Tam Chi Kwong and Another v. Secretary of Justice

HCMP 197/2007

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 197 OF 2007

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BETWEEN

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Before: Hon A Cheung J in Chambers

Date of Hearing: 6 March 2007

Date of Judgment: 6 March 2007

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J U D G M E N T

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1.This is one of those cases where the title to a property has been rendered defective or doubtful because of defective execution of a title document. 

2.In the present case, the plaintiffs agreed to purchase a property from a limited company by way of a sub-sale, the limited company having entered into an earlier agreement with the owner of the property to purchase the same under a sale and purchase agreement.

3.What happened, following usual conveyancing practice, was that the owner of the property, as vendor, executed an assignment of the property directly in favour of the plaintiffs as purchasers, with the limited company joining in to execute the assignment as confirmor. 

4.What went wrong in the present case was that the wrong company seal was applied to the assignment when the confirmor purported to execute it.  In those circumstances, execution of the deed by the confirmor was defective.

5.Title to the property has thereby been rendered defective or doubtful in this way:  The company, as the purchaser under the head sale and purchase agreement had acquired, in equity, from the vendor/owner beneficial interest to the property.  A substantial part of it had since been passed, in equity, to the plaintiffs as sub-purchasers under the sub-sale and purchase agreement, with the remainder to be passed upon completion. Having failed in the circumstances described to execute the assignment as confirmor in favour of the plaintiffs, the company still retained the remaining beneficial interest in the property, notwithstanding the execution of the assignment directly by the vendor in favour of the plaintiffs as purchasers.  As no doubt the purchase price due to the company was fully paid by the purchasers upon completion, the company merely held the remaining beneficial interest as a bare trustee for the plaintiffs after completion.

6.To make things worse, the mistake was not discovered by anybody until sometime last year when the plaintiffs sought to resell the property.  By then the limited company had already been dissolved.  There were difficulties, which I need not detail, in reviving the company to execute a confirmatory assignment in favour of the plaintiffs.  There was also the question of whether the government would make a claim to the remaining beneficial interest that the company had in the property prior to dissolution as bona vacantia.

7.In the circumstances, the correct procedure to adopt in accordance with the authorities that have been helpfully referred to this Court by those representing the plaintiffs was to take out an application under the Trustee Ordinance (Cap 29) for a vesting order: Wong Shuk-ying v Attorney General [1987] HKLR 985; Chung Ka Leung v Secretary for Justice HCMP 4129/1999, Yuen J (4 Oct 1999) and Capital Ltd v Secretary for Justice [2005] 4 HKC 84.  This was what the plaintiffs in the present case did and thus the hearing today before this Court.

8.In accordance with the correct procedure, the Secretary for Justice has been joined as a party.  The Secretary of Justice has very fairly confirmed with the plaintiffs and the Court that the government does not wish to make any claim to whatever interest that the company had or may have had in the property prior to dissolution as bona vacantia after dissolution.

9.In those circumstances, it is quite plain to the Court that the justice of the case requires the granting of relief in favour of the plaintiffs.  The provisions in the Ordinance relied on can be found in section 45(b)(iii), which applies to a case where a trustee entitled to or possessed of any land or interest therein whether by way of mortgage or otherwise, or entitled to a contingent right therein either solely or jointly with any other person, being a corporation, has been dissolved.  In such a case, the court may make a vesting order vesting the land or interest in question in any person in such manner and for such estate or interest as the court may direct.

10.In the circumstances of the present case, I think the just and convenient way to redress the problem is to make a vesting order vesting all interest that the limited company in question had, immediately prior to dissolution, in the property in the plaintiffs.  I so order.

11.As regards costs, the parties have reached agreement and, therefore, by consent, I order that the plaintiffs pay to the defendant the costs of the present proceedings in the agreed sum of $7,756.

Mr Lam San-yin, of Messrs Lam & Partners, for the plaintiffs

Ms Leona Cheung, government counsel, of the Department of Justice, for the defendant