Lee Lai Sheung Karita and Another v. Wei Fei Trading Co. Ltd.

HCMP001315/1998

MP1315/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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Coram: The Hon Madam Justice Yuen in Court

Date of hearing: 21 December 1998

Date of handing down of Judgment: 8 March 1999

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JUDGMENT

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1. This is a Vendor and Purchaser Summons. The Plaintiffs are the Purchasers under an Agreement for the Sale and Purchase of a flat in Sai Kung, New Territories. The Agreement contains the usual provision that the Vendor shall give good title to the property and shall prove title in accordance with s.13 of the Conveyancing and Property Ordinance.

The requisition

2. Upon receipt of the title deeds and documents, the Purchasers' solicitors raised the requisition that the Crown Lease for the lot was not supplied, and asked for it for their perusal.

The answer

3. The answer provided was that there was no record (of the Crown Lease) that could be traced from the Land Registry or the Lands Department, and that the "Application for New Grant is therefore treated as the New Government Grant".

The Application for Grant

4. The Vendors relied only on a copy of a file in the Public Records Office. The subject of the file was the lot in question and stated "Application by Tang Ting Fai of Tseng Tau for --- for Building purposes". This file (or at least the extract from this file which has been relied upon by the Vendor) has been referred to by the parties as "the Application for Grant" and I shall refer to it as such.

5. It contains a certificate by the Asst Land Officer of particulars and recommendations he makes on an application made for the lot, for which the Asst Land Officer recommends a sale by private treaty.

6. The certificate shows that the application was for building purposes; and contains recommendations as to period (75 years), premium and annual Crown Rent. There also appear in the column "Special conditions and Remarks" the words "at $50 per acre", which may be either an explanation for the recommended premium and/or annual Crown Rent, or a special condition in itself. It would appear from the endorsements on this certificate that these recommendations were accepted. On another sheet of paper on the file, there is a note that the lot was subsequently purchased by the applicant.

7. This was the only document that the Vendor could produce to the Purchasers in answer to their request for the Government Lease.

Other materials

8. The Land Search showed against the term "Remarks" that the Original Grant, Lease Term, its Date of Commencement and Rent could not be traced in the Land Registry.

9. Further, the District Lands Office has informed the Vendor's solicitors that it has no record of the lease conditions governing the lot.

Purchasers' stand

10. The Purchasers did not accept good title had been shown. In my view, they are clearly right.

Application for Grant not in compliance with s.13 CPO

11. The Vendor's obligation under s.13 Conveyancing and Property Ordinance is to produce the Government Lease. By that is meant that the Vendor is obliged to produce a tangible document (Wong Wai Ming v Tang Tat Chi [1993] 1 HKC 341).

12. The Application for Grant is clearly not the Government Lease itself. It might be that a Crown Lease (which would now be called Government Lease) never came into existence. But that is beside the point. The Vendor has contracted to prove title under s.13 CPO, and s.13(1) requires the "production of the Government lease relating to the land sold".

13. I would have thought that solicitors who act for a landowner who do not have a Government Lease would have taken care to stipulate in the Agreement for Sale and Purchase that the vendor would not be required to produce the Government Lease (as suggested by Barnett, J. in Gatewood Ltd v Silver Noble Investments Ltd [1992] 2 HKC 473, 477F).

14. Mrs Wacks counsel for the Vendor says that this would be like waving a red rag in front of a bull, as potential purchasers would be likely to stay away from the property. But the absence of the Government Lease is of such fundamental importance that one cannot realistically seek to escape from the problem.

15. A similar situation occurred in the case of Gold Check Investments Limited v Star Investment Ltd. (1992) MP 592 (unrep). In that case, no Government Lease was found, only an application like the Application for Grant here. Godfrey J (as he then was) held that the purchaser was entitled to object to the title.

16. If anything, the present case is even worse for the Vendor. At least in Gold Check, the vendor could show the Conditions of Sale which had been advertised in the Government Gazette, as the sale there was by public auction. The sale in this case was by private treaty, and no conditions of sale are available.

17. Further, any argument on behalf of the Vendor that the Application for Grant contained all the conditions of sale is likely to backfire on it. The Application for Grant does not provide for a right to renew upon expiry of the period of 75 years. Even assuming that the period commenced from 1910 (the year of Tang Ting Fai's purchase), the Crown Lease would have expired in 1985. There would not be any automatic renewal under the New Territories (Renewable Crown Leases) Ordinance cap.152 as that ordinance applies only to leases where there was a right of renewal, and no such right is contained in the Application for Grant.

18. In conclusion, therefore, the Purchasers were clearly right to have objected to the title by reason of the non-production of the Government Lease, and their requisition has not been satisfactorily answered. As a matter of completeness, I would record that the Vendor has confirmed that it does not rely on the letter of compliance in relation to the erection of the existing building.

Order

19. I would grant an order in terms of paragraphs 1, 2, 3 and 4 of the Originating Summons.

20. In relation to interest on the deposits paid as claimed in paragraph 3, I see no reason why interest should not be charged, as there was no exemption from interest in Cl. 27 of the Agreement for Sale and Purchase, and the Vendor has had the use of the money. As to the rate of interest, I take into account the fact that the property here was a residential property, and there is no evidence that the Purchasers were intending to acquire it for any other than residential purposes. Accordingly, I would order that interest be calculated at savings rate from date of issue of the Originating Summons to date of Judgment, and at judgment rate from date of Judgment to date of payment.

21. I should also add that the order in relation to costs in paragraph 4 is an order nisi.

Representation:

Mr Raymond Chow (instructed by Lam & Lau) for Plaintiff

Mrs Penelope Wacks (instructed by Patrick Wong & Co) for Defendant