Chu Kwun Lit and Another v. Sze Siu Ching

DCMP 436/2022

[2022] HKDC 892

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 436 OF 2022

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Before:  His Honour Judge MK Liu in Court

Date of Hearing: 22 August 2022

Date of Judgment: 22 August 2022

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JUDGMENT

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1.In these proceedings, the plaintiffs (“Ps”) seek an order to rectify an assignment dated 30 November 2005 (“the Assignment”), by which the defendant (“D”) assigned a property known as Flat J on the 21^st Floor, Sun Lee Building, Nos. 6-28 Ngoi Man Street, Hong Kong (“the Property”) to Ps.

2.The background facts are as follows:

(1)  By a formal sale and purchase agreement signed by Ps and D dated 2 November 2005 (“the SPA”), D agreed to sell and Ps agreed to purchase the Property at HK$800,000 in accordance with the terms of the SPA.  As per the SPA, D shall assign the Property as beneficial owner.[1] The transaction (“the 2005 Transaction”) should be completed on or before 30 November 2005 (“the Completion Date”).[2]

(2)  On 30 November 2005, the parties executed the Assignment.

(3)  In the 2005 Transaction, Ps were represented by the firm Fung & Fung (“F&F”).  D was represented by the firm Tam, Pun & Yipp (“TPY”).  F&F is also the firm acting for Ps in these proceedings.

(4)  In December 2021, the 2^nd plaintiff made an application to Konew Capital International Limited (“Konew”) for a loan, which would be secured by a mortgage of the Property.  Konew’s solicitors, after inspecting the title deeds of the Property, pointed out that there is an important omission in the Assignment (“the Omission”).  What has been omitted in the Assignment is a clause assigning the title to the Property by D to Ps (“the Operative Clause”).

(5)  F&F has contacted TPY and has successfully located D.  F&F has requested D to execute a confirmatory assignment, but there is no reply from D.

(6)  In these circumstances, Ps commenced these proceedings to seek relief from the court to rectify the Assignment.

3.Having perused the evidence as to service produced by Ps, I am satisfied that the documents in these proceedings have been duly served on D.

4.Ps have also produced evidence showing that the rateable value of the Property is HK$100,680.  Accordingly, I am satisfied that Ps’ application is within s.36 of the District Court Ordinance, and I have the jurisdiction to grant relief to Ps if I accept Ps’ case.

5.Ps’ case is that the Omission in the Assignment is a common mistake and ought to be rectified.

6.The principles concerning rectification based upon a common mistake is well established.  A party seeking rectification for a common mistake should show that (a) the parties had a common continuing intention in respect of a particular matter in the instrument to be rectified, (b) there was an outward expression of accord, (c) the intention continued at the time of the execution of the instrument sought to be rectified, and (d) by mistake the instrument did not reflect that common intention.[3]

7.Based upon the evidence before me, it is plain and obvious that the Omission is a common mistake made by both F&F and TPY in the 2005 Transaction.  As shown by the SPA, both Ps and D must have a common continuing intention that on the Completion Date, D would execute an assignment passing the title to the Property to Ps.  This intention was clearly expressed in the SPA.  By the common mistake of both F&F and TPY, the Operative Clause has not been included in the Assignment.  The Omission is the common mistake of the parties’ respective solicitors acting for them in the transaction.  The Omission must be rectified.

8.Of course, the common mistake can be rectified by a confirmatory assignment executed by D.  However, notwithstanding the efforts made by F&F, there is no reply from D.  I would not make a mandatory injunction compelling D to execute a confirmatory assignment.  An injunction is a discretionary relief.  In my view, D is an innocent party, and the Omission is not his fault.  It would not be appropriate if the court’s discretion is exercised against D in these circumstances.

9.Counsel for Ps has invited me to make an order pursuant to s.38A of the District Court Ordinance directing the Registrar of this court to execute a “Deed of Rectification” to rectify the problem.  However, s.38A would only be engaged if there is a judgment or order directing D to execute such a deed but D neglects of refuses to comply with the judgment or order.[4] Since I am not prepared to make an order to compel D to execute any deed, no order under s.38A can be made.

10.In my judgment, the proper relief should be a declaration that the Assignment ought to be rectified and read and construed as if it contained and had at the time of its execution contained the Operative Clause as follows:

“In consideration of the sum of DOLLARS EIGHT HUNDRED ($800,000) Hong Kong Currency paid by the Purchaser to the Vendor (receipt whereof is acknowledged) the Vendor as beneficial owners ASSIGN to the Purchaser the property described in Schedule 2 hereto (“the Property”) TO HOLD the same unto the Purchaser as Joint Tenants for the residue of the term of years created by the Government Lease referred to in the said schedule SUBJECT TO the payment of a due proportion of the yearly government rent reserved by the covenants conditions and provisions contained in the said Government Lease AND SUBJECT TO and with the benefit of the Deed of Mutual Covenant and the Management Agreement referred to in Schedule 1 hereto.”  

11.I grant the declaration as set out in the above.

12.Ps do not seek any costs against D.  This must be correct.  As said in the above, the Omission is the common mistake committed by F&F and TPY in the 2005 Transaction.  D himself is an innocent party.  There be no order as to costs in these proceedings. 

13.I also record that F&F have offered an undertaking to the court that they would not charge Ps for anything in relation to these proceedings.  F&F take responsibility for the Omission.  I accept the undertaking offered by F&F.

14.Lastly, I thank counsel for the assistance provided to the court.

Mr C.C. Ho, instructed by Fung & Fung, for the 1^st and 2^nd plaintiffs

The defendant was not represented and did not appear