Lionwill Investment Ltd. v. Triple Will Ltd.
Read the full judgment text of HCMP 1461/1992 on BabelCite. This High Court CFI judgment was delivered on 2 September 1992.
1. This matter, which comes before me by way of a vendor and purchaser summons taken out under the provisions of Section 12 of the Conveyancing and Property Ordinance Cap. 219 , concerns the familiar but vexed question often encountered in Hong Kong conveyancing practice, particularly during an up-swing in the property market when confirmor arrangements proliferate, of whether a resulting trust arises in favour of a purchaser who, having paid a deposit upon the execution of a sale and purchase a
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HCMP001461/1992 IN THE SUPREME COURT OF HONG KONG HIGH COURT 1992 No.MP1461 HEADNOTE Property law -- Trusts -- Resulting trust -- Presumption of advancement -- Purchase of property -- Execution of sale and purchase agreement and payment of deposit in joint names -- Subsequent nomination by co-purchasers of one of them to take up assignment -- Nomination records nominee as married woman sharing common address with co-purchaser --Conveyance of property to nominee -- Whether nominee held property or interest therein upon resulting trust for co-purchaser -- Whether presumtion of advancement arose to displace presumption of resulting trust -- Whether co-purchaser-estopped-by-nomination from asserting claim to property. Property law -- Conveyancing -- Title -- Vendor's warranty of good title -- Purpose of requisitions on title -- Extent of vendor's obligations in answering purchaser's requisitions. Chancery practice -- Vendor and purchaser summons -Doubtful title -- Unresolved issues of fact -- Judicial approach to determining validity of title on a vendor and purchaser summons where questions of fact involved. 1992 No.MP1461 IN THE SUPREME COURT OF HONG KONG HIGH COURT --------------------- BETWEEN
Coram: Deputy High Court Judge D.R. Fung, Q.C. in Chambers Date of Hearing: 12 June 1992 Date of Handing down Judgment: 2 September 1992 ---------------------- J U D G M E N T ----------------------- 1. This matter, which comes before me by way of a vendor and purchaser summons taken out under the provisions of Section 12 of the Conveyancing and Property Ordinance Cap. 219, concerns the familiar but vexed question often encountered in Hong Kong conveyancing practice, particularly during an up-swing in the property market when confirmor arrangements proliferate, of whether a resulting trust arises in favour of a purchaser who, having paid a deposit upon the execution of a sale and purchase agreement, thereafter nominates another to take up the assignment upon completion of the purchase wherefor the property is subsequently conveyed to the latter. 2. In the instant case, the issues dividng the parties arose in the following manner. The Plaintiff, one Lion Will Investment Limited, being interested in purchasing certain property known as House No. 31 in a purpose-built residential development called the Riviera in Clearwater Bay Road, Silverstrand in the New Territories ("the Property") executed a provisional agreement dated 14th April 1992 ("the Provisional Agreement") and subsequently a sub-sale agreement dated 9th May 1992 ("the Formal Agreement") to purchase the same from the Defendant, one Triple Will Limited, the vendor. 3. Clause 16 of the Formal Agreement obliges the Defendant qua vendor to give good title to the Property. Under cover of a letter dated 24th April 1992, the Defendant's solicitors sent the title deeds to the Plaintiff's solicitors. Among the enclosures were the following documents:-
4. What emerged from the above documents which arrested the attention of the Plaintiff's solicitors was the stark fact that, as appears from the 1980 Agreement, Wong had jointly with Kwan qua purchasers paid a deposit for the Property whereas the benefit of such payment was thereafter taken up solely by the latter upon the completion of the purchase in 1981. Accordingly, the Plaintiff's solicitors became concerned that a resulting trust of the Property (or at least an interest therein) might have arisen in favour of Wong which would cast doubt upon the ability of the Defendant to give good title to the Property qua vendor, the same having clearly been derived originally from Kwan. 5. By a letter dated 1st May 1992, the Plaintiff's solicitors raised, therefore, this issue with the Defendant's solicitors seeking clarification as to whether Kwan had full title to assign the Property to Yorkbo in 1985. 6. On the following day the Defendant's solicitors replied making essentially two points, namely:-
7. By the operative part of the Nomination, the Defendant's solicitors were referring to, so it was explained to me in Court, that part of the Nomination which reads:-
8. Mr. John Fang of the Defendant's solicitors very forcefully and ably submitted to me that since the Nomination showed (i) Kwan to be a married woman and (ii) Kwan and Wong to be sharing the same address, there can be no doubt that Kwan was no stranger to Wong wherefor no question arose of any resulting trust over the Property binding Kwan to Wong. 9. Such reasoning was not, however, accepted by the Plaintiff's legal advisers either during the stage of correspondence or, indeed, at the hearing before me. By a letter dated 7th May 1992, the Plaintiff's solicitors expressed, for want of evidence, no confidence that Wong and Kwan's relationship fell into any of the accepted categories warranting a presumption of advancement and, further, rejected the estoppel argument in the absence of any representation by Wong in the Nomination that he had relinqished all his rights to the Property. The Plaintiff's solicitors thereupon invited the Defendant's solicitors to join with them in taking out a vendor and purchaser summons to determine the validity of the Defendant's title to the Property. 10. A fortnight later, on 22nd May 1992, the Plaintiff, having heard no more from the Defendant, issued the originating summons herein ("the Summons") seeking as against the Defendant, among other relief:-
11. Thus, the issues were joined and argued before me with skill and persuasion by both sides along much the same lines as set out in the correspondence which I have attempted above to summarise. So perhaps the parties will forgive me for not again repeating in extenso their submissions here. 12. There was, however, one departure from the charted course. Towards the end of his argument, Mr. Fang for the Defendant handed up to me a certified true copy of a marriage certificate evidencing. the marriage of Wong and Kwan on 5th January 1976. After consulting the Plaintiff's Counsel, Mr. Selwyn So, who very properly indicated that he had no objection, I gave leave to the Defendant to have that document adduced in evidence. Further, in the interest of saving costs, the said document being a certified true copy, I dispensed, by consent of the parties, with the need to exhibit the certificate to an affidavit. 13. The production of the marriage certificate signalled, of course, the end to the dispute since there remained no longer any question of the presumption of advancement not displacing the presumption of a resulting trust (even assuming such latter presumption to have arisen in the first place), the co-purchaser and the nominee having thus been established by the Defendant to have been respectively husband and wife. At this juncture, Mr. So again very sensibly and properly indicated that he regarded the production of the certificate as being a satisfactory answer to the Plaintiff's requisitions and that he accepted that the Defendant had by such production shown good title to the Property. 14. Thereafter the Summons was not pursued, but there remained outstanding the question of the costs incurred in these proceedings. At this stage, each side invited me to make the other bear their costs, the Plaintiff submitting that taking out the Summons was not only perfectly reasonable but the only sensible course of conduct in the light of the existing doubt (in the absence of the marriage certificate) as to the validity of the Defendant's title, whereas the Defendant argued that, in view of what was clearly stated on the face of the Nomination as well as the estoppel principle referred to above, the Plaintiff's fears were fanciful and need not reasonably have been entertained by the Defendant. 15. Since the question of costs turns ultimately on the strengths or weaknesses of the parties' stated positions, the merits of the Summons would have to be determined notwithstanding the resolution of the main issue. As the question raised is, so the parties assure me, of considerable interest to conveyancers in particular and the profession in general, I was invited to give a reasoned decision which I now do by way of this reserved judgment delivered in open court. 16. It may be useful for me-to state by way of preliminary observation what I understand to be the proper approach of the court to resolving questions concerning title to property raised on a vendor and purchaser summonses. Whereas the long-standing rule was that the court will not force a doubtful title upon an unwilling purchaser (see, for example, Emmet on Title, 19th ed., para. 8.033 and the authorities therein cited), modern judicial attitude is robustly characterized by the House of Lords in M.E.P.C. Limited v. Christian-Edwards [1981] A.C. 205 as embracing a duty, save in very exceptional circumstances, to decide any doubt concerning title, so far as this is at all possible, at least as between vendor and purchaser even though such decision arising, as it does, on a vendor and purchaser summons, cannot ex hypothesi bind a third party. Further, the above principle extends not only to determining questions of law but also, where appropriate, to drawing conclusions or inferences as to facts upon which a good title depends. see per Lord Russell of killowen ibid. at 220 A to D where he observes:-
17. Accordingly, a vendor's obligation to show good title under the terms of a sale and purchase agreement does not extend to disposing of fanciful or idle concerns on the part of any given purchaser: see Darvell v. Basildon Development Corporation (1969) 211 E.G. 33 where Megarry J. dismissed a purchaser's objection regarding the vendor's title as being based on "mere conjecture of an attack by what would be idle litigation". 18. Were the doubts concerning the Defendant's title to the Property expressed by the Plaintiff by its solicitors' letter of 1st May and thereafter maintained both in the subsequent correspondence and at the hearing before me fanciful or idle such that they need not reasonably have been entertained by the Defendant? 19. The starting point for discussion is the principle of well-established law, so ancient in lineage as to pre-date Dyer v. Dyer (1788) 2 Cox Eq. 92, that he who takes a conveyance of property purchased with money provided by another holds such property upon resulting trust for that other unless the latter is under or expects to be under an equitable obligation to support or maintain the former, in other words, where the latter is the husband or father of or stands in loco parentis to the former: see, for; example, Snell's Equity, 29th ed., pp. 177-180. 20. Does the principle of a resulting trust apply to the facts of the instant case? The Defendant suggests not, Mr. Fang submitting at the hearing that the material before me reveals no evidence of any payment at all by Wong or, strictly speaking, no evidence either way whether of payment or not, wherefor the Plaintiff's complaint fails, as it were, in limine. 21. I agree, of course, that no direct evidence of payment (such as, say, a copy of Wong's cheque made out in the amount of the deposit) appears among the title deeds. However, Clause 2 of the 1980 Agreement provides, as one would expect in such a document, that the purchase money (of HK$2,714,000) "shall be paid by the Purchaser to Messrs. Johnson, Stokes & Master, Solicitors (the vendor's solicitors], as stakeholders in the manner as set out in the Schedule hereto". The "Purchaser" is defined in the Recital to the 1980 Agreement as Wong and Kwan. The Schedule in turn states, so far as is material to this case, that "the purchase money referred to in Clause 2 shall be paid and satisfied by the Purchaser to Messrs. Johnson, Stokes & Master, Solicitors, as stakeholders, in the following manner:- $678,500.00 as deposit and in part payment of the purchase money on the signing of this Agreement". Finally, the last page of the document records after the signatures of the parties and their witnesses the following apparent fact:-
22. The above sentence is then followed by the signature of Messrs. Johnson, Stokes and Master as stakeholders. 23. In my judgment, therefore, there is little doubt that, ex facie the title deeds furnished by the Defendant to the Plaintiff, both Wong and Kwan jointly paid a substantial deposit amounting to fully 25% of the purchase price for the Property. Accordingly, it is equally clear that, when Kwan subsequently took a conveyance of the Property by executing the 1981 Assignment, a presumption arose of her holding the Property or an interest therein upon a resulting trust in Wong's favour. 24. Does a presumption of advancement arise on the facts so as to displace the presumption of a resulting trust? The Defendant suggests an affirmative answer to this question for the reasons already adumbrated in its solicitors' letter of 2nd May referred to above, namely, that the Nomination expressly states Kwan to be a married woman and gives a common address for both her and Wong. What is stated in the Nomination is uncontroversial and it is, indeed, as Mr. Fang has pointed out to me. Further, I note that the 1980 Agreement likewise states the same common address for them both. Mr. Fang for the Defendant next showed me an extract from p.14 of the December 1987 edition of the Hong Kong Law Society Gazette (which appears to be an editorial reminder to practitioners), on which he relies, which reads:-
25. Mr. Fang then sought to persuade me that as Kwan appears from the title deeds clearly to be no "stranger" to Wong, no-presumption. of a-resulting trust could possibly arise. I regret that the use of the term "stranger" in the Gazette has apparently misled the Defendant. Clearly the passage to which I was referred was never intended to provide solicitors with a comprehensive statement of the law. According to my understanding, the presumption of advancement only operates, as a matter of law, in the three categories of relationships where the position occupied by the purchaser vis-a-vis the nominee is such as to raise a presumption that a gift was intended'. Those three legal categories are, as I have earlier mentioned, that of husband, father or standing in loco parentis to the nominee. Accordingly, such a presumption does not extend to benefit even a co-habitee outside of a marriage: see Rider v. Kidder (1805) 10 Ves. 360. The editors of the Gazette no doubt intended the term "stranger" to be used merely as a convenient shorthand expression to define persons other than those falling within any one of the three categories of relationships to which I have referred. 26. So far as concerns this case, there is nothing in the title deeds to show that Kwan, albeit a married woman, was indeed married to Wong, although one might have suspicions in that direction. Further, there is little or nothing in the address itself (namely, the 4th floor of 7-11 Marsh Road in Wanchai) to indicate whether it constituted residential or commercial premises. Finally; even if it can be argued that it ought to appear reasonably clear to a conveyancer that the address referred to residential premises, the question remains unanswered as to whether Wong and Kwan were living together as husband and wife. Indeed, this very question remained unanswered until the late production of the marriage certificate by the Defendant during the hearing. 27. Accordingly, I find no presumption to arise on the facts of this case which would displace the presumption of a resulting trust. 28. Was the Plaintiff indulging in idle speculation or giving vent to unwarranted paranoia when it raised the above issue with the Defendant by way of a requisition on its title? Put another way, would a reasonable solicitor have advised his client to ignore the possibility of Wong emerging to claim an interest in the Property on the basis that any such occurrence was so remote as to be wholly fanciful? 29. Whilst I confess to harbouring some sympathy for the Defendant's solicitors who complained that they were being vexed by a somewhat unrealistic, not to mention pedantic, requisition, I am very far from persuaded that making and maintaining such a requisition was unreasonable. On the contrary, the conduct of the Plaintiff's solicitors reveals all the hallmarks of a truly competent and vigilant conveyancer. 30. Mr. So for the Plaintiff submits and I agree that, far from exhibiting paranoia, his client's concern is an understandable and reasonable one. The perceived defect in the Defendant's title arose on 30th September 1981 when Wong nominated Kwan to take up the assignment of the Property in her own name without declaring either that all the purchase monies had been provided by Kwan who was therefore throughout the sole beneficial owner of the Property or alternatively that he relinqished any or any further interest in the Property. The above event took place less than eleven years ago, well within the 15 year statutory title period laid down under Section 13(1) of the Conveyancing and Property Ordinance Cap. 219. 31. It follows from what I have said earlier that I am not impressed by the Defendant's submission that Wong by nominating Kwan to take up the assignment of the Property was thereafter estopped from asserting an interest in the Property. Such a submission is wrong in principle, unsupported by authority and, indeed, runs counter to the very concept of a resulting trust. In my view, no such estoppel arose in the absence of any declaration by Wong along the lines I have indicated above. 32. In all the circumstances, I find the Plaintiff fully justified in raising and maintaining the requisitions of the Defendant's title including taking out and proceeding under the Summons herein. After all, as Lord Greene M.R. observed in Re Ossemsley Estates Limited [1937) 3 All E.R. 774 at 780, "one of the principal functions of a requisition is, in the case of a defect in title, to enable the purchaser to point it out to the vendor, and to require him to get rid of it". The Defendant proved that it was well up to the task set by Lord Greene when it produced, albeit belatedly at the hearing, the marriage certificate which then disposed of the defect. 33. By way of explanation for its lateness, the Defendant's solicitors explained that they had applied for such certificate from the Marriage Registry towards the latter part of May but, through no fault on their part, only received the certified true copy of such certificate on the morning of or shortly before the hearing. I cast no blame on the Defendant or its legal advisers for the late production of the marriage certificate, but what ought they reasonably to have done when they appreciated that the Plaintiff's solicitors were not merely maintaining their requisitions but were moreover threatening to commence proceedings? 34. In my view, the least they could have done to protect their client from the risk of an adverse order as to costs was to reply to the Plaintiff's solicitors' letter of 7th May to the effect that they were making relevant inquiries of the Marriage Registry to determine the relationship between Wong and Kwan or otherwise to indicate that they require a little time to answer the requisition as to the validity of their client's title. No doubt their failure to do that reflected by no means oversight but merely an understandable reluctance to concede that the Plaintiff's concern was a real one. Clearly, the Defendant wished to hedge its bets as to the result of the inquiries made of the Marriage Registry. As events turned out, the perceived defect was cleared but the costs of and incidental to such exercise, including in particular the costs of taking out and proceeding with this Summons, ought to be borne by the Defendant. 35. Another alternative open to the Defendant faced with such a requisition would have been to follow the suggestion made by Emmet, supra, at para. 5.078 and offer the Plaintiff an indemnity against what the Defendant alleges to be the supposedly negligible risk of Wong emerging to make a claim which might well have rendered his title good and acceptable. Such a solution has, of course, the merit of entailing a vendor to put his money where his mouth is. 36. Since neither of the above courses was taken by the Defendant, I would, in all the circumstances, order that the costs of and incidental to the Summons including the costs of attending the hearing before me to be paid by the Defendant to the Plaintiff, to be taxed if not agreed.
Representation: Mr. Selwyn so instructed by Messrs S.K. Wong & Lee for Plaintiff. Mr. J. Fang of Messrs. J. Fang & Co. for Defendant. |