Yau Allen Lee Nam v. Lo King Man and Another

HCA016782/1998

HCA 16782/1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 16782 OF 1998

____________

____________

Coram: Hon Chung J in Chambers

Dates of Hearing: 10-11 August, 22 October 1999 and 8 June 2000

Date of Handing Down Decision: 15 July 2000

_______________

D E C I S I O N

_______________

Introduction

1. This is an action arising from cross-allegations of breaches of a sale and purchase agreement dated 23 April 1998 relating to a residential unit and a carparking space at Fontana Gardens, Causeway Bay, Hong Kong (respectively "the said agreement" and "the suit property"). The sale and purchase was scheduled for completion on 28 September 1998.

2. The Plaintiff purchaser ("the Plaintiff") alleges that the Defendants vendors ("the Defendants") breached the said agreement by (1) failing to answer requisitions on title, (2) failing to supply a complete sub-deed of mutual covenants ("the SDC") or its certified copy and (3) failing to disclose patent or latent defects in title. Further, he alleges that by a letter dated 28 September 1998, the Defendants wrongfully purported to exercise their right to terminate the said agreement and forfeit the deposit of $1.6 million.

3. All the Plaintiff's allegations are denied by the Defendants and they contend that the Plaintiff breached the said agreement by not completing the transaction in time.

History of the Proceedings

4. On 14 May 1999, the Plaintiff took out a summons pursuant to R.H.C. Ord. 14A asking for final judgment to be entered against the Defendants and for their Counterclaim to be dismissed. On 24 July 1999, the Defendants took out an application under Ord. 86 asking for final judgment to be entered against the Plaintiff in essence for the relief claimed in the Counterclaim.

5. A truncated history of the 2 applications followed. The hearing from 10 to 11 August 1999 ended with leave being given to the Plaintiff to amend his Statement of Claim and Reply (which was later re-amended on 22 October 1999). An adjournment was given to the Defendants to enable them to consider and deal with the Plaintiff's amended case.

6. At the beginning of the hearing on 22 October 1999, Mr Chang for the Plaintiff said that a number of documents had been filed since the earlier hearing. As a result, the Plaintiff took the view that the case should proceed to trial with directions given instead of being dealt with summarily. Should the Defendants persist in proceeding with the applications, Mr Chang wished to put them on notice of a risk for costs. The Defendants did not desist and the parties continued with their submissions.

7. On 8 June 2000, Mr Fung for the Defendants argued that because of developments in the proceedings since the time when the Ord. 86 application was taken out, the matter ought to go to trial. He did not wish to continue with the Ord. 86 application. By this time, however, the Plaintiff took a different stance and submitted that this action ought to be disposed of in his favour summarily pursuant to Ord. 14A. Hence, the only application which needs to be dealt with at length in this Decision is the Plaintiff's Ord. 14A application.

Plaintiff's Ord. 14A Application

8. Insofar as it is relevant, Ord. 14A provides:-

"The Court may ... determine any question of law or construction of any document arising in any cause or matter ... where it appears ...

such question is suitable for determination without a full trial of the action; and ...

such determination will finally determine ... the entire cause or matter or any claim or issue therein".

9. The relevant principles in relation to such kind of application are relatively settled and were set out in The Supreme Court Practice 1999, Vol. 1, para. 14A/2/5. They can be summarized as follows:-

(a) an issue is "a disputed point of fact or law relied on by way of claim or defence";

(b) if a question of construction will finally determine whether an important issue is suitable for determination under Ord. 14A and where it is a dominant feature of the case a court ought to proceed to so determine such issue;

(c) respondents to an application under Ord. 14A are not entitled to contend they should be allowed to hunt around for evidence or something might turn up on discovery;

(d) if the court can be properly persuaded that no matter what the actual facts are the claim is bound to fail for a want of a cause of action, there is no reason to prolong the proceedings;

(e) the question of law or construction to be determined by the court under the Order should be stated or formulated in clear, careful and precise terms;

(f) where the issues of fact are interwoven with the legal issues raised, it will be undesirable for the court to split the legal and factual determination.

(1) Was the SDC Supplied a Complete Copy?

10. Title deeds and documents relating to the suit property were sent by the Plaintiff's solicitors to the Defendants' solicitors on 29 May 1998. Item 3 of the enclosed "LIST OF TITLE DEEDS AND DOCUMENTS" was a document described as an "Attested copy Supplemental Deed of Covenant" ("the attested copy SDC").

11. On 2 June 1998, the Plaintiff's solicitors wrote:-

"We would put on record that the Attested Copy [SDC] ... appears to be an incomplete copy since the execution page(s) concerning owner no. 46 (Fontana Estates Limited) and other owners listed in the Second Schedule ... to the said [SDC] is/are missing. We therefore return the same to you for further handling ... " (emphasis supplied).

Other matters were raised therein but these will be dealt with separately in other headings below.

12. This response was prompted by the following features of the attested copy SDC:-

(a) its recital stated that the Second Schedule of the SDC had set out the parties in possession of Fontana Gardens on which were constructed buildings consisting of 87 residential apartments: see p. 1 of the recital;

(b) its recital further stated inter alia that 6 deeds of covenants ("DMCs") were (earlier) executed in order to define the respective rights and interests of the parties thereto but doubts had arisen as to whether the parties to one of the 6 DMCs may enforce the terms and conditions therein against parties to the other 5 DMCs: p. 2 of the recital;

(c) its recital continued to state that the parties of the 6 DMCs therefore agreed to enter into the SDC in order to define their respective rights and interests: p. 2 of the recital;

(d) its Second Schedule sets out the names and addresses of, and numbers of shares owned by, totally 63 owners of Fontana Gardens. 46 of these were respectively numbered from "1" to "46" and 17 of these were un-numbered;

(e) the total number of shares owned by the parties in the Second Schedule adds up to 90 shares out of a total described as 88 shares;

(f) its execution pages (pp. 27 to 37 thereto) contain the names of the owners who were numbered "1" to "45" in the Second Schedule but there is no reference to the other owners.

13. On 4 June 1998, the Defendants' solicitors sent to the Plaintiff's solicitors another copy of the SDC ("the photocopy SDC") which according to their letter was:-

" ... copies of the [SDC] ... obtained from the Land Registry for your perusal".

14. The Plaintiff's solicitors were still unhappy with the photocopy SDC and they said in their letter of 5 June 1998:-

"The [photocopy SDC] ... appears to be an incomplete copy since the last page of the Deed, which you allege to be obtained from the Land Registry, is page 36 containing the execution page up to owner no. 45 only and the execution page(s) concerning owners from no. 46 ... onwards ... is/are missing" (emphasis supplied).

They also complained that Rider B could not be found in the photocopy SDC. They further asked for a certified complete copy of the SDC. Other queries were made and these will also be dealt with separately under other headings below.

15. Their response was prompted by the following matters in the photocopy SDC:-

(a) the same matters set out in (a) to (c) above in the recital of the attested copy SDC: pp. 1 to 2 of the recital of the photocopy SDC;

(b) similar to the Second Schedule of the attested copy SDC, its Second Schedule sets out the names and addresses of, and numbers of shares owned by, 46 owners which were respectively numbered "1" to "46";

(c) also similar to the attested copy SDC, 17 other owners whose names, addresses and numbers of shares owned were set out after the said 46 individuals but these were not numbered;

(d) as happened in the attested copy SDC, its execution pages (pp. 26 to 36 thereto) contain only the particulars of the owners who were numbered "1" to "45" in the Second Schedule;

(e) in the Memorial of Registration, there is a box for "Signature of Parties Signing Memorial". The words "Rider B" were typed in this box (probably meaning the signatures can be found in "Rider B"). Next to "Rider B" was an initial and the hand-written words "refer to inner pages".

16. The photocopy SDC contains the following additional features:-

(a) unlike the attested copy SDC, of the said 17 owners, 2 were apparently added by hand at the bottom of 2 pages (at pp. 22 and 23 thereof). However, the same particulars of these 2 owners can also be found in the attested copy SDC (at pp.24 to 25 thereof) but they were typed in instead of hand-written;

(b) the total number of shares owned by the individuals in the Second Schedule adds up to 90 (out of a total said to be 88);

17. The Plaintiff's solicitors expanded on their complaint as follows:-

"On page 1 ... , 'the parties hereto' were defined as the several persons set out in the First Column of the Second Schedule ... Moreover, ... the 'Names and Additions of Parties' column [of the Memorial of Registration] ... stipulated 'Please refer to the 2nd Schedule of the annexed [photocopy SDC] ... '. In the Rider 'A' [to the said Memorial], it is expressly stated that 'the parties hereto' did sign and their execution was witnessed by Messrs. S.C. Mok and W.Y. Mok respectively

In the premises, [the photocopy SDC] should contain all the execution pages of 'the parties hereto' (as defined). The [photocopy SDC] ... is therefore incomplete

In addition, Rider 'B' ... cannot be found ... ".

18. The response of the Defendants' solicitors can be found in their letter of 10 June 1998:-

"Rider B

Signature of the Parties are requested to refer to inner pages of the Deed as per the note marked on the Memorial Box".

This comment must be referring to a note found in the Memorial next to "Rider B" and written by hand which states: "refer to inner pages".

19. The Defendants' solicitors made no other comments to the above points made in the Plaintiff's letter of 5 June 1998. However, there were 2 further letters prior to 28 September 1998 (the last date for completion):-

(a) in a letter of 15 June 1998 from the Plaintiff's solicitors, the same query about incompleteness and the request for a certified complete copy before completion were repeated;

(b) in a letter of 8 August 1998 from the Defendants' solicitors, they repeated that the photocopy SDC was obtained from the Lands Registry and noted that it contained only 36 pages plus the back sheet. They further said they believed the attested copy provided (that is, the one sent on 29 May 1998) was a complete copy and they returned that document to the Plaintiff's solicitors.

20. As stated earlier, the other matters raised in the above letters of the Plaintiff's solicitors will be dealt with separately below. Leaving them aside for the moment, it is important to note that the query raised by the Plaintiff's solicitors was merely that the copies (whether attested or not) of SDC supplied did not appear to be complete copies. No requisition was raised about whether the absence of execution by some of the owners would affect the Defendants' title, for example, whether the SDC would be binding on the owners whose particulars did not appear in the execution pages.

21. On the one matter raised by the Plaintiff's solicitors, the Defendants' solicitors have given their answer (on 8 August 1998), namely, they believed the copies supplied were complete copies. Further, they provided the reason why they held that belief, namely, that the document which they obtained from the Lands Registry bore the same number of pages.

22. Affirmations have been filed by both parties as to whether the SDC (be it the attested copy or the photocopy) sent by the Defendants to the Plaintiff was in fact a complete copy. The gist of the evidence is concerned with the types of conveyancing documents filed by Hong Kong conveyancing solicitors with the Lands Registry in the days when there was either no photocopy available or when photocopying was not yet popular. The practice described in the Defendants' evidence was disputed by the Plaintiff's evidence. The Defendants contend in essence that because no photocopies were available at that time, the accepted practice was for copies to be provided to the Lands Registry. Instead of actual signatures, the solicitors providing the copies would insert words like "sd." or "L.S." to signify that the conveyancing documents had been signed.

23. The affirmations filed by both parties were made by people who profess to be experts in Hong Kong conveyancing practice. The Court of Appeal observed in Chen Paul v. Lord Energy [1998] 1 H.K.C. 702 that an expert may give evidence as to a term of art but he is not entitled to say nor is his counsel entitled to ask him what a document means nor what a letter or an agreement or conditions of sale or an assignment mean. The construction of a document is a matter for the court (at pp. 709 to 711). Unlike the evidence adduced in Chan Paul, I consider that the evidence adduced in the present case is related to the filing practice of the Lands Registry during certain period of time; it therefore is related to facts and is therefore properly admissible.

24. As stated above, the query raised by the Plaintiff only concentrated on whether the copies (attested or not) were complete copies (this was raised because on the face of the copies the signatures of some of the parties cannot be found). It is obvious that an answer (with reason) has been given by the Defendants (on 8 August 1998). In essence, the Defendants were saying that those were the only copies they could find and since the copy kept by the Lands Registry also contained the same number of pages, they believed the copies provided were complete.

25. The word "complete" in the context of this action can be an elusive term. From the way in which the requisition letters of the Plaintiff's solicitors were written, the Plaintiff regarded "complete" to mean a document which contains all the necessary component parts. They must have assumed that such a document (which is different from the copies provided by the Defendants) exists. The way in which the Defendants' solicitors used that word in their reply letters shows that they must have considered the copies they provided to have been the only documents in existence. That conclusion must have been reached as a result of their obtaining a copy which they claimed was kept at the Lands Registry.

26. Once the Defendants have answered (with supporting reason) that the copies provided were "complete" copies (as they understood that word to mean), I do not consider it proper to ask them to improve on that answer; to do so would tantamount to asking them to prove a negative. That they may be right or wrong but that is beside the point. Further, the Plaintiff might have been entitled to raise other requisitions based on the Defendants' said answer, for example, whether the SDC was binding on all the parties when there is no evidence that all parties had executed it, or whether the title to the suit property would thereby be in doubt. This was however not raised until the letter dated 28 September 1998 from the Plaintiff's solicitors. The issue of whether this was a new requisition (as the Defendants would have it), or an insistence of an earlier requisition (as the Plaintiff would have it), and whether it was raised out of time will be dealt with under the heading "(4) Were the Requisitions Raised Out of Time?".

27. Insofar as the Plaintiff seeks to establish that the answer given by the Defendants was wrong (in other words, a complete copy (which has all the execution pages) exists), I consider this is not an issue which is fit to be dealt with in an Ord. 14A application because this issue cannot properly be determined as a matter of question of law or construction of document. It can only be properly determined by examining all the relevant factual circumstances including what the filing practice at the Lands Registry was at the relevant time.

28. In the course of Mr Chang's submissions, he also argued that the Defendants had in any event breached the terms of the said agreement by failing to supply the title documents, namely, a complete SDC. This was also mentioned in the correspondence from the Plaintiff's solicitors. This will be dealt with under the heading "(6) Was there a Breach of Clause 10?".

(2) Was there any Patent or Latent Defect in the Title?

29. Para. 18 of the Amended Statement of Claim avers:-

"Further, in breach of [the said agreement] and their obligations thereunder, the Defendants failed to disclose to the Plaintiff the patent or latent defects and doubts in the the [sic] Defendants' title to [the suit property] referred to in paragraphs 7(d), 10, 12 and 14 above (repeated herein) which they knew or ought to have known to be existing, and on the contrary, asserted that they had a good title".

30. Para. 7(d) of the Amended Statement of Claim pleads:-

"From a perusal of the SDC ... there was conveyancing evidence of the entering into and execution of the SDC of the said 46 of the said 63 parties designated as Nos. 1 to 46, by execution clauses but no conveyancing evidence by execution clauses or otherwise of the entering into and execution of the SDC by the remaining 17 of the said parties, whose names were listed in the Second Schedule thereto (at pgs. 24 and 25 of the SDC) but were not designated by numbers".

31. Para. 10 of the Amended Statement of Claim alleges:-

"By a letter dated 5 June 1998, [the Plaintiff's solicitors] raised with [the Defendants' solicitors] the following follow-up or consequential requisitions ... [the requisition that the SDC supplied was an incomplete copy in the manner set out above was set out. Further]

Proof of allocation of 1/88 share to [the suit property]

... In the light of [the Marking Ltd decision], [the Defendants' solicitors] were required to furnish proof of the existence, or absence, or any document which confirm or contradict the number of undivided shares purported to be allocated to [the suit property]".

32. Para. 12 of the Amended Statement of Claim claims:-

"[The Plaintiff's solicitors] understand that a developer was free to allocate and dispose of its shares. However, they would draw [the Defendants' solicitors'] attention to [the Hinex decision] and [the Marking Ltd decision] and maintained their requisition that [the Defendants' solicitors] furnish proof of the existence or absence of any document which could confirm or contradict the number of undivided shares allocated to [the suit property]".

33. Para. 14 of the Amended Statement of Claim states:-

"Subsequently, by a letter dated 28 September 1998 (i.e. on the date of completion), ... [the Plaintiff's solicitors] insisted on their requisitions as follows:

1. After giving due consideration to the terms of the SDC ... in relation to the six Deeds of Covenant ... the main purpose of the SDC was not simply to resolve doubt as to whether anyone owner of a building in Fontana Gardens may enforce covenants and conditions contained in the six Deeds of Covenant against the other owners but expressly to provide for such enforcement by any of such owners; hence all the owners were included as parties to the SDC and were required to execute it so that it would be binding on them. ... However the SDC cannot be binding on all those owners ... who have not executed it. Both the SDC and the relevant Deed of Covenant are intermediate root documents going to the root of the Defendants' title and [the Defendants' solicitors'] opinion that the omission of the execution of the SDC by some owners will not affect the title was not agreed and [they] were required to prove title by producing a SDC which is properly executed by all parties named therein.

2. The allocation of shares ought to have been set out expressly in the relevant Deed of Covenant affecting [the suit property] and the lack of it raised serious doubt as to the individual shares of right in the land by an owner vis-à-vis his co-owners ... ".

34. It is quite clear that the pleaded case of the Plaintiff is that by reason of the 2 matters set out therein, there were defects in the Defendants' title to the suit property. I shall deal with the 2 matters below under separate headings.

Whether the copies of SDC provided were complete

35. This matter has already been dealt with under the headings "(1) Was the SDC Supplied a Complete Copy?" and "(3) Was there Non-disclosure by the Defendants?" and will not be repeated here.

36. In relation to the matters relevant to this sub-heading which were raised in the Plaintiff's letter dated 28 September 1998, I do not agree with Mr Chang's submissions that this was in effect an insistence of a requisition raised earlier. On the contrary, the matters raised were quite different from those raised earlier. The earlier "requisition" was related to whether the SDC supplied was a complete copy, whereas the ones raised on 28 September 1998 were about whether the SDC could bind the owners who apparently had not executed it, and if not, whether that would create a defect in the title.

The No. of Undivided Shares and Allocated Shares

37. In the letter dated 2 June 1998 from the Plaintiff's solicitors, they observed that there was no evidence verifying the allocation of the 1/88th undivided share to the suit property in the DMC or the SDC and asked for evidence to prove such allocation.

38. In reply (4 June 1998), the Defendants' solicitors relied on Sheenip Industries Ltd v. Champion Billion Development Ltd, M.P. No. 1390 of 1995.

39. In a follow-up letter dated 5 June 1998, the Plaintiff's solicitors stated that they did not agree to the above reply and referred to Marking Ltd v. Cheerfit Investment Ltd, M.P. No. 2727 of 1995.

40. In their letter dated 10 June 1998, the Defendants' solicitors relied on Goldjet International Investment Ltd v. Ling Ki Wai and others, M.P. No. 4160 of 1996 and Hinex Universal Design Consultants Co. Ltd v. Chan Lai Hing, M.P. No. 2292 of 1997.

41. The Plaintiff's solicitors replied by their letter dated 15 June 1998 and disagreed with the Defendants' solicitors. They referred to the Hinex case for the proposition that a subsequent owner has the same right as the developer to allocate undivided shares vested in him subject to any prohibition in the DMC. Further, they relied on Marking Ltd and contended that a purchaser is entitled to know if any document relating to the allocation of shares exists so as to know whether what was contracted to be conveyed is consistent with the allocation.

42. In the letter of Defendants' solicitors dated 8 August 1998, they disagreed with the Plaintiff and maintained (relying on the Goldjet case) that the vendor is not obliged to prove a negative. They further argued that the lack of a schedule in the DMC as to allocation of shares did not cast doubt on a clear and unchallenged assignment of title to the unit in question and the related allocated shares.

43. The case referred to in the Plaintiff's correspondence above can be summarized as follows:-

(a) Marking Ltd v. Cheerfit Investment Ltd, M.P. No. 2727 of 1995

The facts of this case were as follows. There was a sale of an office unit. A requisition was raised as to the absence of any sub-deed of mutual covenant or other document to sub-divide the shares allocated to the floor on which the unit was located. It was argued that therefore there was no exact definition of the rights and liabilities running with that unit. The Court considered that a purchaser is entitled to know whether any document relating to the allocation of undivided shares exists because this may affect title to the property (at p. 8 of the transcript).

44. The cases referred to in the Defendants' correspondence above were:-

(a) Sheenip Industries Ltd v. Champion Billion Development Ltd, M.P. No. 1390 of 1995

This case concerned the sale of the staircase on 11th floor, Flat B on 12th floor and the Roof of a residential building. The purchaser argued that since the deed of mutual covenant did not expressly contain a method of allocation of the shares, any subsequent allocation of shares required the consent of the 1st owner. The Court rejected this argument and concluded that a developer had the right to freely allocate the shares.

(b) Goldjet International Investment Ltd v. Ling Ki Wai, M.P. No. 4160 of 1996

This case related to the sale of a residential unit. The purchaser raised requisition regarding the absence of evidence of allocation of shares in the deed of mutual covenant. The Court considered that the requisition was not justified because the assignments relating to the unit always recited the same number of shares were conveyed. The Court further held that the lack of a schedule in the deed of mutual covenant as to the allocation of shares did not cast doubt on title;

(c) Hinex Universal Design Consultants Co. Ltd v. Chan Lai Hing, M.P. No. 2292 of 1997

This case related to the sale of a unit and a storeroom in an industrial building. In a "control card" kept at the Lands Registry, 10 shares were allocated to the unit but no shares were allocated to the storeroom. The vendor purported to convey a total of 10 shares to the purchaser for both the unit and the storeroom and the purchaser raised requisitions as to his ability to do so. The deed of mutual covenant was silent on the allocation of undivided shares. The court concluded that both a developer and a subsequent owner have the same right to allocate shares among the various units and found that the title was not defective.

45. I agree with the conclusions reached in the above cases. I also consider that the conclusions reached in Sheenip, Goldjet and Hinex apply to the facts of the present case. The Plaintiff's solicitors merely asked the Defendants' solicitors to provide documentary evidence as to the allocation of undivided shares to the suit property. They have not, as Mr Chang has, raised doubt on the Defendants' title by pointing to any specific deficiency, for example, a discrepancy in the number of allocated shares said to have been held by the individual co-owners when compared to the total number of shares for the whole development. In these circumstances, I find that there was no proper basis for the Plaintiff's solicitors to raise the "requisition" relating to this sub-heading, and further, the Defendants' solicitors have sufficiently answered it in their reply correspondence.

(3) Was there Non-disclosure by the Defendants?

46. Great emphasis has been placed by Mr Chang on the duty of a vendor's solicitors to act with candour as regards the defects in the vendor's title. He refers firstly to Active Keen Industries Ltd v. Fok Chi-keong [1994] 1 H.K.L.R. 396 at 413:-

"The contractual duty to answer requisitions properly is not an onerous one. All that is required of the vendor is candour and commonsense. The purchaser is not an adversary. The parties have already arrived at an agreement and, normally, it is as much in the purchaser's interest as it is in the vendor's that completion should take place. A good title, or a good marketable title, does not mean a perfect title. If there are, or might be, blemishes upon it, these should be faced squarely. The vendor failed to do so in this case ... ".

Further, he refers to the following cases in support of this point:-

(a) Pratt v. Betts [1973] 27 P. & C.R. 398, 404: "What, in our judgment, is required as a reply to a requisition is a statement of the true position, not one which conceals it ... ";

(b) Regent Summit (Hong Kong) Ltd v. Smart Business (Asia) Ltd [1998] 2 H.K.C. 718 at pp.719 and 725 to 728;

(c) Nottingham Patent Brick and Tile Co. v. Butler (1885) 15 Q.B.D. 261 at 271: "The fourth condition stipulates that the property is sold subject to any matter or thing affecting the same, whether disclosed at the time of sale or not. Such a condition, however, does not relieve that vendor from the necessity of disclosing any incumbrance or liability of which he is aware ... ";

(d) Rignall Developments Ltd v. Halil [1988] 1 Ch. 190, 197: "It is, however, a well-established rule of equity that, if there is a defect in title or encumbrance of which the vendor is aware, the vendor cannot rely upon conditions [deeming the purchaser to have searched the land registry] such as those in the present case unless full and frank disclosure is made of its existence". Similar observations were made at pp. 198 and 199 thereof.

47. As a fact, the question of whether full and frank disclosure has been made by the Defendant is arguable. Documents have been given to the Plaintiff to enable him to raise requisitions regarding:-

(a) whether the SDC provided was a complete copy;

(b) documents relating to the allocation of undivided shares to the suit property.

I have concluded that whether the SDC provided was in fact a complete copy is not an issue which can properly be determined in this application. Subject to that, I find that all information (as disclosed by the documents supplied) regarding the above 2 requisitions has in fact been disclosed to the Plaintiff. In this connection, I agree with what was said in Pratt v. Betts:-

"Having provided the purchaser with all information within the vendor's knowledge ... as to the custody of the document, and if it ought to have been in his possession ... having used his best endeavours to trace it and secure the production the vendor would have satisfied his obligations in respect of that document" (p. 405 to 406).

In the present case, (subject to the issue of whether the SDC supplied was complete) the Defendants have actually done more by handing over the relevant documents to the Plaintiff's solicitors.

48. Mr Chang raised a further failure of the duty of full and frank disclosure. He drew my attention to a number of discrepancies between the attested copy SDC and photocopy SDC including the following:-

(a) the 2 copy documents appear to have been typed by different type-writers;

(b) there was a hand-written amendment to the number of shares held by Fontana Estates Limited (the developer) in the photocopy SDC;

(c) the number of shares said to have been held by the developer in the photocopy SDC was 28 out of 88 shares. The total number of shares held by the parties set out in the photocopy SDC came to 90 instead of 88. On the other hand, the number of shares said in the attested copy SDC to have been held by the developer was 26 only;

(d) the particulars of 2 of the owners set out in the Second Schedule were added by hand at the bottom of pp. 22 and 23 thereof. Although these particulars can also be found in the attested copy SDC, they were typed in there instead of being hand-written.

49. It is at least arguable whether it would make any difference to the Plaintiff even if he were provided with both the attested copy SDC and the photocopy SDC at the same time. The Plaintiff's solicitors have quite clearly (and rightly or wrongly) stated that they did not accept the attested copy SDC to be a complete document. For that reason, they have returned that document to the Defendants' solicitors. That must have been because they considered that document to be a useless document. Even if they were given both copies, they would probably have maintained the same point that both documents were useless because they were incomplete.

50. Moreover, it was the photocopy SDC which stated the number of shares held by the developer was 28 (instead of 26), making the total number of shares held by those set out in the Second Schedule to be 90 (instead of 88). No requisition was made by the Plaintiff's solicitors regarding this point even up to 28 September 1998. This is arguably an indication that the Plaintiff's solicitors considered the photocopy SDC was also a useless document (because it was incomplete) and therefore was not worthy of any detailed examination.

51. Further, when considering the so-called "principle of candour" in relation to conveyancing transactions, I find that the duty to act with candour may arguably also apply to those acting for purchasers. The duty to prove and show a good title is already an onerous one. It is only just and fair for the purchasers' solicitors to act with as much candour and frankness so that the vendors' solicitors know exactly what issues are raised as regards alleged defects in title.

52. In this connection, I note the observations made by the Court of Appeal in the Active Keen case relating to what is expected of the purchasers' solicitors:-

"In conclusion, I would echo the words of the judge, who is highly experienced in these mattes, 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, matter 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 ... '"

(at p. 414, per Litton, J.A.).

"Likewise I would also associate myself with [Litton, J.A.'s] endorsement of the judge's exhortation that the time has come for Hong Kong conveyancers to cease magnifying difficulties that are really non-existent and that frequently keep apart parties themselves eager to conclude their bargain" (at pp. 414 to 415, per Nazareth, J.A.).

Those observations were of course made in relation to "magnifying" non-existent difficulties. However, I find that they reflect the principle of common justice and fairness that both parties to a conveyancing transaction should act with equal candour and frankness, and with a spirit to put through the transaction rather than to bring it down.

53. At least in the past few years because real property prices have fluctuated greatly, sometimes it was in fact the parties to the conveyancing transaction (rather than their solicitors) who wished to get out of the deal. Some of these attempts were made by raising "requisitions" on title. But whatever may be the real reason for raising requisitions, I consider that it is only fair that both parties should "place all their cards on the table" during the time (provided for in the agreement) within which requisitions can properly be raised.

54. For the above reasons, I conclude that whether the Defendants have breached their duty of candour and frankness ought to be dealt with at trial instead of in this hearing.

(4) Were the Requisitions Raised Out of Time?

55. Clause 7 of the said agreement provided that requisitions or objections to title should be delivered in writing to the Defendants' solicitors within 7 working days after the date of the receipt of the title deeds by the Plaintiff and any further requisitions arising from any reply from them to earlier requisitions shall be delivered in writing to them within 7 working days after the receipt of such reply, otherwise the same would be considered as waived.

56. Despite Clause 7, Mr Chang argues that the requisitions raised in the letter dated 28 September 1998 were not out of time because time never started to run:-

(a) the Defendants lacked candour and frankness in disclosing the defects in their title;

(b) the relevant title documents have not been supplied to the Plaintiff;

(c) the requisitions raised in the letter of 28 September 1998 were only earlier requisitions (contained in previous letters) insisted upon by the Plaintiff;

(d) the Defendants have failed to reply to requisitions properly raised by the Plaintiff earlier.

57. In relation to Mr Chang's point (a) above, this has been dealt with under the heading "(3) Was there Non-disclosure by the Defendants?". In short, I concluded that this is a triable issue which ought not be dealt with in this application.

58. In relation to his point (b) above, it is also arguable whether a complete copy SDC has already been supplied to the Plaintiff.

59. For the reasons set out under the sub-heading "Whether the copies of SDC provided were complete" (under the heading "(2) Was there any Patent or Latent Defects in the Title?") above, I disagree with his point (c) above.

60. For the reasons set out under the headings:-

(a) "(1) Was the SDC Supplied a Complete Copy?";

(b) "The No. of Undivided Shares and Allocated Shares (under the heading "(2) Was there any Patent or Latent Defects in the Title?")

I disagree with his point (d) above.

(5) Was the Requisition Waived?

61. It follows from the conclusions reached under the heading "(4) Were the Requisitions Raised Out of Time?" that there must be a triable issue as to whether the requisitions raised in the letter of 28 September 1998 were waived.

(6) Was there a Breach of Clause 10?

62. Clause 10 of the said agreement provided that:-

"[The Defendants] shall prove title to [the suit property] ... pursuant to Section 13 of Conveyancing and Property Ordinance 9Cap. 219). [The Defendants] shall prove his title to [the suit property] at [the Defendants'] expense and shall at the like expense make and furnish to [the Plaintiff] such certified or attested copies (as appropriate) of any deeds or documents of title ... as may be necessary to prove such title ... ".

63. Because the Plaintiff considers that the attested copy SDC and photocopy SDC were incomplete, Mr Chang argues that the Defendants were also in breach of Clause 10. In view of the conclusion I reached under the heading "(1) Was the SDC Supplied a Complete Copy?", I consider that this matter involves an issue unsuitable to be dealt with in this application.

Conclusion on the Ord. 14A Application

64. By reason of the matters aforesaid, I consider that I should refuse the Plaintiff's Ord. 14A application. I shall hear the parties as to the precise form of the Order to be made regarding this application.

Defendants' Ord. 86 Application

65. Mr Fung indicated that the Defendants do not wish to proceed with their Ord. 86 application but asked me not to make any order thereon until after the Plaintiff's Ord. 14A application has been determined. I shall therefore also hear the parties as to how this application ought to be dealt with before deciding on it.

Costs

66. In view of the history of the proceedings, there may be substantial arguments on the question of costs of the applications. I therefore do not propose to make any costs order nisi pursuant to Ord. 42 r. 5B(6) at present.

Representation:

Mr D Chang, SC leading Mr E Shum, instructed by Messrs John Ip & Co., for the Plaintiff

Mr P Fung, SC leading Mr J Lam, instructed by Messrs Siao, Wen & Leung, for the Defendants