conditions were duly accepted and were deposited in the Land Office as Conditions of Grant No. 1453 (which said letters containing the said terms and conditions and another letter hereinafter recited dated the 21^st dayof March 1930 addressed to the party hereto of the first part by the Honourable The Director of Public Works are hereinafter referred to as “the said Agreement”).”

41.The 2 Letters were referred to in the first recital. The terms and conditions of the Grant were alluded to in the second recital. 

42.The next document in the chain of title is an assignment of 23 December 1932 from Dr Robert H Kotewall to Li Tsok Lai, memorial No.135353 in respect of the Lot.  The assignment contained recitals, including those similar to the two recitals set out above[3]. 

43.The intermediate root of title is an assignment of 8 February 1957 from Kwok King Tong to Kui Fat Yuen Limited, memorial No.256981 in respect of the Lot.  Again the two recitals appeared, subject to the typo of the Grant No.[4]    

44.The Defendant acquired the Lot from Kui Fat Yuen Limited by an assignment of 19 September 2007, memorial no.07081301270325.

D.  The issues

45.Mr Chan emphasized that the Plaintiff seeks relief on the basis of the failure on the part of the Defendant to show good title.  The Judge’s reasoning in the judgment of 14 March 2017 was as follows:

(a)   The 2 Letters form part of the agreement for the Government Lease;

(b)   As such the Defendant was prima facie obliged to produce the originals or certified copies of them under section 13(1) of the Conveyancing and Property Ordinance [“CPO”];

(c)   The Defendant cannot rely on section 13(3)(b) of the CPO to escape from such obligation as the effect of that subsection is only limited to material content of the document recited for the purpose of the document containing the recital in question;

(d)   Though the Judge did not separately discuss section 13(4) of CPO, he held at [51] of the judgment that the Defendant could not rely on section 13(4);

(e)   The Judge held that the Defendant did not conduct sufficient investigation to determine the existence or whereabouts of the 2 Letters or copies of the same.  In particular, the Defendant had not approached Messrs.  Lo & Lo and Messrs Lau Chan & Ko (the solicitors responsible for the 1932 and 1957 assignments respectively) and the Government Records Service; and

(f)   The Judge considered that there could be other terms in the Government Lease which had not been set out in the CG and the Government would not be estopped from placing reliance on the covenants in the 2 Letters.

46.In our judgment, the crucial issue in this appeal is the duty of a vendor in showing a good title and the production of documents in light of section 13 of CPO.  That section reads:

“ 13. Proof of title and recitals

(1) Unless the contrary intention is expressed, a purchaser of land shall be entitled to require from the vendor, as proof of title to that land, only production of the Government lease relating to the land sold and—

(a) proof of title to that land—

(i) where the grant of the Government lease was less than 15 years before the contract of sale of that land, extending for the period since that grant; or

(ii) in any other case, extending not less than 15 years before the contract of sale of that land commencing with an assignment, a mortgage by assignment or a legal charge, each dealing with the whole estate and interest in that land;

(b) production of any document referred to in the assignment, mortgage or charge mentioned in paragraph (a) creating or disposing of an interest, power or obligation, which is not shown to have ceased or expired and subject to which any part of that land is disposed of; and

(c) production of any power of attorney under which any document produced is executed where that document was executed less than 15 years before the contract of sale of that land.

(2) Where this section requires the production of any document, it shall be sufficient to produce a copy—

(a) attested, before 1 November 1984, by 2 solicitors’ clerks; or

(b) certified by a public officer or a solicitor,

to be a true copy.

(3) Subject to subsection (1), where any document produced as proof of title to any land contains a recital of any document dated or made before the date from which a vendor is required to prove title, the purchaser of that land shall assume, unless the contrary is proved, that—

(a) the recital is correct;

(b) the recital gives all the material contents of the document recited; and

(c) the document recited was duly executed and perfected.

(4) A recital, statement, and description of any fact, matter or party contained in any document of title, mortgage, declaration or power of attorney relating to any land and dated or made not less than 15 years before the contract of sale of that land shall, for the purposes of any question as to proof of title concerning the parties to that contract and unless the contrary is proved, be sufficient evidence of the truth of that recital, statement and description.

(4A) Where any document is or has been produced by a vendor as proof of title to any land and that document purports to have been executed, not less than 15 years before the contract of sale of that land, under a power of attorney, it shall for the purposes of any question as to the title to that land be conclusively presumed—

(a) as between the parties to that contract; and

(b) in favour of the purchaser under that contract as against any other person,

that the power of attorney—

(i) was validly executed;

(ii) was in force at the time of the execution of that document; and

(iii) validly authorized the execution of that document.

(5) This section affects only the rights and obligations of the parties to a contract for the sale of land entered into after the commencement of this section.”

47.For the sake of completeness, one must also refer to Section 13A of CPO, though that section addresses the giving of title and proprietary right over title deeds upon completion instead of showing of title:

“ 13A Delivery of original deeds or documents of title

(1) Unless the contrary intention is expressed, a purchaser of land shall be entitled to require the vendor to deliver to him, for the purpose of giving title to that land, the original of both of the following only—

(a) if there is a Government lease that relates exclusively to the land, the lease; and

(b) any document that relates exclusively to the land and is required to be produced by the vendor as proof of title to that land under section 13(1)(a) and (c).

(2) Subsection (1) does not affect any rule of common law under which the vendor may discharge his obligation to give title to that land otherwise than by delivering the Government lease or document to the purchaser.

(3) If the vendor is not required to deliver to the purchaser a document in giving title to that land, the purchaser has no proprietary right or ownership in the document.

(4) The fact that—

(a) the vendor is not required to deliver to the purchaser a document in giving title to that land; and

(b) the purchaser has no proprietary right or ownership in the document,

does not affect the right or interest of any other person in that land.”

48.As section 13 had been considered by the Court of Final Appeal in De Monsa Investment v Whole Win Management Fund (2013) 16 HKCFAR 419 and the issue of missing documents in a conveyancing transaction had been discussed by this Court (Cheung CJHC, as Cheung PJ then was, Chu JA and D Pang J, as Pang JA then was) in Zhang Xueshuai v Lai Chan Wing [2015] 2 HKLRD 246,we would start our consideration of the issues by distilling some applicable principles from these authorities. 

E.  De Monsa Investment v Whole Win Management Fund

49.In De Monsa, the vendor was unable to produce some title documents or to provide a satisfactory explanation for their absence.  Mr Chan correctly submitted that on its facts the dispute in that case concerned the duty to give a good title instead of the duty to show a good title.  The certified copies of the missing documents were produced and the obligation of the vendor under section 13(1) was satisfied.  But this does not mean that the judgment of the Court of Final Appeal has no relevance for present purposes. 

50.As held by Ribeiro PJ and Gleeson NPJ in their joint judgment at [36], there are three different (though related) subjects:

(a)  The documents a purchaser is entitled to require a vendor to produce as proof of title at the stage of showing title;

(b)  The documents a purchaser is entitled to require a vendor to deliver upon completion for the purpose of giving title; and

(c)  The purchaser’s proprietary right in the title documents.

51.In the present appeal, Mr Chan submitted that we are only concerned with the showing of title and Section 13 of CPO is the relevant section for our consideration.  That analysis may be correct as far as the Plaintiff’s case is concerned.  However, there is a counterclaim by the Defendant which is repeated in the notice of appeal.  The counterclaim sought declaratory and other relief on the basis that the Defendant had shown and was able to give a good title and therefore entitled to serve the Notice of Determination on 27 November 2015.   

52.There is no issue regarding the proprietary right in respect of the title documents in the present case since the Grant No 1453 was in respect of RB Lot Nos 238-244, not exclusively in respect of the Property.  Further, there is no suggestion that they had been in the possession or power of the Defendant.

53.Although the showing and the giving of title are two stages in the conveyancing process, as observed by Ribeiro PJ and Gleeson NPJ, they are related.  In the context of missing documents, the Court of Final Appeal clearly rejected the proposition that in order to give a good title, every missing document had to be accounted for by secondary evidence.  Ribeiro PJ and Gleeson NPJ (with whom the Chief Justice agreed) said at [45]:

“ … In our view, the vendor’s inability to produce an original document of title rather than a certified copy, and to account for the absence of the original to the standard required for secondary evidence, would only have justified refusal to complete where the absence of the original would indicate the realistic possibility of some transaction affecting the land which could affect the purchaser if it took title.”

54.Chan PJ expressed a similar view at [31]:

“ In my view, if there is a reasonable suspicion on the title where the vendor cannot deliver on completion the original of a relevant title document or to provide a satisfactory explanation for its absence, the purchaser should not be compelled to complete the transaction, running the risk that his title may in future be validly questioned. In such a case, but only in such a case, he is entitled to refuse completion.”

55.Litton NPJ arrived at the same result by analysing the obligation of a vendor to give a good title with reference to the well-known test in MEPC Ltd v Christian-Edwards [1981] AC 205, see [106] – [110].  At [129], His Lordship said:

“ The question boils down to this: is there a real risk that … the purchaser was not receiving a good title to the property in this case?”

56.Thus, all members of the Court of Final Appeal clearly expounded the view that one cannot automatically conclude that a title is not good whenever a title deed is missing and no satisfactory secondary evidence is available.  A conveyancer has to examine the significance of the fact that such document is missing and any potential blot that the loss of that document may occasion to the title. 

57.The rationale for so holding was explained by Chan PJ at [29]:

“ In my view, the fact that the purchaser has a right to the delivery of the title documents does not necessarily mean that he is automatically entitled to rescind and refuse completion if the vendor fails to do so or explain why. Whether the purchaser can do so must depend on the circumstances of each case. In considering whether he is entitled to refuse completion, one should bear in mind that the object of the transaction is for the purchaser to acquire a good title in the property…”

58.And that should be read together with [27]:

“ Obviously, it would defeat the very object of a sale and purchase transaction if a purchaser is entitled to refuse completion even if the originals of the most insignificant title documents which have no realistic possibility of affecting good title are missing and the vendor cannot for some reason offer any satisfactory explanation for their absence ...”

59.Litton NPJ also observed at [106]:

“ The obligations imposed on the vendor in this case to show good title and give good title arise by necessary implication, in order to make the contract work, and give effect to the parties’ bargain.”

60.That observation was made in the context of the implied duty to show and give good title because the parties there had not signed a formal sale and purchase agreement.  However, though there is a formal sale and purchase agreement in the present case, counsel did not refer us to anything in that agreement to suggest that a more onerous duty to show and give good title arises from the relevant clauses.  The object of the transaction remains the conveyance of a good title of the property by the Plaintiff to the Defendant. 

61.The relevant clauses are Clauses 9, 10(1), 13 and 14 of the formal agreement of 16 April 2015:

“9.(1) Subject to Clause 13(2) and without prejudice to Section 13 and 13A of the Conveyancing and Property Ordinance (Cap 219), the Vendor shall not restrict the Purchaser’s right under the law to raise requisition or objection in respect of title.

(2) If the Purchaser makes and insists on any objection or requisition in respect of the title or otherwise which the Vendor is unable or (on the ground of difficulty, delay or expense or on any other reasonable ground) unwilling to remove or comply with, the Vendor is, notwithstanding any previous negotiation or litigation, at liberty to cancel the sale on giving to the Purchaser or his Solicitors at least 14 days’ notice in writing to that effect, in which case unless the objection or requisition is in the meantime withdrawn, the sale is cancelled on the expiry of the notice and the Purchaser is entitled to a return of the deposit and other sums of money already paid but without interest, costs or compensation.

(3) If the Purchaser shall exercise the right under Clause 12(1)(c) hereof to instruct his own solicitors to act for him in this Agreement and/or the subsequent Assignment, any requisition or objection in respect of the title to the Property shall be delivered in writing to the Vendor’s Solicitors within sever (7) days after delivery of the title deeds to the Purchaser’s solicitors and if no requisition or objection is made within this period, the Purchaser shall be deemed to have accepted the Vendor’s title or waived his rights to make such requisition or objection.

10.(1) The Property is sold subject to and with the benefit of the Government Grant, for the term of years created by or absolutely (as the case may be) and with any right of renewal granted by the Government Grant and subject to all easements (if any) subsisting in the Government Grant.

…

13.(1) The Vendor shall at his own expense show a good title to the Property and produce to the Purchaser for his perusal such certified or other copies of any deeds or documents of title, wills and matters of public record as may be necessary to complete such title. The costs of verifying the title, including search fees, shall be borne by the Purchaser who shall also, if he requires certified copies of any documents in the Vendor’s possession relating to other property retained by the Vendor as well as to the Property, pay the cost of such certified copies.

(2) The Purchaser shall raise no objection if the Vendor’s interest in the Property is an equitable interest and not a legal estate.

14.(1) Such of the documents of title as relate exclusively to the Property will be delivered to the Purcahser. All other documents of title in the possession of the Vendor will be retained by the Vendor who shall, if required on the completion of the sale and purchase, give to the Purchaser a covenant for the safe custody of the documents and for production and delivery of copes of those documents at the expense of the Purchaser, such covenant to be prepared by the Purchaser.

(2) The provision of Clause 14(1) shall survive completion of the sale and purchase by the Assignment.”

62.In Zhang Xueshuai v Lai Chan Wing, supra, Cheung CJHC explained the clarification of the law in De Monsa on the duty of a vendor to produce documents and to account for missing documents. After reciting the previous understanding, His Lordship said at [30]:

“ But the true legal position has since been clarified by the Court of Final Appeal ... The real significance of missing title documents, assuming that contents and due execution are not in issue, only lies in the fact that it may, depending on the facts of each case, give rise to a real risk of a successful assertion of an encumbrance against the property after completion, thereby rendering the title of the vendor defective or doubtful…”

63.And at [31]:

“ A statutory declaration to explain why the relevant title documents are missing is only relevant in the above context if and when it is required to remove a doubt which would otherwise arise by reason of the missing title document. In other words, if, without the statutory declaration, there would be a real doubt arising, a statutory declaration would be required. But, in such a case, a statutory declaration, although a most common means relied on, is not the only possible means that can be resorted to. Depending on the facts, if there are other evidence which can remove the doubt and render the risk fanciful or even non-existence, they can be relied on, either in addition to or in lieu of the statutory declaration. There is no magic to a statutory declaration as such. What is required is satisfactory conveyancing evidence to remove the doubt and render the risk unreal or non-existent altogether.”

64.The crucial issue is, therefore, whether there is any real risk of a successful assertion of an encumbrance on the title.  And this issue should always be the ultimate test, be it at the stage of showing of title or making of title.  Thus, Cheung CJHC said at [32]:

“ …where there is no real risk arising, there is no place for a statutory declaration or any other conveyancing evidence. It is not required for the showing/proving of a good title.”

65.Admittedly, unlike the situation in De Monsa and Zhang Xueshuai, the Defendant in our case was unable to produce any certified copies of the 2 Letters.  Notwithstanding such distinction, these judgmentsstill serve as a reminder that as a matter of general principle the scope of the duty to show a good title (like the duty to give a good title) has to be determined with the object of the transaction in mind.  The discharge of that duty involves production of title documents and answering requisitions.  But one does not request a document or raise requisition on missing documents simply for the sake of having the document or an account for a missing document.  There has to be a nexus between the document or the requisition and the showing and the giving of a good title. 

F.  The test for a good title in a conveyancing transaction

66.As illustrated by the facts of Active Keen Industries Ltd v Fok Chi Keong [1994] 1 HKLRD 396, there could be instances where a vendor with a good title has failed to show one due to the manner in which requisitions were answered.  We shall discuss this issue in the context of the present appeal later.  But it is useful at this juncture to remind ourselves of the test for a good title in conveyancing transaction.

67.Litton NPJ alluded to the relevant authorities in De Monsa at [107] to [110] and summarized the test in these words at [109]:

“ … Is there a real risk that a third party might assert some right over the property, thereby encumbering it or defeating the title altogether?”

68.A good title need not be a perfect title.  In the assessment as to whether there is any real problem in the title the matter should be approached from the stand-point of a willing purchaser and a willing vendor with reasonably robust commonsense.  Thus Litton PJ said in Mexon Holdings Ltd v Silver Bay International Ltd (2000) 3 HKCFAR 109 at 117D-E:

“ A good title does not mean a perfect title, free from every possible blemish. Whenever a question like this arises, it must be approached from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain.”

69.In Chun Tat Paper Co Ltd v Wong Ip Cheng [2013] 1 HKLRD 571, Kwan JA cited with approval the judgment of Liu JA in Jumbo Gold Investment Ltd v Yuen Cheong Leung [1999] 3 HKLRD 825 at p.833 where His Lordship said:

“In a vendor and purchaser summons … the court would be considered best guided by the commercial reality as to whether there is any real risk of problems in title. It is not to be troubled by the absence of an absolute risk-free assurance, nor unduly hampered by strict legal proof in matters requisitioned. Conveyancing practice must be geared to uphold bargains…”

70.Jumbo Gold had reached the Court of Final Appeal.  It was cited by Litton NPJ in De Monsa at [110] as a clear example where the court held that there was no real risk of government taking action to encumber the title.  In that judgment, reported at (2000) 3 HKCFAR 52, Bokhary PJ said at [60]:

“The question is therefore whether, assuming that the Government has [a right of entry on account of an unwaived breach of condition], there is any real risk that it would actually take the drastic step of enforcing it to the detriment of innocent owners. I entirely agree with Justice Litton PJ that the correct answer is in the negative. It is simply not in the nature of good government to harm innocent people unnecessarily like that. Accordingly it is safe to proceed on the basis that the Government would never do so.”

71.A similar approach was adopted by Fok JA (as he then was) in So Mariko v Tse Chun Chung John [2011] 3 HKC 174 where His Lordship applied the robust common sense that a vendor and purchaser summons called for and worked on the assumption of a willing vendor and purchaser, see [40] and [45].

72.See also Jovian Corporate Communications Ltd v Link Wide International Investment [2016] 2 HKLRD 1287.

G.  Is there a good title to the Property?

73.In light of the principles discussed above, the significance of the 2 Letters as regards the title to the Property should be examined by asking if there is any risk of successful assertion of adverse claims or encumbrances upon the Property. 

74.Mr Chan submitted that it is not a question of risk as the 2 Letters have to be produced as the root of title.  Counsel referred to three first instance decisions to support his contention: Gatewood Ltd v Silver Noble Investments Ltd [1993] 1 HKLR 248, BMC International Ltd v Star Development Win Co Ltd [1996] 2 HKLRD 22 and Ho So Yung v Lei Chon Un HCMP 3476/1997, 28 May 1998.

75.Based on those authorities, Mr Chan submitted that the Defendant as vendor must produce the Government Lease as a tangible physical document.  Mere evidence of the existence of the Government Lease and its terms were not sufficient.  If there is good conveyancing evidence that the original Government Lease or related title documents are not available, the vendor could prove by secondary evidence the contents of the missing documents in order to discharge the obligation to prove good title. 

76.Mr Chan further highlighted the importance of having sight of the Government Lease by virtue of the legal principles that in respect of grant by the Government nothing will pass to the grantee but by clear and express words (Earl of Lonsdale v AG [1982] 1 WLR 887; Gold Shine Investment Ltd v Secretary for Justice HCMP 1272/2008, at [12]). Counsel also said it is important to know the full terms and covenants as the Government has not granted any right to use the land in a manner not permitted by the lease (Director of Lands v Yin Shuen Enterprises Ltd (2003) 6 HKCFAR 1 at [27]). 

77.With respect, we do not accept Mr Chan’s submissions based on the three first instance decisions.  Those decisions were made prior to De Monsa and they must be read cautiously bearing in mind the clarification of the law on missing title documents as expounded in the judgments of De Monsa and Zhang Xueshuai. 

78.Whilst the missing documents in De Monsa and Zhang Xueshuai were not the Government lease, we cannot see any material difference in principle in the application of the analysis under Sections E and F above.  The production of the Government Lease as the root of title and raising of requisitions regarding a missing Government Lease, like cases involving other missing title documents, are for the purpose of proving a good title to the property.   The test for good title (as discussed in Section F above) remains the same.  

79.As reflected in Mr Chan’s acceptance that secondary evidence of the Government Lease can be relied upon to prove good title, counsel also accepted that the purpose of the process is title oriented.  As stated above, one does not seek to have a document (or secondary evidence of such document) simply for the sake of having it.  One seeks to have it for the purpose of proving title.  The rationale behind the exercise is to give effect to the object of the transaction, sale and purchase of the property with a good title.

80.Thus, production of relevant documentary evidence is required to establish that the vendor has a good title.  In the present case the Defendant has produced a certified copy of the CG.  In this respect, the situation we face is different from the three first instance decisions.  In Gatewood and Ho So Yung, the Government Grant or lease could not be produced at all and counsel for the vendors had to rely on the proposition that the lost Grant or lease had already ceased to have effect and the current titles were derived from a new Crown lease by operation of the New Territories (Renewable Crown Leases) Ordinance Cap 152 and the New Territories Leases (Extension) Ordinance Cap 150. 

81.We do not have to decide in the present appeal whether the contention based on renewal or extension of Government Lease would prevail today in light of the analysis in De Monsa and Zhang Xueshuai. In principle, we must reject the proposition that there is an absolute duty on the part of a vendor to prove title by producing a tangible copy of the Government Lease without regard to the significance of the missing document to the title of the property.  Such proposition is inconsistent with the law as clarified in De Monsa and applied in Zhang Xueshuai.  

82.Insofar as the judges in those authorities derived such absolute duty from section 13(1) of CPO, we respectfully disagree.  The production of the Government lease is, as stated explicitly in that sub-section, part of the process of proof of title.  As Mr Chan rightly accepted, under common law a good title can still be proved even if a relevant Government lease or some other title documents were lost.  This common law rule is reinforced by section 13A(2) (a provision added in 2008) which expressly provides that a good title can be given by means other than by delivering the Government lease. 

83.Given the relationship between the giving of title and proving of title and the analysis in Section E above, it makes no sense to have an absolute rule requiring a tangible copy of the Government lease or its certified copy to be produced to show good title when there is no such absolute requirement for the giving of a good title.

84.The Court of Final Appeal held in Leung Kwai Lin v Wu Wing Kuen (2001) 4 HKCFAR 55 that section 13(1) was enacted to facilitate conveyancing and it does not preclude the proof of title by secondary means.  We also noted that Gatewood was one of the six decisions overruled by the Court of Appeal in Wu Wing Kuen, see [1999] 3 HKLRD 738 at p.746, and the analysis of Godfrey JA was endorsed by Litton PJ in the Court of Final Appeal at p.63C to E.

85.Having said that, we must reiterate that the secondary evidence has to be clear and cogent.  Prior to De Monsa, it was thought that the secondary evidence had to take the form of a statutory declaration regarding the loss of the document and the contents of the document.  As explained above, the Court of Final Appeal clarified that there is no such absolute rule.  Further, as pointed out by Cheung CJHC in Zhang Xueshuai at [31], statutory declaration is but one means of proving title despite missing documents.  There could be other means to prove that there is no risk of successful assertion of encumbrance or claim on the property despite the loss of the document.

86.The proof as to the loss of the document can be important because unaccounted for missing documents can be taken as a risk of equitable charge arising from deposit of title deeds[5]. But this is not a risk that could have arisen in the present context.  The 2 Letters per se cannot be the Government Lease and it would indeed be fanciful to suggest that there is a risk of an equitable charge being created by the deposit of the 2 Letters. 

87.As regards the contents of the missing document, as we shall demonstrate below, in the present context, when there is sufficient evidence to prove that the contents of the 2 Letters could not have affected the proof of the Government Lease, it is not necessary to prove the exact contents of the 2 Letters.  After all, as repeatedly emphasized by Chan PJ in De Monsa, the object of the transaction is sale and purchase of the property with a good title and it would defeat such object if the transaction can be frustrated by a missing document which could not in any way affect the title.

88.However, before we come to secondary evidence in the present context, we must first address the submission of Mr Yu SC (appearing with Ms Ho) that the Recorder erred in holding that the 2 Letters formed part of the Government Lease. 

89.Mr Yu submitted that it was the CG (viz the bundle of documents), certified copies of which had been produced, that constituted the Government Lease rather than the 2 Letters. 

90.He further submitted that by virtue of Section 13(4) CPO, the Defendant can rely on the recitals in the Deed of Covenant that the terms and conditions of the Government Grant had been deposited in the Land Office.  

91.A certified copy of the CG was produced by the Defendant.  It is crystal clear from the documents in the CG that no formal Government Lease or formal memorandum of agreement had been executed in respect of this Grant.  The sale was by private treaty and the transaction was evidenced by correspondence instead of being embodied in one single instrument.  Thus, in all subsequent title deeds, the recitals alluded to the terms and conditions of the Grant deposited in the Land Office as the terms of the agreement between the Government and the grantees.  

92.Though the recitals also referred to the 2 Letters addressed to Mr Robert H Kotewall as the agreement to sell from the Director of Public Works, the letters themselves could not be the agreement itself (as opposed to being part of the evidence of the agreement).  The context for the first of the 2 Letters, viz the letter dated 22 November 1923, was that on 23 October 1923 the Council approved the recommendations of the Director of Public Works with regard to the sale of the land by private treaty to Mr Kotewall and his associates on the terms proposed in the minutes of 25 August 1923 with the substitution in the building covenant of minimum of 25 houses to be built instead of 20.  The approval was endorsed on the minutes, see p.333(7) of the Appeal Bundle B. 

93.Given that there was no approval for other terms and conditions, the irresistible inference is that the letter from the Director of Public Works to Mr Kotewall dated 22 November 1923 would set out the same terms and conditions as approved.  The next letter in the CG was a letter of 12 January 1924 from the Director of Public Works to Mr Kotewall advising the latter that the land was at his disposal, cross-referencing to the letter of 22 November 1923 and requesting Mr Kotewall to pay the premium at $84,751.  The annual rents for the Lots were also set out in the letter of 12 January 1924.

94.In the first pro-forma document recording compliance with building covenant included in the CG at p.333(10) of the Appeal Bundle B, the date of sale was stated to be “12.1.24”, the same as the date of that letter.  It is not clear if Mr Kotewall agreed to the terms in writing or if he agreed by conduct by payment of the premium. 

95.The CG did not contain any reference to the letter of 29 December 1924, the second of the 2 Letters.  However, given that the date of sale was 12 January 1924, pre-dating the letter of 29 December 1924, that letter could not be the agreement itself. The documents in the CG evidenced that the building covenant was not fulfilled within the time originally prescribed (36 months, see sub-paragraph (f) at Appeal Bundle B p.269 and the pro-forma record at p.281. 

96.Apparently, on 23 December 1929, Dr Kotewall sought further extension of time to fulfil the building covenant and made request for amendment of the conditions.  That letter was not in the CG.  But the response from the Director of Public Works dated 21 March 1930 was in the CG at Appeal Bundle B p.279.  By a letter dated 25 March 1930 (in the CG, at Appeal Bundle B p.278) Dr Kotewall accepted those conditions.

97.The CG contained other extensions and letters of modification of some conditions in respect of various parts of these Lots. 

98.In view of these documents in the CG, the 2 Letters could not be the agreement itself.  They were letters in a series of correspondence evidencing the agreement to grant a lease. 

99.The question is whether such letters come within the definition of Government lease under Section 3 of the Interpretation and General Clauses Ordinance Cap 1.  Mr Chan submitted they do because given there was never any formal grant, the agreement for the grant was evidenced by the 2 Letters as the offer and the acceptance of the offer by Mr Kotewall. 

100.Section 3 provides as follows:

“ Government lease (政府租契) means a lease of land granted by or on behalf of the Government, and includes—

(a) an instrument whereby—

(i) the term of the lease has been extended; or

(ii) the provisions of the lease have been varied;

(b) an agreement for such a lease; and

(c) a Crown lease;”

101.We have to apply this definition to a transaction where there was no formal memorandum of Grant and the making of the agreement was evidenced by a series of correspondence and the acts of performance (payment of premium and placing the land at the disposal of the grantees).  If the documents in the CG can be regarded as the Government Lease (as contended by Mr Yu), we cannot see any basis for suggesting that the 2 Letters could not form at least part of the series of correspondence, as such also coming with such definition.

102.In our judgment, the definition under Section 3 has to be applied broadly in a transaction evidenced in writing as opposed to being made in writing.  The 2 Letters were part of the series of written instruments evidencing the grant.  The judge was correct in holding that they come within the meaning of Government Lease for the purpose of Section 13(1).

103.Mr Yu’s submission based on the Recitals only addressed the proof of the terms and conditions of the grant, which in turn goes to the proof of the root of title.  But it cannot assist him in excluding the 2 Letters from the definition of Government Lease.            

104.On the other hand, given that the 2 Letters were only part of the series of written instruments evidencing the grant, there were other documents also evidencing the grant included in the CG.  Hence, the fact that the 2 Letters are within the definition of Government Lease does not mean that the Defendant had not produced the Government Lease by sending a certified copy of the CG to the Plaintiff’s solicitors.  As we have seen there were documents in the CG which also evidenced the Grant.

105.In the context where the grant itself is not contained in a single document (whether by way of a memorandum of sale or a formal lease), in order to determine if the CG (and its certified copy) can be sufficiently regarded as evidence of the Government Lease, one has to assess if there is sufficient evidence of the issue of the grant by the Government, the subject matter of the grant, the duration of the grant, the rent and other terms and conditions for the grant.  These are the matters that a person deriving title from the Government Lease would need to prove his title.  

106.If the CG contained sufficient documents evidencing the Grant and these matters, there is no sound reason in principle for not accepting the CG as the Government Lease for the purpose of Section 13(1) in light of the above analysis as to the purpose and effect of that sub-section.  In other words, the 2 Letters are simply part of the documentary trail in evidencing the Grant.  Actually, the production of the 2 Letters themselves could not prove the Grant (since at the highest, as Mr Chan accepted, they only contained offers from the Director of Public Works).  If there exists other documentary evidence in the paper trail to prove the Grant beyond reasonable doubt without the 2 Letters, the inability to produce the 2 Letters would not stand in the way of the proof of the Government Lease by the CG.    

107.We have gone through the documents in the CG (as discussed above).  Plainly, the internal minutes with the endorsement by the clerk to the Council is the clearest evidence of the agreement of the Government to sell Rural Building Lot Nos 238-244 to Mr Kotewall.  The terms and conditions were set out in the minutes subject to the change imposed by the Council as to the minimum number of houses to be built as stated in the endorsement.  The duration of the Grant was as stated under condition (c) at Appeal Bundle B268 (read together with B333(2) of that bundle) for 75 years renewable for another 75 years.  The whole transaction took effect upon the land being placed at the disposal of Mr Kotewall as evidenced by the letter of 12 January 1924. 

108.Mr Chan submitted that without the production of the 2 Letters, it is not possible to establish that all the terms and conditions for the Grant were set out in the CG.  Further, counsel submitted that there is uncertainty regarding the rights and benefits granted. 

109.With respect, we cannot accept these submissions. 

110.Whilst Mr Chan was correct in that the terms and conditions set out in the minutes of 25 August 1923 pre-dated the letter of 22 November 1923 (by which the terms were offered to Mr Kotewall), the endorsement by the clerk to the Council as to the approval (with amendment) of the terms was dated 23 October 1923.  There was no other approval by the Council of any other terms in the minutes prior to 22 November 1923.  The subject matter of the Grant was Lots Nos 238 to 244 in accordance with the terms and conditions set out in the minutes.    

111.In this connection, it should be noted that the certified copy of the CG was certified by an officer of the Land Registry, see letter of 23 September 2015 from MBJSM to W&P.  As Mr Chan pointed out in the course of his oral submissions, the depositing of the terms and conditions in the Land Registry (formerly known as the Land Office) was not the same process as the registration of title deeds under the Land Registration Ordinance.  The depositing of the CG under the cover of Conditions of Grant No.1453 (and adding documents affecting the terms of the Grant to the CG over the years, as evidenced by the inclusion of documents subsequent to the first reference to such deposit in recitals in title deeds[6]) was done by public officer(s) on behalf of the Government. 

112.As mentioned in the course of hearing, given the purpose of having the CG deposited at the Land Registry, we found it fanciful to suggest that the public officers responsible for compiling documents to be included in the CG failed to take care to ensure that the documents so deposited adequately set out all the terms and conditions of the Grant.  In this connection, the observation of Bokhary PJ in Jumbo Gold Investment Ltd v Yuen Cheong Leung, supra at [60] is equally pertinent.  It is simply unimaginable that after representing to the public for nearly one century that the terms and conditions were in the CG the Government would assert that there was a further term and condition not set out in the CG based on the 2 Letters, especially when the Lands Department (who is the land agent of the Government) had no record of the 2 Letters.

113.As regards the letter of 29 December 1924, it could not have been the agreement for the sale of RB Lot Nos 238 to 244. According to the letter of 12 January 1924 and pro-forma record at p.281 the sale had already taken effect on 12 January 1924.  We note that a further lot, Lot No 252 was added to the land granted to Mr Kotewall and in the letter of 21 March 1930 applications regarding that lot were processed together with Lot Nos 238 to 244.  Since we are not dealing with Lot No 252, we do not need to investigate if the letter of 29 December 1924 contained some other terms and conditions for Lot No 252.  The present appeal concerns a sale in respect of RP of RB Lot No 243.  In light of the clear evidence that the grant of this lot had taken effect on 12 January 1924, it cannot possibly be suggested that the letter of 29 December 1924 evidenced the terms of the agreement for the relevant grant. 

114.It suffices for present purposes that by virtue of the documents in the CG, it can be concluded from a conveyancing point of view that the surrounding circumstances are so compelling that it is beyond reasonable doubt that the CG contained all the terms and conditions of the Grant.  The risk of successful assertion of unknown encumbrances and unknown obligations under the Grant against the owner of RB Lot No 243 is nil.

115.For these reasons, we hold that the CG, or its certified copy, also comes within the definition of Government Lease and its production satisfies the requirement under Section 13(1) of CPO.  

116.We conclude that the absence of the 2 Letters does not give rise to any doubt to the title of the Defendant and the obligation to produce the Government Lease to prove title was fulfilled by the production of the certified copy of the CG.  The Recorder erred in failing to appreciate that the production of the 2 Letters was not the only means to produce the CG in the context of this Grant.  

H.  Did the Defendant fail in answering the requisitions?

117.Mr Chan submitted that irrespective of the view on the title of the Defendant, MBJSM had not answered the requisitions raised by W&P, as such (relying on Active Keen Industries Ltd v Fok Chi Keong, supra) the Plaintiff was entitled not to complete and the notice of determination issued by MBJSM was invalid.

118.As Litton JA (as he then was) observed in Active Keen Industries Ltd v Fok Chi-keong, supra, at p.407 and p.413, the contractual duty to answer a requisition is not onerous:

“ If the matter was self-evident, the purchaser’s solicitor cannot insist upon a fuller reply. But the vendor’s solicitor must act with total candour, so that the purchaser can be reasonably certain that there are no facts and material relevant to the requisition known to the vendor which have not been disclosed. A requisition as to title is not an occasion for the parties’ solicitors to bandy propositions of law: each party must decide for himself, ultimately, what the legal position is, based upon the facts known to himself …

The contractual duty to answer requisitions properly is not an onerous one.   All that is required of the vendor is candour and common sense.”

119.As we have seen, in the present case the requisitions raised by W&P demanded the production of the 2 Letters on the following grounds:

(a)   As documents referred to in Assignment Memorial No. UB256981 (in the letter of 7 August 2015);

(b)   As documents related to change of the terms of the Conditions of Grant and referred to in the Deed of Covenant Memorial No. UB126758 (letters of 29 September 2015 and 6 October 2015);

(c)   Production of such documents is required under Section 13(1)(b) CPO (letter of 5 October 2015);

(d)   They form part of the government lease and the purchaser was entitled to tangible copies of the same (letters of 5 October 2015 and 28 October 2015); and

(e)   The rights which the Lessees may enforce against the Government as stipulated in the 2 Letters (letter of 19 October 2015).

120.In the letter of 5 October 2015, W&P also said that they were not concerned with the duration of the lease.  Instead they simply asked for production of the 2 Letters notwithstanding the production of the certified copy of CG.  As we have explained by reference to the judgment in De Monsa, such stance is wrong in law.  One must examine the significance of the missing documents in terms of the potential risk to the title.  If the missing documents do not give rise to any risk, it is not necessary to produce the same simply for the sake of having the document. 

121.By way of answer, MBJSM repeatedly stated that the CG (meaning the whole set of documents comprised in the certified copy) was the Government Lease and the 2 Letters were missing.  They also relied on Section 13(3) and (4) of CPO and argument on estoppel to demonstrate that there is no risk of successful assertion of other terms and conditions under the Grant.  As regards the last requisition on the rights of the Lessees, MBJSM replied on 19 October 2015 by saying that such requisition is illusory and repeated previous replies.

122.As analysed above, since the Defendant had already produced a certified copy of the CG which fulfilled the requirement under Section 13(1), the only outstanding requisition of substance which has a bearing on title is the possibility of the letters containing terms and conditions other than those set out in minutes included in the CG and uncertainty as to the rights of the grantees. 

123.In these respects, instead of analysing the effect of the CG as produced, MBJSM relied on Section 13(3) and (4) CPO.

124.The Recorder had this to say in the judgment regarding these statutory provisions at [49] to [51]:

“ 49.   As noted Mr Chan has submitted that section 13(3)(b) cannot have the effect of deeming that the recital in question would contain all the material terms of the document for all purposes.  He submitted for example that such a construction would obviate the need to provide the Government Lease at all, and stressed that in any event the section cannot extinguish the Vendor’s duty to prove title by producing title documents required by section 13(1) of the CPO.

50.   I accept Mr Chan’s analysis that section 13(3)(b) means that the recital gives all the material content of the document recited for the purpose of the document containing the recital in question, and not for all purposes.  Any other interpretation would in my view potentially lead to absurd results, particularly when it is clear that there must be other terms that would be relevant to the property which were not recited in the recital. As such I must with respect reject Mr Ho’s submissions on this point.

51.   To conclude on this point, I find that the Vendor is unable to rely upon s.13(3) and 13(4) to say that all the material contents of the missing Letters have been recited in the recital, and thus that there was no need to produce the Lost Letters for the purposes of proving title.”

125.With respect, irrespective of the correctness of such analysis regarding Section 13(3), the Recorder did not really grapple with Section 13(4).  The purpose of sub-section (4) is to facilitate the proof of title by enabling conveyancers to rely on recitals in a document of title of more than 15 years before the contract of sale.  Its effect is to treat such recitals as sufficient evidence of the truth of any fact or matter contained in the recitals unless the contrary is proved.

126.We agree with Mr Yu that the Defendant was entitled to rely on Section 13(4) to assert that unless there is evidence to the contrary the factual assertion in the recitals in the Deed of Covenants of 1931 and the Assignment of 1932 that the terms and conditions of the Grant were duly accepted and deposited in the Land Office as the CG was true.  The mere fact that the 2 Letters were missing could not be evidence to the contrary. 

127.The terms and conditions in the Grant also cover the rights acquired by the Grantees under the same.  It is not a separate point.

128.Thus, the Defendant had already given a sufficient answer to the requisition regarding the risk arising from unknown conditions and rights set out in the 2 Letters.

129.Adopting the approach of Litton JA in Active Keen, we are of the view that the Defendant has answered the requisitions with candour without holding anything back from the Plaintiff.   The Plaintiff should be able to say with reasonable certainty that there were no facts and material relevant to the requisition known to the Defendant which have not been disclosed.  The concerns raised on the Government Lease had been adequately addressed.

130.With respect, we do not find the criticism at [57] and [58] of the judgment against the failure of MBJSM to enquire with two other solicitor firms and the Public Records Office to be justified.  First, as analysed above, the Defendant had already shown a good title in respect of the Government Lease.  In the absence of any evidence suggesting any risk to the title, the Defendant had no obligation to exhaust all possible sources to find copies of the 2 Letters.  Second, this is particularly so when the District Lands Office had confirmed that they had no record of the 2 Letters, W&P did not respond to the MBJSM’s invitation in the letter of 29 October 2015 to identify other sources to check. 

131.We hold that the Defendant had adequately answered the requisitions. 

I.  Disposition

132.We allow the appeal, set aside the judgment below, and grant the declaratory relief in terms of paragraphs 2 to 4 as prayed for in the notice of appeal.

133.The Defendant also seeks damages and interest for repudiatory breach of the agreement and assessment of damages.

134.There is no evidence on damages and we have no submission from counsel on the same. If the Defendant still seeks the relief of assessment of damages, we direct written submissions (not more than 5 pages) to be lodged on their behalf within 14 days. The Plaintiff will have 14 days to reply thereafter. We shall then give our decision in that respect on the papers without further oral hearing.

135.We also order the Plaintiff to pay the costs of the Defendant in this appeal. Such costs are to be taxed (if not agreed) with certificate for 2 counsel.

136.Last but not least, we thank counsel for their able assistance.

Mr Edward Chan SC leading Mr K M Chong, Ms Joyce Leung and Mr Charles Kwok, instructed by K M Lai & Li, for the plaintiff

Mr Benjamin Yu SC leading Ms Janet Ho, instructed by Mayer Brown, for the defendant