Schneider Wong Fung Yin v. Peter Ngai

DCCJ2904/2005

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

CIVIL ACTION NO. 2904 OF 2005

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BETWEEN

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Coram : H H Judge H C Wong in Chambers

Date of Hearing : 28 February 2006

Date of Delivery of Decision : 28 February 2006

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D E C I S I O N

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1.The plaintiff seeks an Order 14 summary judgment against the defendant for: a declaration that the defendant fails to show and prove good title to the property in accordance with the agreement; a declaration that the defendant fails to answer the plaintiff’s requisitions in accordance with the agreement; a declaration that the plaintiff was entitled to rescind, and did validly rescind the agreement; an order that the defendant do return to the plaintiff its deposit in the total sum of $200,000, together with interest, and  an order that the defendant do pay the plaintiff $200,000 as liquidated damages or, alternatively, damages or wasted conveyancing costs and disbursements in the sum of $15,660; a declaration that the plaintiff is entitled to an equitable lien on the defendant’s interest in the property under the agreement for the deposits, the interest therein, damages wasted, conveyancing costs and disbursements and costs for this action, plus interests and costs of the application.

2.The background of this case stems from an agreement entered between the plaintiff and the defendant for the purchase of a property situated at Unit No. E8, 8th Floor Yee On Building, 26 East Point Road, Causeway Bay, Hong Kong, for the sum of $2 million (hereinafter referred to as “the said property”).  The completion date was to take place on 20 May 2005.

3.The formal sale and purchase agreement was signed on 8 March 2005.  Based on the formal sale and purchase agreement on 8 March 2005, the plaintiff’s solicitor raised requisitions on 11 May 2005 after receiving the documents of titles which were delivered by the defendant’s then solicitor on 9 May 2005. 

4.The requisitions are threefold but the relevant requisition in the present case contained in the letter of requisition and it is as follows:

“Nomination Memorial No. 7576178 was executed by Ngai Property Limited by one director.  As Ngai Property Limited was a corporation incorporated in Australia, a legal opinion is necessary to prove due execution.” 

5.The vendor solicitor replied on 13 May 2005, the following: 

“Please note that the said company had been deregistered by our client.  Since the agreement for sale and purchase had been merged into the subsequent assignment Memorial No. 7576180, the said agreement had ceased to have effect thereafter, hence production of legal opinion is not necessary”. 

6.The plaintiff’s (the purchaser’s), solicitor was not happy with the answer to the requisition and on 17 May 2005 replied: 

“We do not agree with your view.  Your client is only entitled to the property by valid execution of nomination by Ngai Property Limited, otherwise the equitable interest of the property would still be in the hands of Ngai Property Limited.  The effect of the deregistration of the Australian corporation still needs the legal opinion from qualified Australian lawyer.” 

7.To this answer the defendant’s then solicitor replied on the next day, 18 May 2005, as follows: 

“... We do not understand the gist of your allegation since the said company had been deregistered and defunct already.  What is the purpose of requesting for legal opinion?  We repeat that the said agreement for sale and purchase had been merged into the subsequent Assignment and Peter Ngai was the then director of the said company and registered owner of the said property.  There is no resulting trust, if any, arisen therefrom”... 

8.To this, on 20 May, the original date of completion, the plaintiff’s solicitor replied, the first paragraph of that letter says:

“We do not agree with your opinion.  In the first place Ngai Property Limited was an Australian corporation and the Nomination Memorial No. 7576178 was executed by the said corporation under its common seal but was signed by one director only.  As such a legal opinion from an Australian lawyer is necessary for proving that the said execution was in accordance with the laws of Australia and the by-laws of the corporation.  Secondly, a legal opinion from an Australian corporation is also necessary for certifying the validity of the registration and the effect of such deregistration.  Thirdly, as the nominee of the said nomination was the director of the Australian corporation, there was the issue of conflict of interest.  A legal opinion from an Australian lawyer is needed to certify the validity of the nomination despite the said conflict of interest”. 

9.On the same day the defendant’s then solicitor replied:

“Not agreed.  We have repeatedly pointed out that since the said company had been defunct what is the point for requesting for legal opinion.  Your allegations are totally without ground and unsubstantiated.  We have sent you the search record made by Australian agent confirming the fact that the said company had been deregistered on 9 June 2002, therefore your litigations are merely hypothetical.  We reiterate our previous position that the said nomination was duly executed unless the contrary is proved”. 

10.On the same day the plaintiff’s solicitor replied again, paragraph 2 of the relevant passage said:

“If the company was voluntarily wound up the latest balance sheet of the same have to be produced so as to ascertain whether the property remained as one of the assets of Ngai Property Limited.  If this is the case your client must be a mere trustee for and on behalf of the company.  Therefore, please let us have the relevant balance sheet for our perusal.  On the other hand, if the company was insolvent its creditors will be able to trace for the dispositions for a certain period of time before the winding-up, especially if the same have been undervalued”. 

11.Further correspondences followed after 20 May and correspondences exchanged thereafter centred round the matter as to the nomination of the defendant as the nominee for the execution of the assignment of the said property when the property was purchased from a Madam Chiu, the predecessor in title.  The documents of title included provisional sale and purchase agreement and the formal sale and purchase agreement which named Ngai Property Limited as the purchaser.  In these documents, Dr Peter Ngai was the signatory who signed as the director of Ngai Property Limited, and the company seal was administered at the time of execution of the provisional sale and purchase agreement and the formal sale and purchase agreement signed with the predecessor in title, Mr Chiu.

12.In the Deed of Assignment, Dr Ngai’s signature appeared as the only signature and Dr Ngai was named in the Deed of Assignment as the assignee.  The plaintiff’s requisition centred round the nomination form from Ngai Property Limited to the defendant, Dr Ngai, and the fact that the two sale and purchase agreements named Ngai Property Limited as the purchaser.

13.The matter was further complicated by the fact that Ngai Property Limited had been deregistered in 2002 and that was why the plaintiff’s solicitor requested the latest balance sheet before the deregistration of Ngai Property Limited in Australia.  Needless to say, the requests were refused and rejected by the defendant’s then solicitor.  Consequently, completion never took place due to the unresolved issues.  The plaintiff therefore issued a writ claiming for the declarations that the defendant had failed to show good title and the defendant had failed to answer the requisitions and for the recovery of the deposit and damages for wasted conveyancing costs.

14.The defendant at today’s hearing, opposes the application for summary judgment.  Mr Siu, counsel for the defendant, submitted that (1) the purported requisitions raised were of no basis; (2) the requisitions raised have been satisfactorily answered; (3) that the plaintiff was not entitled to demand for an extension of time for completion.  Mr Siu further submitted that the nomination of the defendant to purchase the said property was duly executed under section 23A of the Conveyancing and Property Ordinance, that the presumption of due execution of deed by the corporation applies in this case and the protection was extended to the defendant until the contrary is proved.  Mr Siu submitted that the plaintiff had failed to prove the contrary and, therefore, it must be presumed that the defendant has shown good title.

15.It is Mr Siu’s further submission that the nomination did not create a resulting trust.  In the present case the nomination clearly stated the nominator, i.e. Ngai Property Ltd., was entering the sale and purchase agreement on behalf of the defendant and it declared that the defendant was the beneficial owner of the said property.  It further renounced any interest in the said property on the face of the nomination.  It is on this basis the defendant claimed the documents spoke for themselves and there was no need to explain the circumstances to the intended purchaser by production of any further documents or legal opinions.  Mr Siu claimed that on this same basis there was no resulting trust. 

16.Of Mr Siu’s submissions I find his strongest point of defence lies in his submission that the transfer of the land in Hong Kong, being based on the Deed of Assignment of 2 September 1998 from Madam Chiu was to the defendant, Dr Ngai, directly, not to the company, Ngai Property Limited.  On that basis, and because the nomination had declared the beneficial interest of the said property lies in Dr Ngai, Dr Ngai’s title therefore must be a good one. 

17.Mr Law, counsel for the plaintiff, however, submitted that the nomination itself raises a question of whether the nomination was duly executed.  Because it was signed by Dr Ngai himself, the only person whose signature appeared on that document, and the contents of the nomination named Dr Ngai as the beneficiary, therefore there is a matter of conflict of interest which needed to be explained.  There was further the matter as to the execution of the company seal, which was not accompanied by a signature of the secretary.  It is Mr Law’s submission that under the law in Hong Kong, there should either be two directors signing the document or it should be executed by the director and the secretary when the company seal was endorsed.

18.So far as the risks of litigation are concerned, it is Mr Siu’s submission that Ngai Property Limited was deregistered in 2002, it is unlikely that Ngai Property Limited would come back to life to claim against Dr Ngai.  In any event, the nomination named Dr Ngai as the beneficial owner and it stated that Ngai Property Limited was, in effect, the agent of Dr Ngai, and because Ngai Property Limited renounced all interests in the said property, it is highly unlikely that there would be any risk of litigation.  Furthermore, with the passage of time, any such action would be time barred.

19.After hearing submissions from counsel for both sides, and assessing the issues raised by Mr Siu of the defendant’s defence, it is clear to me that the defence has raised some triable issues which would require the full consideration in the trial because the issues raised involve legal issues on the question of whether there were proper requisitions raised by the plaintiff and whether a good title has been proved. 

20.I am, therefore, persuaded that this matter should be further examined by the trial judge.  On this basis I grant leave to the defendant to defend and costs to be costs in the cause with certificate for counsel. 

(Discussion)

Order

(1)	The parties do file and serve list of documents within 21 days from the date hereof, inspection to take place within 7 days thereafter.
(2)	The parties do file and serve signed witness statements as to facts within 42 days from the date hereof.
(3)	The application to set down is adjourned sine die with liberty to restore after the expiry of 42 days hereof.
(4)	Liberty to apply for further directions.

Parties:

Mr Law Man-chung, instructed by Messrs F. Zimmern & Co., for the Plaintiff

Mr Stanley C.K. Siu, instructed by Messrs Norman M.K. Yeung & Co., for the Defendant