Town Bright Industries Ltd. v. Bermuda Trust (Hong Kong) Ltd. and Another

HCMP003269/1997

1997, No. H.C.M.P. 3269

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS

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Coram: The Hon. Mr. Justice Hartmann in Court

Date of hearing: 7 April 1998

Date of handing down of judgment: 30 April 1998

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J U D G M E N T

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1. On Bermuda Trust 23rd July 1997, in terms of a provisional agreement, the First Defendant, (Limited, agreed Hong Kong) Limited, agreed to sell and the Plaintiff, Town Bright Industries to purchase certain office premises for a price of HKcustomary, the $21,800,000.00. As is initial agreement was replaced by a formal agreement8th August 1997. ; the latter being dated In laymandescribed as two office 's terms, the property which was the subject of sale may be units on the second floor of a building in Des Voeux Roadknown as the Hing Yip , Central, Commercial Centre.

2. During the course of August and September 1997, in processing the transfer of the property, Plaintiff raised certain requisitions. It was not satisfied the answers revealed that the vendor was able to show good title. Accordingly, by letter dated 29th September 1997, Plaintiff rescinded the agreement and now, in terms of its summons, seeks a declaration that it has lawfully done so and is entitled to the relief claimed.

A brief history

3. The First Defendant, a professional trust company, had originally been vested with the property as trustee for the Chartered Institute of Bankers Hong Kong Centre (the 'Centre') in terms of a deed of assignment dated 4th May 1989. It is not disputed that at all material times the First Defendant (the 'trustee') has held the legal title in the property. The difficulties in this case are centered rather on equitable title.

4. Although the Centre was an organisation registered in Hong Kong in terms of the Societies Ordinance, Cap. 15, and had its own constitution, it was closely allied to the Chartered Institute of Bankers of Great Britain, so much so that the Centre's constitution incorporated aspect's of the constitution of the British Institute. In light of Hong Kong's change of sovereignty, the Centre resolved to dissolve itself and be replaced by an independent corporate body to be called The Hong Kong Institute of Bankers (the 'Institute'). This resolution was carried through and on 10th August 1995 the Institute was incorporated in terms of the Companies Ordinance, Cap. 32.

5. Quite clearly, it was always intended that the assets of the Centre, including its real estate, should, upon dissolution, be transferred by way of donation to its effective successor, the Institute. But was such a donation within the powers of the centre and, if so, was there a valid transfer? Plaintiff contends not.

The Ultra Vires issue

6. Plaintiff has argued that the Centre had no power to dispose of its property by way of donation to a third party, even if that third party was effectively its successor. Its actions were therefore ultra vires.

7. In this regard, Plaintiff's counsel, Mr. Benjamin Yu S.C., referred to the Royal Charter of the British Institute, Article 3 of which sets out the objects of the Institute in the following terms:

"The object for which the Institute is hereby constituted is the advancement of knowledge of and education in the principles and practice of banking for the benefit of the public."

8. As to the powers to manage the way in which property may be dealt with, counsel referred to Article 5 which begins:

"The income and property of the Institute shall be applied solely towards the promotion of the Object of the Institute and no portion thereof shall be paid or transferred directly or indirectly by way of dividend, bonus or otherwise however by way of profit to the members of the Institute...."

9. It was argued by Mr. Yu that, in terms of the Charter, the property of the British Institute could only be applied towards the promotion of the stated object of that Institute and that there was no provision in the Charter which authorised the disposal of property for no consideration. He went on to argue that the constitution of the Centre bound it to the provisions of the Royal Charter and accordingly the Centre itself had no power to dispose of property to a third party without consideration. In this regard, reference was made to Article 37 of the Centre's constitution which read as follows:

"Insofar as anything done by the Institute shall be inconsistent with the terms of the Constitution of the Chartered Institute of Bankers, London, it shall be ultra vires provided that it shall be intra vires the Institute to do anything expressly authorised by or within the terms of this Constitution notwithstanding that the same may be inconsistent with the terms of the Constitution of the Chartered Institute of Bankers, London."

10. Leaving aside the Centre's constitution for one moment, I regret I cannot accept Mr. Yu's submission concerning the limited powers of the Royal Charter. Article 4 of the Charter sets out the powers of the British Institute to further its objectives and inter alia includes the power:-

"(h) to confer, consult, communicate or co-operate with any other professional or educational institution, society, association or body with a view to the pursuit of common objects in banking and related subjects and to represent the banking profession both nationally and internationally;

(i) to enable and encourage all persons engaged in banking to meet and correspond in order to facilitate the exchange of ideas and information on the practice, teaching and use of banking;"

11. As to the management of property (in so far on that may be required in furtherance of its object), Article 4 continues:

"(p) so far as the law may from time to time allow, to purchase, take on lease or in exchange, hire or otherwise require any real or personal property and any rights or privileges and to construct, erect, alter, improve and maintain any building which may be required from time to time by the Institute and to manage, provide accommodation and catering facilities in, develop, sell, demise, let, mortgage, dispose of, turn to account or otherwise deal with all or any part of the same."

12. In my view, the Royal Charter provides not only for the sale and demise of property but also the power generally to 'dispose of' or 'otherwise deal with' property. This must include the power to donate if such donation is in furtherance of the object and the object, of course, includes co-operation with like-minded professional bodies for the purposes of encouraging the dissemination of banking knowledge.

13. In my judgment, therefore, not only does the Royal Charter itself allow for the disposition of property that took place in this case but the constitution of the Centre, when that constitution was still operative, allowed for it too. In this regard, Article 14A of the centre's constitution said that the Executive committee:

"... shall also have power, from time to time, to sell, lease, surrender or otherwise deal with any premises which in their judgment are longer required for the purposes of the Institute."

14. Clearly, in anticipation of dissolution, the property was no longer required for the purposes of the Centre and, in my view, the Executive Committee thereby had the power to 'otherwise deal with' the property by way of donating it to the Centre's nominated successor.

15. But even if the Executive Committee may have been sailing into unchartered seas, Article 14C provided the necessary protection:

"Any and all acts and things done by the Executive Committee in good faith in the exercise of the aforesaid powers shall be intra vires the Institute and shall be binding on all Members for the time being of the Institute as if they had expressly authorised the doing of the same."

16. In this regard, in my view, it is noteworthy that the Centre in general meeting at a later time specifically ratified the action of the Executive Committee in donating the property to its effective successor, the Institute.

17. For the sake of completeness I should mention that Article 41 of the Centre's constitution made provision for the disposal of assets on dissolution in the following terms:

"On the dissolution of the Institute, the funds of the Institute after payment of the liabilities, shall be distributed in such manner as the Executive Committee shall determine prior to such dissolution."

18. Finally, a reading of Article 37 supra reveals that, even if the acts of the Executive Committee of the Centre were ultra vires the Royal Charter, provided it was authorised by or was within the terms of the 'local' constitution then such acts were to be considered intra vires.

19. In all the circumstances, I find no merit in the ultra vires submission. In my judgment, the Centre acted within its constitutional powers.

The valid transfer issue.

20. As noted earlier, it was always the intention of the Centre to donate its equitable interest in the property to the Institute. Was there, however, a valid disposition? The Plaintiff has submitted that there was not. I disagree.

21. In transferring its equitable interest to its successor, no formal conveyance was necessary. In the case of a direct gift, where the legal estate is vested in a trustee and the donor thereby has only an equitable interest in the property, it is not necessary for the donor to procure a conveyance of the property; it is sufficient for the donor to direct the trustee to hold the equitable interest for the benefit of the donee (see Snell's Equity, 29th Ed. Page 123). A deed is not therefore necessary although writing is essential. In this regard Section 5 of the Conveyancing and Property Ordinance, Cap. 219, reads -

"no equitable interest in land can be created or disposed of except by writing signed by the person creating or disposing of the same, or by his agent thereunto lawfully authorized in writing, or by will, or by operation of law;"

22. As I see it, for the equitable interest to be transferred, what was required on the part of the Centre was a resolution which was lawful in terms of its constitution to make that disposition and an instruction to the trustee to hold the equitable interest for the benefit of the donee.

23. What then of the Centre's constitution? Article 14D of the constitution directed that all real estate must be vested in a professional trustee; hence the vesting of the property in the name of First Defendant. However, as earlier noted, the power to acquire property and dispose of it lay with the Executive Committee. In this regard, I repeat Article 14A which said that the Executive Committee:

"... shall also have power, from time to time, to sell, lease, surrender or otherwise deal with any premises which in their judgment are longer required for the purposes of the Institute."

24. The trustee was obliged in terms of Article 14E to deal with the Centre's property as directed by the Executive Committee. That Article read as follows -

"The Trustee shall deal with the property of the Institute as directed by the Executive Committee and shall be indemnified against risk and expense out of the Institute's property. A resolution of the Executive Committee, evidenced by a copy signed by two members thereof and by the Honorary Secretary shall, in all cases, be sufficient authority and protection to the Trustee for and in respect of any conveyance, transfer, payment or other act thereby directed."

25. In my judgment, Article 14E did not mandate the sole manner in which the Executive Committee must communicate its directions to the trustee. Its directions could be communicated and acted upon in any number of ways. But to ensure that it had sufficient authority to act and that it would be indemnified in respect of such acts, the trustee required only a resolution of the Executive Committee evidenced by the signatures of two members and the Honorary Secretary.

26. The deed of assignment dated 4th May 1989, in terms of which the trustee was vested with legal tittle to the property, in one of its 'recital' clauses, paraphrased Article 14E in the following terms -

"The rules of the Institute provide that the Trustee should deal with the property by way of sale mortgage charge lease or otherwise howsoever as directed by the Institute and that such direction shall be given by a resolution of the Executive Committee of the Institute passed by a majority of the members present at a duly convened meeting of the Institute."

27. That paraphrase may have led to some misunderstanding but, with respect to the draftsman of the clause, I do not consider it to be an accurate paraphrase of the meaning and true intent of Article 14E.

28. In my judgment, therefore, to lawfully 'surrender' or 'otherwise deal with' any property in which the Centre had an equitable interest, the Executive Committee had to pass a resolution to do so. The power of disposition lay with that committee.

29. On 17th November 1994, the Executive Committee met to deal with the many complexities involved in the process of dissolving itself and being re-constituted in an independent corporate form. At that meeting inter alia it was noted that the Monetary Authority had given consent to the use of the name 'Hong Kong Institute of Bankers' which would be registered as a limited company. The Memorandum and Articles of Association of that future corporate body were then approved. This was not, therefore, simply an early meeting at which the members debated what would have to be done in the future. This was a meeting at which matters were resolved; for example, the approval of the Memorandum and Articles of the future Institute.

30. The minutes of this meeting of the Executive Committee then record the following -

"The meeting also resolved that all assets including the property of the Chartered Institute of Bankers - Hong Kong Centre, upon dissolution, be transferred to the future Hong Kong Institute of Bankers."

31. It is Plaintiff's submission that this resolution to transfer all assets including property, upon dissolution, to the future Institute could have been no more than a statement of future intent; to put it into colloquial terms: "this is what we, the Executive Committee, intend to do in the future when we will then pass further and more specific resolutions." On an ordinary reading, however, I cannot agree. In my judgment, it is plain that the Executive Committee did not at that time merely express an intention; to the contrary, it made a decision.

32. How then was this formal decision of the Executive Committee to transfer its equitable interest in the property communicated to the trustee?

33. By the 17th November 1994 the trustee already knew that the Centre intended to make changes to enable it to become independent from Great Britain and that these changes would be relevant to the passing of equitable interest in the Centre's property. But concerning the Executive Committee's resolution to transfer its equitable interest, the trustee received a written direction in terms of a letter dated 6th April 1995; that letter was signed by the Chief Executive Officer and was expressed as follows -

"I refer to your memo dated 13 January 1995 (copy enclosed) concerning our property and forward herewith a copy of our minutes, confirming that it is the wish of the Chartered Institute of Bankers Hong Kong Centre to have the property transferred to the Hong Kong Institute of Bankers when it is established.

Please advise whether any action is required on our part. We would like Bermuda Trust (Hong Kong) Ltd to regard the Hong Kong Institute of Bankers as the beneficial own of the following premises: 2/F, Hing Yip Commercial Centre, 272-284 Des Voeux Road Central, Hong Kong."

34. A trustee may hold equitable title for a beneficiary not yet formed and that letter in my judgment is a clear direction by the donor of the property to the trustee to hold the equitable interest for the benefit of the donee.

35. There had, therefore, been a decision made by the Executive Committee to transfer the equitable interest in the property to the Institute upon its incorporation and that decision had been communicated to the trustee by the Chief Executive Officer. In addition, for the avoidance of doubt, the relevant minutes had been sent. Those minutes, I presume, must have been the minutes of the Executive Committee dated 17th November 1994. Reference has been made to no others.

36. A week later, on 13th April 1995, the trustee replied to the letter of direction in the following terms -

"We refer to your Memorandum of 6 April 1995 regarding the above matter.

We write to confirm that Bermuda Trust (Hong Kong) Limited now regards the Hong Kong Institute of Bankers as the beneficial owner of 2nd Floor, Hing Yip Commercial Centre, 272-284 Des Voeux Road, Central, Hong Kong.

In the meantime, would you please let us have a certified true copy of the Minutes in this respect of our records."

37. It is to be noted that the trustee, requested a 'certified true copy' of the relevant minutes: presumably to protect its own interests in terms of Article 14E of the Centre's constitution.

38. Of course, on 13th April 1995, when this letter was written by the trustee to acknowledge the directions given, the Institute had not yet come into existence. It was only to be incorporated on 10th August of that year. On the face of the trustee's letter it may appear that it understood it was to regard the Institute as the holder of equitable title with immediate effect. If that is the case, I do not see that this unilateral mistake can vitiate the disposition. Equity looks to the intent rather than the form. The intent of the Centre was unambiguous. There could be no conceptual or evidential uncertainty as to the beneficiary on the part of either the Centre or the trustee. In any event, by 10th August of that same year when the Institute was incorporated, the effect of any mistake on the part of the trustee fell away.

39. As I see it, the essential issue is whether some two years later, at the time of the sale of the property to the Plaintiff, there could be any doubt in whom the equitable interest in the property then lay. I do not see that by that time there could be any such doubt, more especially as by 31st March 1996 the Centre itself had been formally dissolved.

40. As to the principle that equity looks to the intent rather than the form, I believe it is pertinent to note that on 6th October 1995 there took place in a joint meeting both the final annual general meeting of the Centre and the first general meeting of the Institute. The minutes of that joint meeting record the following -

"The Chairman moved to transfer all business, and assets of the Chartered Institute of Bankers - Hong Kong Centre, as at 10 August 1995 to the Hong Kong Institute of Bankers. Seconded by Mr. David Li, the motion was carried."

41. Mr. Warren Chan S.C., for the two Defendants, has submitted that here was clear ratification by the Centre in general meeting of the resolution passed earlier by the Executive Committee to transfer all assets to the Institute and evidence too, of course, of the Institute's acceptance of such transfer. In such circumstances, it is difficult to see where the risk of a challenge to good title would emanate.

Identification of the transfer document

42. The Plaintiff has argued that, even if there was an attempt to transfer the equitable interest in the property, it is not possible to identify the required written document which gave effect to that transfer, this being a mandatory requirement pursuant to Section 5 of the Conveyancing and Property Ordinance. This argument, if I understand it correctly, appears to suggest that there must be just one written instrument which meets the requirements of the section. In my judgment, however, the section is not to be interpreted so narrowly. Snell's Equity, 29th Ed. page 107, under the heading, 'Dispositions of interests under trusts', states the following principle -

"... the disposition must actually be in writing, and not merely be evidenced by writing. The disposition may be in two or more interconnected documents, only one of which is signed."

43. One of the authorities cited for this principle is Re Danish Bacon Co. Ltd. Staff Pension Fund Trusts [1971] 1 W.L.R. 248, in which Megarry J. considered Section 53(1)(c) of the Law of Property Act, 1925, which read -

"(c) a disposition of an equitable interest or trust subsisting at the time of the disposition, must be in writing signed by the person disposing of the same, or by his agent thereunto lawfully authorised in writing or by will."

44. In respect thereof he went on to say -

"However, if a statutory requirement that a "memorandum" shall be "in writing" may be satisfied by two or more documents, I do not see why two or more documents should not satisfy the requirement that a "disposition" shall be "in writing." True, section 40(1) is merely directed to providing written evidence of a transaction, whereas under section 53(1)(c) the matter is one not merely of evidence but of the disposition itself. Yet two documents are used in constituting a strict settlement of land or establishing a trust for sale of land, and there are well-established rules for the incorporation of documents in a will; and if two or more documents, when read together, dispose of an equitable interest, I do not see why the court should insist on separating them and subjecting each separately to the test of section 53(1)(c)."

45. If more than one document is capable of meeting the requirements of Section 5 of our Conveyancing and Property Ordinance, the test must be whether those documents are sufficiently interconnected. In this regard, I can do no better than echo the submission of Mr. Chan for the Defendants; namely, that the minutes of the Executive Committee meeting of the Centre dated 17th November 1994 constituted both the decision and the direction to the trustee to transfer equitable interest. The letter from the Chief Executive Officer dated 6th April 1995 to the trustee amounted to the communication of the Executive Committee's direction to hold the equitable interest for the benefit of the Institute. The minutes and the letter are, therefore, to be read together, the one being inextricably linked to the other.

46. In this regard, for the sake of completeness, as it was the Executive Committee only and not the Chief Executive Officer which had power to dispose of landed property and as the only document from that Committee is the minutes of 17th November 1994 (sent under cover to the trustee), I find general support for my findings in In re Strathblaine Estates Ltd. [1948] 1 Ch. 228 at 230 per Jenkins J. -

"The minutes show that there was an agreement to divide the company's unsold freehold properties amongst the shareholders, and I think the company must accordingly be regarded as having become a trustee for the shareholders of the properties in question. The existence of such a trust is borne out by the fact that the title deeds of the properties were handed to and have been retained by the shareholders. The minutes relating to the agreement to divide the company's unsold properties were signed by the chairman, and I think they constitute sufficient written evidence to satisfy the requirements of s. 53 of the Law of Property Act, 1925." (my emphasis)

The issue of stamp duty.

47. In contending that there was no written instrument that passed equitable title, the Plaintiff, inter alia, referred to the uncontested fact that neither of the written instruments referred to by Defendants had been charged with duty in accordance with the provisions of the Stamp Duty Ordinance, Cap. 117. This matter was argued at the hearing with particular reference to Section 15 of the Ordinance which reads:

(1) No instrument chargeable with stamp duty shall be received in evidence in any proceedings whatsoever except -

(a) criminal proceedings;

(b) civil proceedings by the Collector to recover stamp duty or any penalty payable under this Ordinance,

or be available for any other purpose whatsoever, unless such instrument is duly stamped:

Provided that an instrument which is not duly stamped may be received in evidence in civil proceedings before a court if the court so orders upon the personal undertaking of a solicitor to cause -

(i) such instrument to be stamped in respect of the stamp duty chargeable thereon; and

(ii) any penalty payable under section 9 in respect thereof to be paid.

48. There is, of course, a proviso contained in that section and in regard thereto, by letter dated 24th September 1997, the Defendants' solicitors gave the following undertaking:

"If you insist, we could procure a Statutory Declaration from Cecilia Ting testifying that she was the Chief Executive Officer at CIB-HK at that time and submit a copy of the Memorandum for stamping."

49. It should further be noted that during the hearing, on behalf of the Defendants, counsel gave a formal undertaking to have the relevant documents stamped if they were found by this court to be instruments which passed title in terms of Section 5 of the Conveyancing and Property Ordinance.

50. Mr. Chan has argued that, in light of the formal undertakings, there is nothing in the stamp duty point; that it is a matter of conveyancing and does not affect title. In this regard he referred to the Privy Council judgment in Lap Shun Textiles Industrial Co. Ltd. v. Collector of Stamp Revenue [1976] AC 530 at 535:

"A third head of possible difficulty was said to relate to matters of title. But their Lordships were not satisfied of the reality of this difficulty under the system prevailing in Hong Kong. The dictum of Eve J. in In re Indo-China Steam Navigation Co. [1917] 2 Ch. 100, 106 suggesting that registration of a transfer while inadequately stamped would not bring about a legal transfer does not appear to their Lordships to be correct."

51. This judgment, of course, precedes our present Stamp Duty Ordinance which came into force in 1981. I further accept that the passage may well be obiter. However, in my view, the principle stated holds good. A failure to ensure that an instrument chargeable with stamp duty is duly stamped does not go to title.

52. In fairness, of course, counsel for the Plaintiff does not strongly argue to the contrary. As I understand it, it is rather his argument that a document which is unstamped may not be used by a vendor to prove good title. In this regard, he has referred me to an article in the Hong Kong Law Journal by P.G. Willoughby (then Director of Professional Legal Education at the University of Hong Kong) entitled: Professional Conduct and Stamp Objections (1981) 11 HKLJ 361. In part the article reads:

"Having regard to the fundamentally different policy of the Hong Kong stamp duty legislation, which has always imposed a statutory obligation on the parties to stamp certain instruments, and bearing in mind the civil liability to pay the duty (which was until recently supported by criminal sanctions), it seems that failure to stamp is not a mere technicality which counsel can be permitted to waive. Rather it seems more likely that it is the duty of counsel to uphold the law and endeavour to ensure that the statutory obligation to stamp is observed.

There is perhaps a further aspect to this matter which should be considered and that is whether in Hong Kong failure to stamp an instrument goes to its validity and therefore whether even under the ruling affecting members of the English Bar stamp points can be taken. It seems that references to the validity of an instrument in this context are to the unusual situation that used to affect certain instruments such as bills of exchange and promissory notes12 which could not be stamped out of time. However, the wording of section 15(1) of the Stamp Duty Ordinance is such that it seems that in Hong Kong an unstamped or insufficiently stamped instrument may properly be regarded as 'invalid'. It may be, therefore, that for this reason also it is proper for counsel to object to the admissibility of instruments that are not duly stamped."

53. Certainly, the ordinance lays down an obligation to ensure that stamp duty is charged and a failure to do so means that an instrument shall not be received in evidence or 'be available for any other purpose whatsoever'. But Section 15 gives a discretionary power to the court to receive such instruments in evidence subject to suitable undertakings; that is, undertakings of the kind given by Mr. Chan. If the proviso allows for such instruments to be used in evidence to prove good title, in my judgment, it must follow that they can be used outside court to prove good title subject, of course, to a similar undertaking. That undertaking was given by the vendor's solicitors.

54. In my view, therefore, the fact that the instruments passing equitable title from the Centre to the Institute were unstamped did not prevent the vendor from proving good title subject to any undertaking necessary to ensure that the statutory obligation to stamp was observed and the purchaser protected from possible liability.

Recission by the Plaintiff.

55. The formal agreement of sale dated 8th August 1997 placed upon the vendor the obligation to show good title to the property. The agreement further provided that in every respect time was to be of the essence. As concerns the completion date, the parties originally agreed that it should be on or before 10th September 1997. However, two days before that date it was agreed that it should be extended by fourteen days to 24th September.

56. The matter of the completion date, however, did not rest there. On 20th of the month, the Plaintiff's solicitors sought a further extension of fourteen days until 8th October. Defendants' solicitors advised that they were taking instructions and would revert. On 23rd September, Plaintiff's solicitors requested a response to their request. There was no immediate response. Instead, on 25th September - the day after the completion date - Defendants' solicitors sent a detailed letter to answer the balance of the requisitions. At the end of the letter they said that the vendor did not consider any further 'postponement' to be necessary and gave notice to complete without specifying a date. On the same day, Plaintiff's solicitors responded by saying (in part):

"We are considering further on the question of ultra vires in relation to the gift from CIB-HKC to HKIB...

We have not drafted the undertaking letter as we were not, and still are not, sure what documents will be given to us to form parts of title deeds. Your notice to complete is certainly pre-nature (sic) as the title queries have not been settled."

57. It is, therefore, apparent that, although there had been no agreement to extend the completion date, nothing was done by either party to complete on the specified date. Instead, attempts to answer the requisitions were continued and those attempts were considered and answered.

58. What then was the result? I am satisfied that the contract did not terminate at midnight on 24th September but continued with the substitution of a reasonable time for the failed express condition that completion be on the specified date. The consequence that I have detailed was stated by Hunter J.A. in Camberra investments Ltd. v. Chan Wai Tak [1989] 1 HKLR 568 at 574, this dicta being approved by the Privy Council in Chong Kai Tai and another v. Lee Gee Kee and another [1997] 1 HKC 359:

"I regard the point as fundamental and very relevant as revealing both parties to have been at fault. Their obligations under cl 3 were mutual. The duty of the defendant to tender an executed assignment and that of the plaintiff to tender the balance of the purchase price were concurrent conditions. Neither performed: neither tendered: neither triggered the corresponding obligation of the other. The defendant neither executed nor tendered an assignment before 1 pm and thereafter was denying his obligation so to act and preventing his solicitor from taking any step to that end. The plaintiff tried to tender and failed. The cheque constituted at most conditional payment and not the 'full' payment required. An effective tender required cash or its equivalent, neither of which was available that Saturday afternoon.

In my judgment this contract remained uncompleted at midnight on 28th February by the fault of both parties. It did not then terminate as was at one time suggested. It remained on foot with the substitution of a reasonable time for the failed express condition."

59. Although the Defendants solicitors continued to attempt to answer Plaintiff's requisitions and although Plaintiff, as Mr. Chan expressed it, continued to co-operate, during that process, on 29th September, Plaintiff rescinded the agreement. The letter read:

"Despite the efforts we have made, your client has not proved title to the property. The completion date, as extended, has expired on 24th September 1997.

We now give you notice that our client rescinds the agreement for sale and purchase. Your client is requested to return the deposit of HK$3,270,000.00 to us forthwith."

60. In my judgment, however, at that time the vendor was continuing to attempt to answer Plaintiff's requisitions and was doing so with candour in a bona fide attempt to show good title. Indeed, it appears that a further letter from Defendants' solicitors crossed the letter of recission. Yes, there may have been some shifting of ground in an attempt to answer the requisitions but the issues were far from simple. Matters were capable of resolution and I am satisfied that in the final result Defendants were able to show good title so that any risk of that title being successfully challenged became negligible.

61. In the circumstances, in my judgment, Plaintiff was not able, without notice, to rescind in the manner it did. Time for completion could be made an essential term but only by serving a notice to complete within a reasonable time. In this regard, see for example, Douglas Ltd. v. Resources Main Enterprises Ltd. CA Nos. 213 and 214 of 1997:

"No doubt it is true that in the ordinary case where one party, the vendor, fails to answer a requisition, it is normally right for the purchaser, insisting on the requisition, to give some notice making time of the essence and putting a period within which the vendor must answer the requisition."

62. There may, of course, be occasions where such a notice is unnecessary. That will depend on the facts of each case. In this regard, see for example A-Mayson Development Co. Ltd. v. Betterfit Ltd. [1992] 2 HKC 533 at 535 per Godfrey J. (as he then was):

"There are circumstances in which the purchaser may call off the contract at once, without waiting to see whether the vendor can succeed in proving title on or before completion: see Price v. Strange [1978] Ch 337 per Goff LJ at p 355. For example, in my judgment the purchaser does have a right to call off the contract as soon as he discovers a fundamental defect in the title, or some other fundamental breach of contract by the vendor. However, although, upon discovering before completion a fundamental defect in the vendor's title, the purchaser may thereupon treat the contract as at an end, in my opinion he may not do so merely for minor deficiencies, removable defects, matters of conveyance and so on: compare Pips (Leisure productions) Ltd. v. Walton (1981) 260 EG 601, per Megarry VC, at pp 603, 604. Where proof of title is insufficient, but the title is not necessarily defective, the purchaser is, in my judgment, bound in the ordinary way to give the vendor a proper opportunity of establishing the title."

63. In my judgment, however, as I have said, in the present matter it was incumbent upon the Plaintiff to serve notice. This was not done. Plaintiff's recission, therefore, amounted to a breach of the contract. Defendants were entitled to accept that breach. Thereafter, it became unnecessary - if it was still required - for the vendor to answer any outstanding requisitions.

Conclusion.

64. It is my judgment that Plaintiff is not entitled to the declarations sought; Plaintiff's summons is dismissed. As for the counter-claim, that is allowed. Costs are awarded in favour of the Defendants, that order to be an order nisi in the first instance with liberty to apply within 21 days.

Representation:

Mr. Benjamin Yu, S.C. inst'd by M/s. Ng and Fang for the Plaintiff

Mr. Warren Chan, S.C. leading Mr. Liu Man-kin inst'd by M/s. K.B. Chau & Co. for the Defendants

Plaintiff's appeal to Court of Appeal dismissed. Please refer to CACV137/1998 dated 21 January 1999