Tin Shui Wai Development Ltd v. Polykin Ltd

HCA 561/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 561 OF 2004

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BETWEEN

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Before: Mr Recorder Edward Chan, SC in Chambers

Date of Hearing: 30 & 31 March 2006

Date of Judgment: 9 May 2006

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J U D G M E N T

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1.This is an application by the Plaintiff to strike out the Defence and Counterclaim of the Defendant under Order 18 rule 19 of the Rules of High Court.  The Plaintiff relied on all the grounds available under that rule.  The application was supported by an affidavit of the Plaintiff’s solicitor.  The main purpose of the affidavit was to put in evidence the Government Grant, the agreement between the parties, various other documents relating to the development of the land and also the correspondence between the parties.  All these matters are not really in dispute.  In fact the Defendant had not filed any evidence for this application and was not represented before me.

2.The Plaintiff is the developer of a big development at Tin Shui Wai called the Kingswood Villa, which is erected on 7 lots of land granted by the Government under New Grant no. 3466 (the “Grant”) in May 1985.  The 7 lots are known and registered in the Land Office as TSWTL no. 1 to 7 respectively.  Maywood Court was part of the Kingswood Villa development erected on TSWTL no. 6 and it is a development consisting of 8 blocks of multi-storey buildings. 

3.By an agreement dated 21 May 1997 (hereinafter called the “Agreement”), the Defendant agreed to purchase one of the units viz. flat C on the 19^th floor of Block 2 of Maywood Court (hereinafter called the “Property”) at a price of $3,465,000.  At the time of the Agreement, the construction of Maywood Court had not yet been completed.  It is common ground that the sale and purchase of such uncompleted flats is governed by what is commonly known as the consent scheme and the terms of the Agreement would be in the standard form prescribed by the Government.   It is important to note that the consent scheme is not just applicable to Maywood Court or Kingswood Villa.  It is applicable to the sale of all flats in development on land granted by the Government which contained terms prohibiting against alienation of the land granted or any part thereof until after all the terms and conditions of the grant have been complied with.  It is also common knowledge and I am prepared to take judicial notice that since at least the 1980s all lands for residential buildings in Hong Kong were granted with such prohibition.

4.The Grant is not a Government lease.  Rather it is a memorandum of agreement between the Government and the Plaintiff which incorporated 2 sets of conditions, viz. the General and Special Conditions of the Grant.  In fact it is just an agreement for a Government lease.  Under clause 7(a) & (c) of the General Condition it is provided that:

“(a) When the development of each lot has been completed and these Conditions have been complied with to the satisfaction of the Director, the Grantee shall, subject to the approval of his title by the Registrar General (Land Officer), be entitled to a Crown lease for each lot as described in the Particulars of the Lot hereof for the term stated in the preamble to these Conditions.

(c) Pending the issue of the Crown lease the tenancy for each lot shall be deemed to be upon the subject to and such Crown lease when issued shall be subject to and contain all exceptions, reservations, covenants, clauses and conditions now inserted in the Crown leases of similar lots in Hong Kong as varied, modified or extended by these Conditions.”

5.Further by clause 16(a) of the Special Conditions, except in cases provided for in clause 16(b), the Plaintiff as grantee shall not assign, mortgage, charge, underlet, part with the possession of or otherwise dispose of the lot or any part thereof or any interest therein or any building or any part of any building thereon until, amongst other things, all the provisions in the General and Special Conditions have been complied with to the satisfaction of the Director and the Registrar General (Land Officer).  Insofar as it is relevant for this case, Clause 16(b) of the Special Conditions provided:

“16(b) The Grantee may before these Conditions have been complied with to the satisfaction of the Director :-

(ii) upon obtaining the prior written consent of the Registrar General (Land Officer) and subject to such terms and conditions (including the payment of such fee) as he may see fit, enter into agreement for the sale and purchase of undivided shares in the whole of the lot or a section or sections thereof carved out under the Scheme together with the right to the exclusive use and occupation of a party or parts of the building or buildings erected or to be erected thereon or …

(iv) upon obtaining the prior written consent of the Registrar General (Land Officer) and subject to such terms and conditions (including the payment of such fee) as he may see fit, dispose of any part or parts of the lot save insofar as ultimate responsibility for the development of such part or parts in accordance with these Conditions shall rest with the Grantee.”

6.On or about 7 March 1997, the Plaintiff obtained the written consent of the Registrar General to enter into sale and purchase agreements with purchasers for the sale of the flats and car parks in TSWTL no. 6, (i.e. Maywood Court) subject to the conditions set out in the written consent.  These conditions included the provision that the sale and purchase agreements must be in the approved form and that none of the terms of the agreement in the form approved could be altered without the prior written approval of the Registrar General. 

7.By the terms of the Agreement between the Plaintiff and the Defendant, the purchase price was payable by stages.  The Defendant had duly paid the total sum of $1,039,500 as part payment of the price, leaving the balance of $2,425,500.  By clause 3(1) and Schedule 4 of the Agreement, this sum of $2,425,500 “shall be paid on completion within the time stipulated in clause 5” of the Agreement.

8.I should digress to mention that in the standard form of agreement under the consent scheme, it is not mandatory that the payment of the price should be by stages.  It would be open to the parties to agree other form of payment, and it is permissible and in fact is rather common that purchasers would opt to pay the full purchase price upon signing the sale and purchase agreement or within a short time thereafter because the developer would ask for a lower price if the purchaser would opt to pay the full price before the completion of the development.

9.The scheme of the Agreement was that the Plaintiff as the developer would have to complete the construction of Maywood Court within a certain period of time.  There were certain consequences if the construction was not completed by the prescribed dates and there were also provisions for the extension of time in certain circumstances.  Clause 4(1)(c) of the Agreement stipulated a contractual date of 30 December 1997 (which may be extended by the Authorized Person in certain circumstances under clause 4(5)) for the completion of Maywood Court.  If the Plaintiff should fail to complete Maywood Court by the date stipulated in clause 4(1)(c) subject to such extension under clause 4(5), if any, then the Defendant had an option to rescind the Agreement by notice to the Plaintiff (see clause 4(4)(a)).  If the Defendant did not rescind within 28 days, then under clause 4(4)(b), the Defendant would be deemed to have elected to wait for the completion of Maywood Court.  If Maywood Court was not completed within 6 months from the date stipulated under clause 4(1)(c) as extended under clause 4(5), then under clause 4(4)(c) the Defendant would have a second opportunity to elect to rescind the Agreement.  However on this occasion, there was to be no deemed election to wait for the completion of Maywood Court.

10.When the construction was completed, the Plaintiff was obliged to take steps to bring about the obligation to complete the Agreement. 

11.Clause 4(6) & (7) of the Agreement provided:

“4(6) The Vendor shall apply in writing for a Certificate of Compliance or the consent of the Director of Lands to assign in respect of the Development within 14 days of his having completed the Development as stipulated in sub-clause (1)(c) above.

(7) For the purpose of this clause the issue of a Certificate of Compliance or consent to assign by the Director of Lands shall be conclusive evidence that the Development has been completed or is deemed to be completed as the case may be and nothing in this sub-clause shall preclude the Vendor form proving that it has complied with sub-clause (1)(c) above by other means”.

12.Clause 5 of the Agreement provided for the completion of the Agreement:

“5(1) The Vendor shall notify the Purchaser in writing that he is in a position validly to assign the Property within one month of the issue of the Certificate of Compliance or the consent of the Director of Lands to assign, whichever shall first happen.

(2) The sale and purchase shall be completed at the office of Messrs. Baker & McKenzie during office hours within 14 days of the date of the notification to the Purchaser that the Vendor is in a position validly to assign the Property to the Purchaser.” (emphasis added)

13.On 22 December 1997 the Authorized Person certified that the development of Maywood Court had been completed in all respect in compliance with the conditions of the Grant insofar as they related to the development of Maywood Court.  On the same day, the Building Authority issued the Occupation Permit in respect of TSWTL 6, i.e. Maywood Court. 

14.On 23 December 1997, the Plaintiff’s solicitors applied for consent to assign. 

15.Apparently the Government was not entirely satisfied that the Plaintiff had complied with all the requirements of the Grant in relation to the development of Maywood Court.  On 4 June 1998, the Plaintiff gave an undertaking to the Government in respect of certain works on TSWTL no. 6 and provided a bank bond in support of the undertaking.  After receiving this undertaking and bank bond, the Director of Lands gave written consent to assign the units in Maywood Court on 17 June 1998.  Hence by clause 4(7) of the Agreement, upon the issuance of this consent to assign on 17 June 1998, it is deemed that the Plaintiff has completed all the requirements in relation to the construction of Maywood Court.

16.On 3 July 1998, the Plaintiff gave notice to the Defendant to complete the Agreement within 14 days in pursuance of clause 5 of the Agreement.

17.The 14 days to complete expired on 17 July 1998.  The Defendant did not complete or tender the balance of the purchase price.  On 4 August 1998 the Plaintiff’s solicitors gave the Defendant a final notice to complete in pursuance of clause 16(1) of the Agreement.  Despite this notice, the Defendant failed to complete.  On 22 September 1998, the Plaintiff’s solicitors gave notice to determine the Agreement. 

18.The Certificate of Compliance in respect of TSWTL no. 6 was issued on 23 April 1999. 

19.On 9 March 2004, shortly before the expiration of the 6 year limitation period, the Plaintiff issued the writ in this action claiming damages for the Defendant’s breach of the Agreement in failing to complete the Agreement.  The damages were quantified in the Statement of Claim on the basis of the loss suffered because subsequent to the termination of the Agreement, the Plaintiff was only able to sell the Property at a loss. 

20.By its Defence and Counterclaim, the Defendant contended that it was not liable to the Plaintiff because the Defendant was induced into entering into the Agreement by reason of a misrepresentation of the Plaintiff’s servant or agent.  Since this is an application for striking out under Order 18 rule 19, I would assume that what is pleaded in the Defence and Counterclaim to be true in order see whether the pleading has disclosed a reasonable defence.  From the pleading as well as the further and better particulars given, it is clear that the substance of the alleged representation was that the Property would be delivered to the Defendant in early 1998.  It is said that this representation was not true because in fact by 30 December 1997, the date stipulated in clause 4(1)(c) for the completion of the development of Maywood Court, the development was not yet completed, and that it was only in mid July 1998 that the Plaintiff was in a position to deliver possession of the Property to the Defendant.  It is pleaded in the Defence that the representation was made to the Plaintiff on or about 30 March 1997 by the Plaintiff’s salesman to a director of the Defendant.  It is also pleaded that the same representation was also conveyed to the Defendant in a sales brochure which stated inter alia that the estimated completion date of the development was 31 October 1997, the estimated date of application for consent to assign was 31 December 1997 and that the estimated date for occupation was 15 May 1998.

21.I agree with the Plaintiff’s submission that the defence of misrepresentation as pleaded is patently bad.  It is clear from the pleading and particulars that the representation made were matters of opinion or belief or at the most, matter of promises.  In order to be actionable, the representation must be a representation of facts.  In this respect, it is notable that even if the representation is to be treated as a representation of belief by the maker of the representation, there was no fact pleaded either in the Defence or in the further and better particulars to support any suggestion that the maker did not bona fide entertain the belief in the truth of the representation at the time when the representation was made.  Likewise there was no fact pleaded to support any suggestion that the various estimated dates found in the sales brochure were not bona fide made or that the maker or compiler of the brochure did not in fact consider that the estimated dates were realistic. 

22.Insofar as the alleged representation would amount to a promise, there is no suggestion that there was any collateral contract between the parties arising from the representation.  In any event, to suggest that there was a collateral contract between the parties whereby the Plaintiff had promised to deliver the Property to the Defendant in early 1998 would appear to the contrary to the detailed and elaborate provisions of clauses 4 and 5 of the Agreement concerning the Defendant’s obligation to complete the development of Maywood Court and also the various procedures to be taken before the obligation to complete the Agreement would arise. 

23.The Defendant further pleaded that in or about January 1998 upon the Defendant’s director’s enquiry over the phone about when the Property would be delivered to the Defendant, the Plaintiff’s agent had further told the Defendant’s director that the Property would be delivered to the Defendant on schedule and asked the Defendant to wait for further notice.  It was said that in reliance on this representation the Defendant did not exercise its right to rescind the Agreement under clause 4(4)(a) of the Agreement.  I assume in favour of the Defendant that when its director was told that the Property would be delivered on schedule, it was intended to convey and did convey to the Defendant the idea that the Property would be delivered to the Defendant in early January 1998.  However, I am unable to see how this pleading would lead the Defendant anywhere.  If it is to be suggested that this is a plea of misrepresentation so that the Defendant would become entitled to rescind the Agreement or somehow to claim damages under the Misrepresentation Ordinance, the plea would fail because the representation was not made to induce the Agreement but was only made well after the Agreement was made.  There was no pleading or suggestion that there was any new contractual obligation arising as a result of this telephone conversation. 

24.The Defendant further pleaded that the Agreement was subject to an implied term (the “implied term”) that:

“… in order to enable the Defendant to exercise the rights of rescission given to him by clause 4 of the Agreement meaningfully pursuant to the purpose and intent of the Consent Scheme, that the Plaintiff was obliged to answer the Defendant’s questions or requisitions concerning whether the Development had in fact been completed in accordance with clause 4(1)(c) on or before 31 December 1997”

25.It was pleaded in paragraph 3(26) of the Defence and Counterclaim that Defendant was under no obligation to complete in the present by reason of:

“(a) the Plaintiff’s breach of [the implied term],

(b) its [the Plaintiff’s] failure to answer the Defendant’s requisition as to when possession of the Property would be delivered to him sufficiently or at all and/or

(c) its failure to complete the Development in accordance with clause 4(1)(c) on or before 31 December 1997;

the Plaintiff was not ready or able to complete the sale an purchase of the Property and was not entitled to serve any notice under clause 5(2) or 16(1) of the Agreement.”

26.It is noted that the averments that (1) the Plaintiff was not ready or able to complete the sale and purchase, (2) the Plaintiff was not entitled to serve the notice to complete under clause 5(2) or 16(1) of the Agreement, were predicated on the 3 matters identified under paragraph 3(26) (a), (b) and (c) quoted above.

27.I agree with the Plaintiff’s submission that in the circumstances of the present case, there is no room for implying the implied term.  It is trite law that a term is not to be implied into a contract merely because it is a reasonable term in the context of the contract.  In context of the present case, I am of the view that it cannot be said that had the parties been asked at the time of the contract as to whether there was such obligation on the part of the Plaintiff as alleged in the implied term pleaded, the parties would both agree that there would be such obligation without saying.  Nor could I see any reason for saying that without the alleged implied term, the Agreement would be lacking in business efficacy.  In this respect, I consider that the decision of the Court of Appeal in Yau Chin Kwan and Yuen Suk Kuen v Tin Shui Wai Development Ltd. (CACV 3970/2003) is in point and that decision is binding on me.  In that case, the Court of Appeal held that there was no room for a similarly worded implied term in the context of an agreement on identical terms as the Agreement in the present case.  Although the implied term pleaded in the present case was not on identical wordings as the one pleaded by the purchaser in Yau Chin Kwan and Yuen Suk Kuen v Tin Shui WaiDevelopment Ltd.(CACV 3970/2003), I do not see any material difference between the two.  Accordingly I am of the view that the implied term pleaded in the Defence simply could not stand.

28.If there was no such the implied term, then there could not be any breach of such implied term as the term simply did not exist.  For the same reason the pleading in paragraph 3(26) of the Defence must be bad because there was no obligation to answer the Defendant’s requisition as to when possession of the Property would be delivered to the Defendant. 

29.Even assuming that in fact the development was not completed on or before 31 December 1997 as required by clause 4(1)(c) of the Agreement, it does not follow that the Plaintiff could not serve a notice to complete under clause 5 of the Agreement.  In the circumstances of the present case, since the Defendant had not elected to rescind under clause 4(4)(a) within 28 days from 31 December 1997, by reason of clause 4(4)(b) the Defendant was deemed to have elected to wait for completion of the development.  Of course under clause 4(4)(c) of the Agreement, if by 30 June 1998 the development of Maywood Court has still not been completed, the Defendant would have a second opportunity to rescind.  However this second opportunity to rescind did not arise in this case because the consent to assign was issued on 17 June 1998 and by clause 4(7) of the Agreement, the issue of the consent to assign was conclusive evidence that the development was deemed to be completed. 

30.In the circumstances, the bases for the averments that the Plaintiff was not ready or able to complete or was not entitled to serve the completion notice under clause 5(2) were wholly unsupportable. 

31.The Defendant also sought to plead in paragraph 3(28) of its Defence that (a) it was not contemplated within the Consent Scheme or the Agreement that there should be a substantial delay in excess of 5 months between the time of the Plaintiff’s application for consent to assign and the actual date of the issuance of the consent to assign; (b) that during the 5 months period there was a substantial drop in the property market; and (c) in all the circumstances it was unfair and inequitable for the Plaintiff to require the Defendant to complete and to pay the balance of the purchase price.  I do not see any substance in this plea.  It was not suggested, nor could it be suggested that because of the 5 months or so delay, the Agreement had become frustrated.  Nor could I see any reason or basis for saying that because of the drop in the property prices, the Plaintiff should not be allowed to enforce the Agreement.

32.What remains for me to consider is the Defendant’s plea in paragraph 3(27) of the Defence and Counterclaim which said:

“(27) The Defendant also relies on clause 3(3) of the Agreement as further support of its contention that it was not obliged to complete the purchase of the Property or to pay the Plaintiff the balance of the purchase price”.

33.Clause 3(3) of the Agreement read:

“3(3) In the event of the Purchaser being required pursuant to Schedule 4 to pay the balance of the purchase price at a time when the Occupation Permit is issued and the Vendor not being at that time in a position validly to assign the Property to the Purchaser for whatever reason, the Purchaser shall be entitled to withhold such payment until the Vendor is in a position to assign the Property and has given at least 14 days’ notice to that effect to the Purchaser.” (emphasis added)

34.According to Schedule 4 the balance of purchase price is payable on completion within the time stipulated in clause 5 of the Agreement.  By clause 5 the Plaintiff as vendor was obliged to notified the Purchaser in writing that he was in a position validly to assign the Property within one month of the issue of the Certificate of Compliance or the consent to assign whichever shall first occur, and after the issue of such notice the completion shall take place within 14 days.  If the words “in a position validly to assign the Property” should bear the same meaning under clause 3(3) and also under clause 5(1) which I think should be the case, then it is difficult to conceive a situation whereby clause 3(3) of the Agreement would come into operation in the factual situation of the present case. 

35.Apart from making a reference to clause 3(3) and stated that the Defendant intended to rely on that clause to say that the Defendant was not obliged to complete, the Defendant had not pleaded anything facts or circumstances that it would rely on as giving rise to the operation of clause 3(3).  For clause 3(3) to operate so as to hold the purchaser’s obligation to complete in abeyance, it is necessary to show that the Vendor is not in “a position validly to assign the Property”.  However there is no pleading to say why or how it was said that the Plaintiff as vendor was not in a position validly to assign the Property to the Defendant on 17 July 1998, 14 days after the day of the notice given under clause 5(1) that the Plaintiff was in a position validly to assign the Property.  In the circumstance, I take the view that paragraph 3(27) of the Defence and Counterclaim should be struck out on the ground that it may embarrass a fair trial of the action.  

36.The Defendant had chosen not to appear in the hearing before me and there was accordingly no means for me to seek any clarification as to the meaning and purport of the plea in paragraph 3(27).  In the course of the hearing, I have raised with counsel for the Plaintiff as to the possibility of raising a defence along the following argument:

(a) Under the Agreement the Plaintiff was obliged to assign to the Defendant a legal estate, or a legal title to the Property.

(b) The Plaintiff was not in a position validly to assign the Property because until the Plaintiff had complied with all the terms and conditions of the Grant, or alternatively until the issuance of the Certificate of Compliance, the Plaintiff did not have a legal estate in TSWTL no. 6 or in the Property (see section 14 (1) & (3) of the Conveyancing and Property Ordinance). 

(c) It is highly arguable that on 17 July 1998 the Plaintiff had not yet complied with all the terms and conditions in the Grant because the consent to assign was issued against the undertaking to comply with certain conditions and the certificate of compliance was not issued until 1999.

37.In Pang Moon Kee & Kam Suk Yee v Concord PropertyDevelopment Ltd. (HCCT 127/1998), a property developer applied for summary judgment against a purchaser under the consent scheme for a declaration that the developer was entitled to rescind the agreement and to forfeit the deposit paid by the purchaser.  Being also an agreement made under the consent scheme, the terms of the agreement were similar to the one in the present case.  Like the present case, the developer was obliged under the sale and purchase agreement to serve a notice to complete after the consent to assign was given and one was so served.  The purchaser did not complete but instead issued proceedings claiming a declaration that the agreement had been validly rescinded by them.  The developer counterclaimed for a declaration that the developer was entitled to rescind and to forfeit the deposit.  At the hearing for summary judgment, the purchaser took the point that it was the obligation of the developer under the sale and purchase agreement governed by the consent scheme to show and assign to the purchaser a legal title to the property and that before the developer had complied with all the terms and conditions of the grant from the Government or had obtained the certificate of compliance, the title of the developer was only an equitable one and as such the purchaser was not obliged to complete.  Deputy Judge Saunders held that although he was not at all confident that the purchaser’s argument was sound, he felt that he ought to give the purchaser leave to defend the action.  In coming to this conclusion, he was impressed by the fact that on 21 May 1999 the Legal Advisory and Conveyancing Office (LACO) sent a circular to all solicitors about the obligation to assign a legal estate in an agreement under the consent scheme and also directing that there be an amendment to the terms of the sale and purchase agreement under the consent scheme to incorporate a clause to oblige the purchaser to accept an equitable estate.  Deputy Judge Saunders took the view that since the agreement before him did not contain such additional clause and the fact that the Lands Department felt that it was necessary to include such an additional clause, would strength the purchaser’s case.

38.The relevant part of the LACO circular is in the following terms:

“2. Pursuant to a Consent to Assign, a vendor can convey an equitable interest and not a legal estate.  Although the approved form of Agreement does not stipulate that there be an assignment of a legal estate upon completion, with a view to avoiding the possibility of argument that the vendor must convey a legal estate on completion, a new subclause 12(2) has been added to the approved form of Agreement as per the attached”.

“Clause 12(2)   The purchaser shall raise no objection if the Vendor’s interest in the Property is an equitable interest and not a legal estate.”

39.Counsel for the Plaintiff submitted that Deputy Judge Saunders was wrong in thinking that the circular and the addition of clause 12(2) to the standard form of agreement under the consent scheme would support the argument that under the Agreement in the present case where there was no clause 12(2), the purchaser was entitled to have a legal title to the Property.  His submission was that the circular rather suggested that the addition of clause 12(2) was for the avoidance of doubt and that on true construction of the Agreement in the present case, the purchaser may have to accept also an equitable estate if by the time of the completion the vendor merely had an equitable estate to TSWTL no. 6 or the Property.

40.In view of the fact that the point was not raised in the Defence at all, it is really not necessary for me to consider or decide on the point.  Further, even if it is said that the point about whether the Plaintiff was obliged to convey a legal estate could be said to be embraced by the pleading on clause 3(3) in that the Plaintiff not having a legal estate to the Property would mean that he was not in a position validly to assign the Property, I am of the view that it is for the Defendant rather than the Court to spell out the argument in the point.  In our adversarial system it is not for the Court to take points for a party who has chosen not to appear unless the point is a patent point of law.  In the present case, the point involved is a difficult and obscured one.  As I have pointed out above, on the material presented before me, my view is that the pleading of clause 3(3) in paragraph 3(27) of the Defence and Counterclaim should be struck out as the same was embarrassing.  Hence it is not necessary for me to decide on the contention that the Defendant was not obliged to complete in view of the fact that the Plaintiff did not have a legal title to the Property on 17 July 1998.

41.If however I am wrong in my view that it is not necessary for me to decide on the point, I am of the view that even if the Defendant had raised the point, the point is bound to fail for the following reasons:

(a) Although when an agreement is silent on the point, prima facie, the vendor is obliged to show and assign a legal title to the property agreed to be sold (see Chen & another v LordEnergy Ltd.(1998) 1 HKCFAR 365), the parties are free to provide by the terms of their agreement as to what title the purchaser is entitled to get.

(b) I agree with the Plaintiff’s submission that on true construction of the Agreement in the present case, once the vendor had complied with the requirements of clauses 4 & 5, the Purchaser could not refuse to complete on the ground that the vendor’s title was only equitable.  This is because by reason of clause 4(6) of the Agreement, the vendor was obliged to apply in writing for a Certificate of Compliance or the consent to assign within 14 days of his having completed the Development.  There may well be differences of view between the vendor and the Government as to whether the vendor had in fact completed the development.  However once the vendor bona fide considered that he had completed the development, he would have no choice but to apply for the Certificate of Compliance or the consent to assign under clause 4(6).  It was then up to the Government to decide whether to give the Certificate of Compliance or the consent to assign. 

(c) By clause 4(7) of the Agreement, the Certificate of Compliance or the consent to assign, once issued, would be conclusive evidence that the development had been completed.  This would be so even though in fact the development was not yet completed.  By clause 5(1) of the Agreement, the vendor must give a notice to complete within one month of the issue of either the Certificate of Compliance or the consent to assign.  The vendor has no option not to issue that completion notice. 

(d) Where the Government had issued just the consent to assign and in circumstances where the Government took the view that the development was not yet fully completed as in the present case, the vendor might not have any legal title to the Property.  He would only have the legal title if in fact he had complied with all the terms and conditions of the Grant and that the Government was wrong in taking the view that he had not done so.  Yet even in cases where in fact he had not fully complied with all the terms and conditions of the Grant, by clause 5(1) the vendor was still obliged to give the notice to complete.  Since the Government had given its consent to assign, there could be no objection to the vendor from assigning all his interest in the Property to the purchaser.  In this way, the vendor must be in a position validly to assign the Property.  In fact the whole drafting of clauses 4(6), (7) and clause 5(1) proceeded on the basis that once either a Certificate of Compliance or a consent to assign was obtained, the vendor would be in a position validly to assign the Property. 

(e) Clauses 4(6) & (7) and Clause 5(1) were for the protection of the purchaser as well.  They were there also to ensure that the vendor could not delay in completing the sale and agreement when the Government considered that the development was completed or so substantially completed that the Government would feel at ease to grant the consent to assign so as to enable the completion of the sale and purchase to take place.  Many purchasers who had paid the full price or at least 30% of the price would be anxious to obtain the use of the properties they contracted to buy as soon as possible.

(f) It is well within the contemplation of all parties that when the Government simply gave the consent to assign, the legal title in the land may not have been vested on the vendor.  Yet clause 5 of the Agreement made it mandatory that the vendor must notify the purchaser to complete and the purchaser must complete.  Clause 5 was couched in mandatory terms.

(g) Even though the purchaser was only to acquire an equitable interest, in fact his enjoyment of the Property was not likely to be adversely affected by the fact that the interest was equitable.  Under clause 16(b)(iv) of the Special Conditions of the Grant, the fact that the Government had given consent to assign or to dispose of the any part of the interest in the land granted would not mean that the Plaintiff had been relieved of his obligation to develop the land in any respect.  It was clearly provided in this clause that the ultimate responsibility for the development of the Property sold in accordance with terms of the Grant shall rest with the Plaintiff.  In due course, when the Plaintiff had complied with all the conditions of the Grant or upon the issuance of the certificate of compliance, the legal title would become vested on the Plaintiff and by the doctrine of the feeding of title, the Defendant, if it had completed the purchase, would get a legal estate to the Property.

42.Even assuming that I am wrong in my views on the construction of the Agreement and that in fact the purchaser was entitled to have a legal estate under the Agreement, I am still of the view that in the circumstances of the present case, the purchaser was in breach in failing to complete for the following reasons:

(a) This is a case where the Plaintiff as vendor did have title to the Property.  The only objection was that the title was equitable as opposed to legal.

(b) The consent scheme was implemented by the Government primarily for the protection of the purchaser.  The terms of the Agreement between the parties were dictated by the Government and were imposed on the parties as a condition for the Government to grant its consent to the Plaintiff to enter into agreements to dispose of the units in the development before completion of the development.  The Government must be fully aware of the terms of the sale and purchase agreements so entered into between the Plaintiff and its purchasers, and in particular the fact that once the Government had granted the consent to assign, the Plaintiff as vendor would have to give the notice to complete which in turn would trigger off the purchasers’ obligation to complete.

(c) Clause 6 of the Agreement provided that “on completion of the sale and purchase, the Vendor and all other necessary parties (if any) will execute a proper assurance of the Property to the Purchaser free from incumbrances but subject to the Government Grant….”.  If the obligation of the vendor was to assign a legal title, even though the vendor’s title was merely equitable, the vendor would be able to assign a legal title if the Government would join in as a party to the assignment to give a proper assurance of the Property to the purchaser. 

(d) The purchaser had never raised any objection or requisition that the vendor’s title was merely equitable.  Had the purchaser done so, the vendor could have invited the Government to join in the assignment to vest the legal title on the purchaser.

(e) In view of the fact that the whole of the consent scheme including the terms of the agreements between the vendor and the purchasers were devised and dictated by the Government and the Government having gone to the extent of giving its consent to the vendor to enter into the agreements and subsequently also its consent to assign the properties to the purchasers in pursuance of the sale and purchase agreements, it is difficult to see how the Government could justifiably refuse to join in the assignments if there were in fact an obligation created by the terms of the agreements dictated by the Government on the part of the vendor to assign a legal title.

(f) Although technically the Government being the lessor of the Government lease was never the holder of the legal title to the leasehold estate created by the Government lease, in my view, if the Government should join in the assignment to make assurance of the Property to the Defendant, the Government as lessor and the Plaintiff as the grantee to the Grant will both be estopped from ever denying that the legal title to the Property is vested on the Defendant under such assignment.

(g) It is for the purchaser to tender an appropriate assignment on completion.  If the purchaser had really wanted to have a legal title, the purchaser could and should have raised the point with the vendor and tendered an assignment joining the Government as a necessary party to give the assurance of the legal title to the Property.  The Defendant had not done so in the present case.

43.For the above reasons, my decision is that the defences on misrepresentation, breach of implied term and/or there being no obligation to complete, are obviously unsustainable and should be struck out.  It also follows that there is no substance in the counterclaim and the same should also be struck out.  However, I do not see any reason for striking out paragraphs 3 and 3(30) of the Defence which has the effect of putting the Plaintiff to prove the alleged liquidated or unliquidated damages pleaded in paragraphs 15 to 19 of the Statement of Claim.  I see no reason why a defence putting the Plaintiff to proof of the damages alleged to have been suffered by the Plaintiff should be struck out.  It may well be the case that there is no difficulty for the Plaintiff to obtain judgment as claimed in an application for summary judgment. However, this could not be achieved in an application to strike out.

44.In the circumstances, I will order that paragraphs 3(18) to (29) and paragraph 4 and the prayer of the Defence and Counterclaim be struck out.

45.Although the Plaintiff has not succeeded in getting all the relieves prayed for in the summons, the Plaintiff is substantially the successful party in the application.  Accordingly the Plaintiff will also have the cost of the application.

Mr Benjamin Yu SC, instructed by Messrs Hobson & Ma, for the Plaintiff

Defendant:  Polykin Limited (Absent)