Schneider Wong Fung Yin v. Ngai Peter
|
CACV 374/2007 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF APPEAL CIVIL APPEAL NO. 374 OF 2007 (ON APPEAL FROM DCCJ NO. 2904 OF 2005) ----------------------
---------------------- Before: Hon Rogers VP, Le Pichon JA and Sakhrani J in Court Date of Hearing: 6 June 2008 Date of Handing Down Judgment: 13 June 2008 ---------------------- J U D G M E N T ---------------------- Hon Rogers VP: 1.This was an appeal from a judgment of HH Judge Mimmie Chan given on 8 October 2007. The matter before the judge was a claim by the plaintiff for the return of deposits totalling $200,000 paid in respect of an agreement to purchase a flat, Unit No. E8, eighth floor, Yee On Building, 26 East Point Road (“the flat”). In addition the plaintiff also claimed $200,000 as liquidated damages and in the alternative damages relating to wasted conveyancing costs and disbursements. Various declarations were also sought. 2.The judge held in the defendant’s favour and dismissed the plaintiff’s claim ordering a nominal $100 on the defendant’s counterclaim. At the conclusion of the hearing of this appeal judgment was reserved which we now give. Background 3.By an agreement dated 8 March 2005 the plaintiff agreed to purchase the flat for $2 million from the defendant. There was to be a total sum of $200,000 payable in 2 payments as a deposit and completion was to be on 20 May 2005. The agreement provided amongst other things as follows:
4.Following the second request for the documents, on 9 May 2005 the solicitors who were then acting for the defendant, who were not the same solicitors who have acted in this case, sent all the title deeds and documents to the plaintiff’s solicitors. 5.Amongst the title deeds was an agreement dated 2 July 1998 made between Chiu Yin Mei, who had been a previous owner of the flat and Ngai Pty. Ltd (“the company”). In addition to that there was a document which bore the seal of the company and was signed by the defendant, who was described as its director, in the presence of the defendant's Hong Kong solicitor. That was headed “NOMINATION”. In the recital clause it was said that the company had entered into the agreement to purchase the flat and that all the deposit money had been provided by the defendant. The operative part of the document stated that the company declared “..that all interest title benefits rights vested in us under the said Agreement shall as from the date hereof be vested in the” defendant. 6.This prompted an almost immediate requisition on 11 May 2005, the material part of which is:
7.It suffices to say that the judge held that that was a proper requisition and that it had never been properly answered, and certainly not prior to the time when the plaintiff’s solicitors eventually accepted the defendant’s repudiation on behalf of the plaintiff. What emerges from the correspondence between the solicitors is that the defendant’s solicitors informed their counterparts that the company had been de-registered by their client and they relied upon the argument that “the Agreement of Sale and Purchase had been merged into the subsequent Assignment Memorial.” 8.The plaintiff’s solicitors did not accept that answer and pointed out that it was necessary to show valid execution of the Nomination. It was also pointed out that if the de-registration of the company were to be relied upon that would require an opinion from an Australian lawyer. The defendant’s then solicitor persisted in the original argument that the rights under the Nomination had merged with the Assignment Memorial. The matter did not remain there however. 9.The plaintiff’s solicitors pointed out that the Nomination was executed by the company under its common seal but was signed by one director only. It was pointed out that in view of that it was necessary to have an opinion from an Australian lawyer as to the validity of that execution. This was in addition to the fact that the opinion was also required in respect of the effect of the de-registration of the company. Finally it was pointed out that since the defendant was the nominee under the Nomination and had been the director of the company signing what purported to be a deed it was necessary to have confirmation of the validity of the Nomination despite the apparent conflict of interest. In that letter of 20 May 2005 the plaintiff’s solicitors expressed their willingness to extend the completion date to 31 May. 10.No progress was made as regards persuading the defendant’s solicitors to advance the matter any further and in a subsequent letter on the same day the plaintiff’s solicitors indicated that if sight could be obtained of the latest balance sheet of the company that might indicate its solvency. 11.On 30 May 2005 the plaintiff’s solicitors wrote accepting the defendant’s repudiation and requested the return of the deposits plus an additional sum of $200,000 as liquidated damages. 12.After the repudiation had been accepted by the plaintiff, on 16 June 2005 the defendant’s then solicitors wrote enclosing a copy of a letter opinion from Australian lawyers in which it was stated that, according to the Articles of the company, the common seal had to be affixed in the presence of two directors or a director and secretary. It would appear that there was no evidence that that had been done in the presence of the secretary and it was stated:
13.As already indicated, the judge held that the requisition had been a proper requisition and had not been answered. Nevertheless, the judge came to the conclusion that the defendant had discharged his obligation to show and prove good title to the flat because she held that “There was no real risk of a successful assertion of title against the Property.” 14.In reaching that conclusion, however, the judge relied upon what was stated in the Nomination. The difficulty with that approach is that once it is accepted that the Nomination had not been shown to be a document of the company any statement in that document, in reality, constitutes a statement made by the defendant and not by the company. In so far, therefore, as the document purports to state as a fact that the deposit was made by the defendant and not by the company, it is not strictly a statement upon which reliance can be placed. Nor is it possible to place reliance upon the statement that the company had passed all interest, title, benefits and rights to the defendant since, as a document, that was a statement made by the defendant himself and not by the company. In those circumstances the reasoning adopted in paragraph 44 of the judgment is not something upon which reliance can be placed. 15.Finally in paragraph 44 the judge referred to the fact that no action had been taken since 1998 and hence it might be assumed that the company had no intention of claiming any rights. 16.It may reasonably be supposed that there were probably a number of ways in which the defendant’s solicitors could have satisfied the plaintiff as to title. Quite apart from relying on the Nomination, it might well have been possible to establish that the nature of the company precluded any possible claim. As it was, the defendant’s solicitors appear to have resolutely avoided giving a satisfactory answer to a valid requisition. In those circumstances it would appear that the defendant had failed to show good title by the extended time for completion. No doubt it had a marketable title in the sense that a purchaser might have been prepared to accept what was stated but unless and until the questions as to a possible claim by the company had been resolved, the defendant had failed to show good title. In my view, therefore, this appeal falls to be allowed. 17.Mr Wong SC, who appeared on behalf of the defendant, sought to argue that the requisition had not been properly raised. It was argued that in the present case the company had not acted for itself but had acted as agent for the defendant when the flat had been purchased. Whilst it does appear that copies of the relevant cheques were obtained from the bank in September 2005 copies of those cheques were not available at the relevant time. It was said that requisitions were never raised to query or to seek proof that the funds referred to in the Nomination had in fact been provided by the defendant. That, however, puts the onus in the wrong place. The plaintiff’s solicitors had queried the validity of the Nomination which formed part of the title deeds, rightly as it turned out. Nor can any benefit in this regard be obtained from the fact that the assignment to the defendant in 1998 referred to the monies having been paid by the defendant. That was a document executed by the defendant. The vendor to the defendant had no other knowledge than that which she had been told by the defendant and the assignment was apparently prepared by the defendant’s own solicitors. 18.The plaintiff seeks an order not only as to the return of the deposits but also payment of a sum equivalent thereto provided for in the forfeiture clause in the memorandum of sale and purchase. Mr Wong, on behalf of the defendant, objected to that on the basis that it should be regarded as a penalty rather than liquidated damages. Since the amount is 10% of the purchase price I see no reason why this court should disallow the claim in that respect when the memorandum itself refers to the amount being liquidated damages. The property market is rarely, if ever, static and with a delayed completion date, I do not consider that an estimate of the damages at 10% of the sale price to be untoward. 19.I would therefore allow this appeal, set aside the judgment below, make an order for the return of the deposits and the payment of liquidated damages in the sum of $200,000 together with interest from 30 May 2005. There should be an order nisi of costs in favour of the plaintiff both here and below with a certificate for counsel in the court below. Hon Le Pichon JA: 20.I agree. Hon Sakhrani J: 21.I also agree.
Mr Edward Chan SC & Mr Liu Man Kin, instructed by Messrs F. Zimmern & Co., for the Plaintiff/Appellant Mr Horace Wong SC & Mr Stanley Siu, instructed by Messrs Arthur Au & Co., for the Defendant/Respondent |