Sze King Lun and Another v. Nicerich Investments Ltd.

HCMP007102/1999

HCMP 7102/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 7102 OF 1999

____________

____________

Coram: Deputy High Court Judge Gill in Court

Dates of Hearing: 8 September & 3-4 October 2000

Date of Judgment: 18 October 2000

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J U D G M E N T

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1. This is an application brought by originating summons for the recovery of deposits paid and reimbursement of expenses incurred by prospective purchasers of a property which transaction did not proceed.

Background

2. The defendant Nicerich Investments Limited (the vendor) was at all material times the registered proprietor of a property which I shall describe in short as shop C and shops D, E and F with cocklofts above situated at 100, Woosung Street, Kowloon. The vendor promoted the shops for sale and, by provisional agreement of September 1999 superseded by a formal agreement of 7 October 1999, agreed to sell them to the plaintiffs Mr Sze King Lun and Miss Shum Shui Fan (the purchasers). The agreed purchase price was $9.28m. The completion date was 10 November 1999. Deposits totalling $928,000 were due (and paid) upon signing of the formal agreement. The purchasers were committed to pay half the real estate agent's commission and their own costs amounting to $136,460. These are the amounts they seek to recover as I shall come to.

3. The formal agreement contained, inter alia, the following clauses:-

"13.(a) The Vendor shall prove his title as provided in Part VIII of the First Schedule hereto.

15.(a) Requisitions and objections (if any) in respect of the title or description of the Property or otherwise arising out of this Agreement shall be delivered in writing to the Vendor's solicitors within 7 working days after the date of receipt of title deeds and documents by the Purchaser's Solicitors and any further objection or requisition arising upon any reply to a former requisition shall be delivered to the Vendor's solicitors within 7 working days after the date of receipt of such reply ("the said Period") in which respect time shall be of the essence of this Agreement. If requisition or objection is not so delivered in the said Period, such requisition or objection shall be deemed to have been waived and no request or demand for documents of the Property of whatever nature after the said Period shall be entertained (save and except those documents which relate exclusively to the Property).

..........

(d) If the Purchaser shall make and insist on any objection or requisition which the Vendor shall be unable or (on the grounds of difficulty delay or expense or on any other reasonable grounds) unwilling to remove or comply with the Vendor may (notwithstanding any intermediate attempt to remove or satisfy or comply with the same or intermediate dispute or negotiation or litigation in respect thereof) by giving to the Purchaser or his solicitor (3) working days notice in writing to annul the sale in which case unless the objection or requisition shall have been in the meantime withdrawn the sale shall at the expiration of the notice be annulled and the Parties hereto shall at their own costs enter into and cause to be registered at the Land Registry an Agreement for Cancellation and the Purchaser being in that event entitled to the immediate return of all the deposit money paid but without interest costs or compensation and neither party shall have any claim against the other party hereon and the Purchaser shall upon annullment forthwith return to the Vendor all title deeds and documents belonging to the Vendor in his possession in connection with this sale.

22.(a) If the Purchaser shall fail to complete the purchase in accordance with the terms and conditions contained herein or if the purchaser shall fail to make payment of the balance of purchaser price or any part thereof on the date stipulated for payment of the same herein, then all moneys paid hereunder shall be absolutely forfeited as and for liquidated damages (and not as a penalty) to the Vendor who may thereupon by notice given to the Purchaser or his solicitors but without tendering an assignment to the Purchaser determine this Agreement.

23. If the Vendor shall for any cause (other than the default of the Purchaser) fail to complete the said sale in accordance with the terms hereof the Purchaser shall be entitled to recover from the Vendor such further damages (if any) over and above the said deposit as the Purchaser may sustain by reason of such failure on the part of the Vendor and it shall not be necessary for the Purchaser to tender an assignment to the Vendor.

The First Schedule

..........

Part VIII

Vendor's title:-

(a) The Vendor shall show prove and give a good title to the Property (in accordance with Section 13 of the Conveyancing and Property Ordinance Cap.219) at his own expense and he shall at the like expense make and furnish to the Purchaser such certified copies of any deeds or documents of title, wills and matters of public record as may be necessary to complete such title ("the Title Deeds"). ........."

4. The vendor instructed solicitors Josip Ma & Co. (Josip Ma) to act for them in the transaction. Y T Chan & Co. (Y T Chan) represented the purchasers.

5. Josip Ma sent the relevant title deeds and documents to Y T Chan on 6 October for inspection. By letter of 14 October Y T Chan raised a number of requisitions only one of which is relevant to these proceedings. The requisition derived from the documents of title which disclosed that one Chan Charn Ping had died in April 1967 whilst owner of 100 Woosung Street. He left a will appointing his wife and third son to be his executors. By his will he bequeathed 100 Woosung Street to his two eldest sons. The deceased's widow subsequently died. Probate was granted to his third son as surviving executor in March 1979. In October 1986 he, the executor, assigned 100 Woosung Street to San Jose Limited.

6. This prompted the requisition I now reproduce as follows:

"Y. T. CHAN & CO.,
SOLICITORS & NOTARIES

Date: 14th October 1999

Messrs. Josip Ma & Co.,
Solicitors
Room 2205-6, Hollywood Plaza
610 Nathan Road
Kowloon

Dear Sirs,

Re:

Shop C on Ground Floor and Shops D, E and F on Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to your letter of 6th October 1999 which was received by us on 7th October 1999. Upon perusal of the title deeds and documents, we would raise the following requisitions:

1. From Clause 3(2) of the Wills annexed to certified copy of Probate Memorial No.2436060, we note that the whole of Kowloon Inland Lot No.3159 should be handed to CHAN CHOCK CHING alias CHAN SUI SHAN and CHAN CHOCK BUN alias CHAN SUI CHONG as tenant in common in equal shares. Contrary to the said Wills, Kowloon Inland Lot No.3159 was assigned to San Jose Limited by Assignment Memorial No.3202990. Please clarify.

..........

	Yours faithfully,
	Y. T. CHAN & CO."

7. The reply from Josip Ma on this point by letter of 27 October, was cryptic:-

" JOSIP MA & CO., SOLICITORS

Date: 27th October, 1999

Messrs. Y. T. Chan & Co.,
Solicitors,
Hong Kong

Dear Sirs,

Re:

Shop C, Ground Floor and Shops D, E and F, Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to your letter of 14th instant and reply at seriatim:-

1. Under common law and Probate Ordinance, the executor has definitely power to sale the subject property.

.......

	Yours faithfully,
	Josip Ma & Co."

8. This prompted the following response from Y T Chan of 2 November:-

" Y. T. CHAN & CO.,
SOLICITORS & NOTARIES

Date: 2nd November 1999

Messrs. Josip Ma & Co.,
Solicitors
Rooms 2205-6, Hollywood Plaza
610 Nathan Road, Kowloon

Dear Sirs,

Re:

Shop C on Ground Floor and Shops D, E and F on Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to your letter of 27th October 1999 and would like to comment on your answers to our requisitions as follows:

1. As Chan Jook Lam alias Chan Sui Sum was only the trustee of the Will of Chan Charn Ping, deceased, he must deal with the land known as Kowloon Inland Lot No.3159 in accordance with the proviso contained in the said Will. We hereby reiterate our requisition Clause 1 raised in our letter to you dated 14th October 1999.

.......

	Yours faithfully,
	Y. T. CHAN & CO."

9. Josip Ma replied by enclosing an opinion from Messrs Chu and Lau, Solicitors dated 30 October:-

"JOSIP MA & CO., SOLICITORS

Date: 2nd November, 1999

Messrs. Y. T. Chan & Co.,
Solicitors,
Hong Kong

Dear Sirs,

Re:

Shop C, Ground Floor and Shops D, E and F, Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to your letter of today's date and enclose herewith for your attention; copy letter dated 30th October, 1999 addressed from Messrs. Chu & Lau, the contents of which are self-explanatory and which uplifted our comments previously stated.

	Yours faithfully,
	Josip Ma & Co."

"CHU & LAU
SOLICITORS & NOTARIES

Date: 30 October 1999

Messrs. Josip Ma & Co.,
Solicitors
Rooms 2205-6, Hollywood Plaza
610 Nathan Road, Kowloon
Hong Kong

Attn: Mr. Ivan Ho

Dear Sirs,

Re:

Shop C, Ground Floor and Shops D, E and F, Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon We refer to your letter dated 22 October 1999.

We are of the view that the Vendor as Executor and in the course of administration of the estate of the Deceased could sell the property in manner set out in the Assignment. An executor can resort even to specific gifts for the payment of debts. The above fundamental rule can easily be found in Snell's Principles of Equity.

Nothing herein contained shall be construed as admission of any liability.

	Yours faithfully,
	CHU & LAU"

10. There was further correspondence between solicitors, the next relevant letter being from Y T Chan dated 4 November:-

"Y. T. CHAN & CO.,
SOLICITORS & NOTARIES

Date: 4th November 1999

Messrs. Josip Ma & Co.,
Solicitors
Rooms 2205-6, Hollywood Plaza
610 Nathan Road, Kowloon

Dear Sirs,

Re:

Shop C on Ground Floor and Shops D, E and F on Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to the above matter and would like to draw to your attention to the decision of Ultra Eternal Ltd. v Liu Tai Cheong (1997) 1 HKC 258 which concerns the subject property.

As the title of the above property is defective for the reasons set out in the said decision, we are of the view that our client is entitled to a return of the deposits under the Agreement for Sale and Purchase made between our respective clients. Please therefore let us have the draft Cancellation Agreement for our approval as soon as possible.

	Yours faithfully,
	Y. T. CHAN & CO."

11. It is, I believe, appropriate at this stage to deal with the judgment cited; in particular because the parties to it were, coincidentally, purchaser and vendor of another shop in 100 Woosung Street, being shop A, and the dispute centred around the self same requisitional point raised by the purchasers in the proceedings before me.

12. In Ultra Eternal, it was common ground that the assignment from the executor of Chan's estate to San Jose Limited was a sale of the building. The purchaser as in this case queried the executor's right to sell property when, under the will he was administering, it was bequeathed to specific legatees. Consents of the beneficiaries were not part and parcel of the documents of title and there was no evidence they had agreed to the sale. The vendor adopted the position that the executor had a power of sale without requiring the consent of the specific legatees. The purchaser did not accept this proposition, refused to complete and by originating summons sued for refund of the deposit paid.

13. The matter came before Jerome Chan J who handed down judgment on 8 January 1997. Before him the vendor argued that there is a presumption in law that an executor selling a part of the estate he is administering is doing so in due performance of his duty so to do as executor. That power is exercised lawfully unless the contrary is proved.

14. But Chan J found that an executor's power to dispose of property is subject to any restriction which may be imposed by the will by reason of section 54(4) of the Probate and Administration Ordinance Cap.10 (PAO).

15. Sections 54(4) and (5) PAO are as follows:

"54. Power of personal representative to dispose of property

...........

(4) A personal representative may charge, mortgage or otherwise dispose of any property vested in him, as he may think proper, subject to any restriction which may be imposed in this behalf by the will of the deceased and to the provisions of this section:

Provided that an executor may dispose of any property notwithstanding any restriction so imposed, if he does so in accordance with an order of the court.

(5) The disposal of property by a personal representative in contravention of the provisions of this section shall be voidable at the instance of any other person interested in the property."

16. Chan J went on to find that on the facts there was no justification for the sale of 100 Woosung Street such as to raise funds to pay duty or other debts. The sale in the absence of consent of these specific legatees was not lawful. He upheld the purchaser's claim that the vendor had failed to show good title.

17. I revert now back to the exchange of correspondence.

18. Y T Chan having cited Ultra Eternal brought response from Josip Ma of 5 November, and 9 November:

"JOSIP MA & CO., SOLICITORS

Date: 5th November, 1999

Messrs. Y. T. Chan & Co.,
Solicitors,
Hong Kong

Dear Sirs,

Re:

Shop C, Ground Floor and Shops D, E and F, Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to your letter of 4th instant and may we invite you to refer to Section 20 of the Limitation Ordinance Cap.347.

We believe all your requisitions raised herein has been satisfactorily answered by us.

All our client's right and interest herein are fully reserved.

	Yours faithfully,
	Josip Ma & Co."

"JOSIP MA & CO., SOLICITORS

Date: 9th November, 1999

Messrs. Y. T. Chan & Co.,
Solicitors,
Hong Kong

Dear Sirs,

Re:

Shop C, Ground Floor and Shops D, E and F, Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to our previous correspondence herein. For the avoidance of any doubt, we now re-cap the following:

......

2. We have fully and satisfactorily answered your requisition as to alleged fault in respect of administration of the estate of the deceased under the will as annexed to the certified copy of Probate Memorial No.2436060 and a good title has already been shown and proved as cited in our previous correspondences.

......

We are now instructed to inform your client, through your goodselves, that our client is able and willing to sell the above properties to your client and hereby agrees and allows your client to complete the sale and purchase herein up to 13th November, 1999 before 5:00, failing which, we have firm instructions to forfeit all the deposits already paid and rescind the Agreement for Sale and Purchase herein and furthermore reserves its rights to claim against your client in respect of all losses and/or damages suffered.

	Yours faithfully,
	Josip Ma & Co."

19. Y T Chan responded on 10 November thus:

"Y. T. CHAN & CO.,
SOLICITORS & NOTARIES

Date: 10th November 1999

Messrs. Josip Ma & Co.,
Solicitors
Hong Kong

Dear Sirs,

Re:

Shop C on Ground Floor and Shops D, E and F on Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to your letter of 9th November 1999 and reply as follows:-

.......

2. We have already drawn your specific instruction to the case of Ultra Eternal Ltd v. Liu Tai Cheong [1997] 1 HKC which was in fact decided on the same property and same documents as in our present case. We are of the view that any purchaser of the property would be constituted constructive trustee of the property for the beneficiaries named under the Will of Chan Charn Ping deceased dated 22nd July 1959.

.......

We reiterate that our client is ready able and willing to complete the purchase of the above property. However, your client has failed to prove and show a good title to the property. We would also remind you of your firm's duty as stakeholder in this transaction as stated in our earlier correspondences. Meanwhile, all our client's rights are hereby specifically reserved.

	Yours faithfully,
	Y. T. CHAN & CO."

20. They wrote again the next day terminating the agreement and calling for a refund of the deposits as follows:-

"Y. T. CHAN & CO.,
SOLICITORS & NOTARIES

Date: 11th November 1999

Messrs. Josip Ma & Co.,
Solicitors
Rooms 2205-6, Hollywood Plaza
610 Nathan Road, Kowloon

Dear Sirs,

Re:

Shop C on Ground Floor and Shops D, E and F on Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to the captioned property ("the Property") and the Agreement for Sale and Purchase made between our respective clients dated 7th October 1999 ("the Agreement").

It was an express term of the Agreement that completion should take place by 5:00 p.m. on 10th November 1999. Your client failed to show or make a good title to the Property whether by the time agreed for completion or at all and is therefore in breach of the Agreement. We are writing on behalf of our clients to terminate the Agreement and demand an immediate return of the deposits in the sum of HK$928,000, together with our costs of investigating title and incidental expenses.

Should we not have received your reply by noon tomorrow to confirm that your client accepts liability in terms particularized above, we shall issue proceedings forthwith for recovery of the same. Please let us know whether you have instructions to accept service of proceedings on behalf of your client.

Your will appreciate that our client paid the deposits to you to be held as stakeholder. As such, you have assumed personal responsibility for the safe keeping of the sum of HK$928,000. Any improper disposal of it on the instructions of your client renders you personally liable to our clients for their loss. As prudent solicitors, you should have known and properly advised your client that its title to the Property is plainly bad by reason of the judgment of the late Hon. Jerome Chan J in Ultra Eternal Ltd. v. Liu Tai Cheong [1997] 1 HKC 258. None of your purported answers to our requisition in this regard begins to distinguish the decision in the Ultra Eternal Ltd. Case and thus does not come near to showing a good title. If you release the stake to your client under such circumstances, we have imperative instructions to hold you personally liable for any loss and damage our clients will suffer as a result of the improper disposal.

	Yours faithfully,
	Y. T. CHAN & CO."

21. Josip Ma treated that as a repudiatory breach by the following:-

"JOSIP MA & CO., SOLICITORS

Date: 12th November, 1999

Messrs. Y. T. Chan & Co.,
Solicitors,
Hong Kong

Dear Sirs,

Re:

Shop C, Ground Floor and Shops D, E and F, Ground Floor together with the Cocklofts immediately thereabove of No.100 Woosung Street, Kowloon

We refer to your letter of 11th November, 1999.

It is and has always been our client's position that our client has already duly discharged its duty to prove good title to the Property.

In the premises, your client's demand for an immediate return of the deposits shall be deemed as repudiatory act.

Our client has no other alternative but to treat the said contract as terminated and reserves all its rights and remedies against yours.

As to the deposit now being held by us as stakeholder, it is our position that we hold the deposit as stakeholder in pursuant to the sale and purchase agreement. Since your client has committed repudiatory breach of the said agreement, it is an implied term and/or for business efficacy that the said deposit should not be returned to your client unless and until the case is finally disposed off by the Court or otherwise.

Anyway, to avoid unnecessary argument, we would suggest meanwhile that the said deposit be paid into court pending the final outcome of the impending court case.

	Yours faithfully,
	Josip Ma & Co."

22. Needless to say, the sale and purchase did not proceed.

The pleadings

23. By the originating summons the purchasers seek a declaration that the requisition was not sufficiently answered by the vendor, that by completion date the vendor had not shown good title and that the vendor be ordered to return to them the deposits paid totalling $928,000 and interest thereon, the real estate commission of $92,800, conveyancing fees of $43,660 and costs.

24. The vendor seeks a dismissal, an order that the deposits are forfeited and costs.

The issue

25. Has the vendor properly answered the purchasers' requisition, and proved it could show as well as give good title?

The purchasers' case

26. From the purchasers' point of view it is unfortunate that subsequent to their terminating the agreement the Court of Appeal dealt with the powers of an executor to dispose of part of the estate he is administering in the case of Chun Hon Wai v. Junichi Takashima [2000] 2 HKC 777 in a way which differed from Chan J in Ultra Eternal. The Court held that as a matter of general law and equity a personal representative selling part of the estate is presumed to be acting in discharge of his duties imposed by his appointment. Section 54(4) PAO does not affect the absolute power he holds to sell for the purpose of administering the estate. There is a presumption that the sale is for the purpose of administration and a purchaser need not and should not be concerned to enquire unless there is evidence to displace the presumption.

27. Godfrey VP delivered the leading judgment. He said at p.783:-

"The answer to the question whether anything in section 54, [PAO] particularly, of course, in sub-section (4) and (5), operates to limit the rights of a personal representative to sell property comprised in the deceased's estate for the purposes of administration is clearly that it does not. Were it otherwise, it would make nonsense of section 61(1)(a). What subsections (4) and (5) do is to preserve the right of a beneficiary to object, as an excess of power to any disposition by a personal representative otherwise than for the purposes of administration. They do not affect a purchaser who takes an assignment from an executor who is selling in the course of administration, or who is to be presumed to be doing so, unless the circumstances are such that the purchaser is put on notice that the sale is in breach of trust; for example, when there is evidence that the administration has been completed and that the sale is not being effected for the purposes of administration. The suggestion that the vendor must satisfy the purchaser by proof that the sale is required for the purpose of administration is misconceived. The purchaser is entitled so to assume, and is protected if he does, unless there is evidence to the contrary. In that case (but only in that case) a purchaser would be entitled to demand either proof of the consent of the beneficiaries or proof (e.g. if a beneficiary is under age) that the court has sanctioned the transaction."

28. Section 61(1)(a) PAO states:-

"61. Property of deceased is asset for payment of debts

(1)(a) The property of a deceased person, to the extent of his beneficial interest therein, and the property of which a deceased person in pursuance of any general power disposes by his will, are assets for payment of his debts and liabilities, and any disposition by will inconsistent with this Ordinance is void as against the creditors; and the court shall, if necessary, administer the property for the purpose of the payment of debts and liabilities.

....."

29. Mr Mok appearing before me for the purchasers candidly opined that this was 'a robust ruling from a fearless judge', and might be said to do violence to the wording of sections 54(4) and (5) PAO. He is of course entitled to his viewpoint. But as he quite properly accepts, I am bound to follow Chun Hon Wai, which clearly overrules Ultra Eternal.

30. The thrust of Mr Mok's argument is that whilst under current judicial authority the vendor can now be said to have been able to give good title he failed to show that he could.

31. He relies on the Court of Appeal judgment in Active Keen Industries Limited v. Fok Chi Keong [1994] 2 HKC 67.

32. In that case the purchaser of a flat in a multi-unit building raised a requisition going to an apparent discrepancy between the number of flats permitted under the occupation permit and that actually subdivided under the deed of mutual covenant. The vendor's response such as it was was not acceptable to the purchaser and it terminated the agreement. The judge below Godfrey J (as he then was) found that the vendor had established it could give good title and that it had done enough to show good title. The Court agreed with him on the first finding but not on the second; the vendor had failed to respond properly or adequately to a reasonable requisition raised and thus had not shown good title.

33. Litton JA (as he then was) said at pages. 78 and 79:-

"How is good title shown?

The question 'how is good title shown?' is not capable of an answer in the abstract. It depends upon the matter at hand.

......

Obviously, if a purchaser raises a substantial objection as to the vendor's title and there are facts within the vendor's knowledge which, if revealed, might meet the objection, and the vendor chooses to withhold that from the purchaser, the vendor clearly cannot, on the day fixed for completion, turn round and say to the purchaser, 'Now I will both show you a good title and make you good title; you pay the balance of the purchase price today or I will rescind.' The purchaser must be given reasonable time to consider the title of the vendor and his own position; the implied obligation of showing a good title would not have been discharged by disclosure on the day fixed for completion.

But assume the objection to have no substance. In such a case, as Godfrey J remarked, this presents considerable difficulties. Is it enough for the vendor to say, 'there is no substance in the purchaser's objection'? The judge answered this question as follows:

'If there is nothing the vendor can usefully add, I would hold that it is enough. Certainly, a sufficient answer to the purchser's objection would have been this, 'You will see from the deed of mutual covenant dated 21 March 1964, and from the assignment to the vendor's predecessor in title dated 16 July 1964, that the building of which this property forms part was laid out in its present arrangement some 28 years ago. The Building Authority is aware of the position and has raised no threat of enforcement proceedings. In the premises, the purchaser's objection is without substance.'

In my judgment, the judge's approach must in principle be correct. 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, although, obviously, if one party can persuade the other to his own point of view on the law, so much the better."

34. Mr Mok's argument is that Ultra Eternal being as at the time of exchange of correspondence right on point, the purchasers' requisition could only be described as reasonable and required an adequate response. In practical terms that meant it was incumbent on the vendor's solicitors to face the ruling of Ultra Eternal and deal with the evidence before the judge, his reasoning and conclusions. The correspondence the pertinent parts of which I have reproduced reveals that they did no more than state that the executor was entitled to sell. This was not good enough. The vendor had failed to show good title and that gave the purchasers the right to terminate.

35. Mr Chan SC for the vendor had a contrary view; namely that the vendors had shown that it could give good title and the purchasers were in breach for terminating.

The outcome

36. As Litton JA said in Active Keen, the answer to the question: "How is good title shown?" depends upon the matter at hand. I take that to mean the nature and substance of the requisition raised. If, for instance, there are matters known to the vendor which, if known to the purchaser would allay any concerns he might have, then he is duty bound to disclose them. If, however, the requisition is without substance the vendor need simply respond by saying so.

37. What is the situation here?

38. There were no facts known to the vendor such that, by passing them on, the purchasers' concerns might be resolved. But in the light of Ultra Eternal certainly the requisition had substance.

39. How then was the requisition to be answered?

40. Litton JA said that it is not an occasion for bandying propositions of law. The purchasers were clearly, and perhaps justifiably, concerned that there was a judicial pronouncement which said that the vendors could not give good title. The vendor's legal advisers evidently disagreed; without expressly saying the decision was wrong they reverted to establish principles embodied in the Common Law. There is a cryptic reference to a text book on Equity. I do not believe it was required to do more. Had it spelt out its reasoning, perhaps submitted counsel's opinion, then it might have done enough to allay the purchasers' fears and save the sale. But on questions of law it is up to each party to seek its own advice and decide for itself. Litton JA said as much in Active Keen at the tail end of the passage I have quoted. And he said at p.86:-

"It must be a rare case indeed where a vendor has in fact a good title and yet fails to show a good title."

41. In this case I find the vendor has satisfied both.

42. Before concluding I want to pay tribute to Messrs Mok & Chan for the clarity of their submissions.

43. The application is dismissed. The deposits are forfeited to the defendant and are to be paid to the defendant together with interest earned thereon.

44. Liberty to apply.

45. Costs are to the defendant, with certificate for two counsel taxed if not agreed, but this order as to costs is nisi at first instance.

Representation:

Mr Y C Mok, instructed by Messrs Y T Chan & Co., for the plaintiffs

Mr E Chan, SC leading Mr A Ng, instructed by Messrs Liu, Chan & Lam, for the defendant