Murray Alastair Elliot v. Healthy Living Products International Ltd and Others

HCA 3202/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 3202 OF 2003

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BETWEEN

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Before: Deputy High Court Judge Gill in Chambers

Date of Hearing: 13 July 2006

Date of Judgment: 19 July 2006

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J U D G M E N T

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1.In a judgment handed down on 19 April 2006 I found in favour of the plaintiff (Mr Murray) in his claim for specific performance of a contract between himself as purchaser and the 1^st defendant (Healthy Living) as vendor of a house known as House 56, Hing Keng Shek, Sai Kung.  The defence mounted by all defendants was that Healthy Living as registered proprietor of House 56 was the owner thereof under a resulting trust in favour of the 2^nd defendant (Nu Life HK), which had not as beneficial owner consented to the sale.

2.In the event, Mr Murray succeeded in his claim because I found it not made out that Nu Life HK had such interest.

3.Following applications for directions made in turn by Mr Murray and jointly by Healthy Living and Nu Life HK, I made certain orders on 18 May 2006.  These included the dismissal of the defendants’ joint application to stay the order for specific performance pending appeal, and directions and a timetable concerning completion.  The stay dismissal followed Mr Murray’s willingness to undertake not to dispose of House 56 after completion (other than for the purpose of raising a mortgage) pending the appeal or further order.

4.I gave liberty to apply.

5.There have been developments giving rise to two further applications; one by Mr Murray, the other by Healthy Living.  These are the matters now before me.

6.The most significant development post-judgment is the emergence of a further claim of beneficial interest in House 56 under a resulting trust from Healthy Living by a company called Nu Life International Limited (Nu Life International).  As the name suggests it had or has connections with Nu Life HK with common shareholders and directors and so on. It was not and never has been a party to these proceedings, and took no part and, of course, there was no pleaded case.

7.However, by writ dated 29 May 2006 it filed a claim against Healthy Living and Mr Murray as 1^st and 2^nd defendants.  The primary prayer is for a declaration barring the sale and purchase to Mr Murray.  The writ and statement of claim were filed under HCA 1157 of 2006 and then registered as a lis pendens against the title of House 56 on 30 May 2006.  The memorial number is 06503002240020.

8.The application brought by Mr Murray derives from what is said to be the failure by Healthy Living and/or its solicitors to comply with the directions for completion of the sale made by the orders of 18 May 2006; in particular, the failure by Healthy Living to execute an assignment in proper form, and the non-delivery of the title deeds.  These failures to comply were seen as a delaying tactic, and the application brought on Mr Murray’s behalf is to invite an order giving conduct of the sale to his solicitors with a direction to the Registrar of the High Court to execute the assignment for and on behalf of Healthy Living, with further consequential directions. 

9.In the event, the title deeds were in due course sent to Mr Murray’s solicitors so that is no longer an issue.  But a material sticking point remains the execution of the assignment.

10.In the usual way Mr Murray’s solicitors sent a draft for consideration and execution.  In it there was no reference to the claim of Nu Life International which by then had been registered on the title.  By letter in response, Healthy Living’s solicitors proposed the inclusion of words to be inserted after the description of the property being assigned to include the following reference to the claim, thus:

“Subject to the interest of Nu Life International Limited as found by Deputy High Court Judge Gill in his judgment dated 19 April 2006 under High Court Action No. 3202 of 2003 and/or subject to the interest of Nu Life International Limited in High Court Action No. 1157 of 2006and registered in the Land Registry with memorial no. 06053002240020.”

11.Mr Murray’s solicitors rejected this inclusion as not being in line with the agreement for sale and purchase.  The response to that was that Healthy Living was, with the emergence of this claim, unable to pass good title without reference to the encumbrance; the covenant to do so implicit in the proposed form of assignment would be a lie.

12.The impasse led to a further development made by Healthy Living’s solicitors in correspondence and then mounted in the cross-application filed on its behalf.  This is to the effect that clause 11 of the agreement for sale and purchase has been brought into play.  This reads as follows:

“… If the [Plaintiff] shall make or insist on any objection or requisition in respect of the title conveyance or any matter appearing on the title deeds or particulars or conditions or otherwise of the Property which the [1^st Defendant] shall be unable or (on the grounds of difficulty, delay or expense or on any other reasonable ground) unwilling to remove or comply with or if the title of the [1^st Defendant] shall be defective, the [1^st Defendant] shall notwithstanding any previous negotiation or litigation be at liberty on giving to the [Plaintiff] or his solicitors not less than five (5) days’ notice in writing to annul the sale in which case, unless the objection or requisition shall have  been in the meantime withdrawn by the [Plaintiff] or the same shall have been removed or complied with by the [1^st Defendant], the sale shall at the expiration of the notice be annulled the [Plaintiff] being in that event entitled to a return of all the said deposit or deposits but without interest, costs or compensation.”

13.It is Healthy Living’s case that Mr Murray was, by his recalcitrant conduct, insisting on the removal of the requisition evidenced by the registration of the writ.  Five days notice was given inviting him to withdraw his objection; when that was not forthcoming, the sale was effectively annulled.  Thus a primary feature of its application is that Healthy Living should be entitled to a declaration to that effect.

14.I find no merit in that proposition.  The impasse stemmed from there being reference or not to the newly emerged so-called encumbrance in the body of the assignment.  There was no insistence by those representing Mr Murray that it be removed or complied with.  As Mr Yin on his behalf has submitted, he stands ready to defend or otherwise have disposed of the claim Nu Life International has brought.  His solicitors wrote on 26 June 2006 to those representing Healthy Living thus:

“… we disagree that we have insisted on your removing the encumbrance against the property as alleged. … For the avoidance of doubt we have no requisitions in respect of the title deeds …”

15.The dispute, as I am satisfied, is not about the removal of an encumbrance whose presence and effect is not disputed, but whether or in what way it should be referred to in the assignment.

16.I am satisfied clause 11 does not come into the play and there is no nullity.

17.Healthy Living’s secondary position is that either it should now be discharged from having to specifically perform, or that it do so subject to the claim by Nu Life International. 

18.There is a third proposal; that the completion be adjourned pending determination of the Nu Life International claim.

19.Ms Tong representing Healthy Living was quick to give the assurance that her client is ready and willing to comply with the terms of the judgment and consequential directions as long as it is not exposed to the fiction that it is assigning the property free of encumbrance.

20.Mr Yin accepts that the registration of the writ does represent a blot on the title which has to be addressed.  His submission is however (if I am correct in my interpretation of it) that as between the parties there is no such blot; they contracted for the passing of an unencumbered title and possession and the assignment should mirror that.  His point is that an assignment which is silent on the existence of the encumbrance will not affect the claim by Nu Life International.  But if (or, as he would have it, when) the blot goes, Healthy Living must be estopped from denying the purchaser Mr Murray an unencumbered title.  He went on to deal with a matter of history as to the existence and make-up of Nu Life International and its link with Nu Life HK and other parties to the litigation.

21.Of course Nu Life HK made precisely the claim that has been now mounted by Nu Life International, and that claim is maintained on appeal.

22.My view is that whatever the parties agreed to under the contract for sale and purchase, there is now a claim.  If completion proceeds before that claim is dealt with, as is favoured by Mr Murray and with which Healthy Living now takes no issue, his assignment must reflect the existence of the claim.  The fact that Nu Life International has a history that is interconnected with some or other of the parties in this action with competing interests which are apparently hard to reconcile is not a matter that bears to this.  That goes to the merits of its case.  If the claim fails or is struck out there will be no claim; Healthy Living will gain no residual benefit.

23.But the proposed insertion is unnecessarily wide as well as being inaccurate.  The insertion should read simply:

“subject to a claim of Nu Life International Limited made in HCA 1157 of 2006 registered in the Land Registry under memorial no. 06053002240020.”

24.One remaining matter for consideration is that of possession.  Of course Mr Murrary wants it; his application seeks a direction in this respect, in the way of a purchaser fronting up with the purchase price in full.  I do not see that this should be withheld from him.  I have not been addressed as to why he should not be given possession.  There is the somewhat flip comment twice made in affidavits of the 3^rd defendant (Mr Khan) who has held various offices in the litigants and in particular has been and perhaps still is a director of Healthy Living that:

“The property is now being occupied by the staff of [Nu Life International] who refuses to vacate the premises.”

25.There is no elaboration, or explanation.

26.This simply does not wear, given that the evidence at trial was that he occupies House 56; furthermore, that Nu Life International no longer trades.

27.Dealing now with the summonses filed, Mr Murray’s first:

paragraph 1 is dismissed;

paragraph 2 (without proviso) shall provide for completion to be 14 days from the date of this judgment, time being of the essence;

paragraph 3 shall be amended to require the 1^st defendant to execute the assignment in terms of the plaintiff’s draft, subject to the insertion of the words at paragraph 23 herein;

paragraph 4 shall be in terms;

paragraph 5 shall be in terms;

paragraph 6 is dismissed;

paragraph 7 shall be in terms.

28.As for the summons brought by Healthy Living:

paragraph 1 is dismissed;

as to paragraph 2 (i) is dismissed, (ii) is in terms;

paragraph 3 is dismissed;

paragraph 4 is in terms.

29.I come now to costs.  The order is nisi.  Neither party wholly succeeded, or failed.  In the circumstances both should bear their own costs.  So there is no order as to costs.

Mr M Yin, instructed by Messrs Wong Hui & Co., for the Plaintiff

Ms S Tong, instructed by Messrs Hau, Lau, Li & Yeung, for the 1^st Defendant