So Ka Hung Sam v. Leung Chee Yin

DCMP 1208/2011

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 1208 OF 2011

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BETWEEN

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Coram : Deputy District Judge Grace Chan in Court

Dates of Hearing : 3 November 2011

Date of handing down of Judgment : 25 November 2011

J U D G M E N T

Background

1.This is a Vendor‑Purchaser Summons. The Plaintiff is the purchaser and the Defendant is the Vendor.

2.On 21^st March 2011, the Plaintiff entered into formal sale and purchase agreement (“Agreement”) with the Defendant to purchase Flat Q, 1^st Floor, Kwong Fu Building, No. 38 Kam Lam Street, Kwoloon, Hong Kong (“Property”) at the agreed purchase price of $1.7 million. By then, the Plaintiff had paid deposits in the total sum of $170,000 to the Defendant.

3.Completion date for the sale was fixed for 26^th April 2011 (“Completion Date”) by 5 p.m. at the office of the Defendant’s solicitors.

4.On 12^th April 2011, the Defendant’s solicitors delivered one set of title deeds and documents to the Plaintiff’s solicitors purporting to show and prove a good title to the Property. In response, the Plaintiff’s solicitors raised requisitions on title to the Property on two documents as follows:

(1)   missing Agreement for Sale and Purchase dated 21^st January 2011 with memorial No. 11021600430120 (“2011 Agreement”), as only an original but plain copy (which does not bear a stamp chop and memorial number) was delivered to the Plaintiff (“1^st Requisition”);

(2)   an Assignment dated 14^th September 2000 with memorial No. UB8210531 (“2000 Assignment”), and the Plaintiff queried on the undervalued sale price of $100; risk of ultra vires and due execution (“2^nd Requisition”).

5.It is the Plaintiff’s case that the Defendant could not answer the requisitions relating to the two documents satisfactorily. The Defendant insisted that they had. It comes as no surprise that completion did not take place on the Completion Date.

6.On 3^rd May 2011, i.e. 7 days after the Completion Date, the Plaintiff’s solicitors wrote to the Defendant’s solicitors accepting the Defendant’s wrongful repudiation of the Agreement. The Plaintiff rescinded the Agreement and asked for full refund.

7.On 12^th May 2011, the Defendant’s solicitors replied to say that the Plaintiff failed to complete despite a week’s extension of time was given by the Defendant; thus the Defendant forfeited the deposit.

8.I shall now deal with the requisitions and the answers thereto in the following. However, due to the argument put forward by Mr. Ng, Counsel for the Defendant, on the extension of completion time (which I will go into greater details below), I will not follow the sequence of nomenclature on the requisitions that have been adopted by the parties in their correspondences. Instead, I will start with the 2^nd Requisition on the 2000 Assignment before I proceed to deal with the 1^st Requisition on the 2011 Agreement.  

The 2^nd Requisition: Failure to prove due execution of the 2000 Assignment

Correspondences between the solicitors

9.The 2000 Assignment was executed by Kwong Fu Building Owners Welfare Association Limited (“Association”) as vendor in favour of The Incorporated Owners of Kwong Fu Building (“IO”) as purchaser on 14^th September 2000, under which the former sold the Property to the latter at consideration of $100 only. A Lee Ying Choi and a Tse Wai Sum purported to sign the 2000 Assignment for both the Association as well as the IO.

10.By way of a letter dated 13^th April 2011, the Plaintiff’s solicitors raised the following requisition (“13^th April Letter”):

“Assignment memorial No. 8210531

The sale of the subject property by the Vendor…. at HK$100 is obviously undervalue …. unless you can prove to the contrary. It follows that such sale is not for the benefit and welfare of the members of the Association unless there is a members [sic.] resolution endorsing the same and price at HK$100.00.

Further there is no evidence showing that the members of the Association are exacting all owners of the subject building at the material time of sale.

In the premises, the said sale is prima facie ultra vires and that the signatories and/or the directors resolving the sale (if any) are in breach of fiduciary duty rendering the said sale void. Please clarify by supporting evidence. Further, please provide the directors resolution of the Association authorizing the execution by Lee Ying Choi and Tse Wai Sum with their interests duly declared to prove for due execution of the Assignment presuming the said sale is not void ab initio which we never admit.” (emphasis added)

11.The Defendant’s solicitors replied by letter dated 19^th April 2011, together with a copy Memorandum of Association of the Association, as follows (“19^th April Letter”):

“2a) Under Section 59 of Cap. 219 it is provided that ‘no purchaser, made bona fide and without fraud, of any interest in property of any kind within Hong Kong shall be opened or set aside merely on the ground of undervalue.

b) According to the object of the Association as revealed under paragraph 3 of the Memorandum of Association of the Vendor, the Vendor was established to promote fellowship and good will among the flat owners of the Building and to look after their interest and welfare. Taking such objective in mind, one should not doubt that both the Vendor and the Purchasers are related Companies having set up for the benefit of the flat owners for the time being, any suggestion that the signatories were in breach of their fiduciary duty is far-fetched and unfunded [sic.]

c) As the Assignment was executed in accordance with Section 20 of the Cap. 219, we don’t see a board resolution is applicable.” (emphasis added)

12.The Plaintiff’s solicitors were not satisfied with the reply, so on 20^th April, they wrote back in these terms (“20^th April Letter”):

“Section 59 of the CPO can not [sic.] help your client’s case as in the absence of supporting evidence the subject transaction under Assignment memorial No. UB8210531 is prima facie not made bona fide and obviously undervalue.

Further your interpretation of paragraph 3 of the Memorandum of Association is self-serving. We reiterate that without supporting evidence as requested in our earlier requisitions, the sale is prima facie ultra virus [sic.] and that the signatories and/or the directors are in breach of fiduciary duty rendering the sale void.

Lastly, Section 20 of the CPO is irrelevant. We repeat our request of your client’s production of the relevant directors resolution authorizing the execution by the signatories with their interest duly declared.”(emphasis added)

13.This drew a further reply from the Defendant’s solicitors by letter dated 21^st April 2011 (“21^st April Letter”) as follows:

“2. We are surprised to note that the grounds by you put forward to object to our answers contained in our letter dated 19^th April 2011 in particular:-

a. You are in a way suggesting that purchasers acquiring assets at under-value consideration are not bona-fide purchaser which we cannot agree especially in the present case when the parties in Assignment Memorial No. UB8210531 are obviously related companies both set up for the purposes of promoting the well being of the flat owners of the Building for the time being, both companies were distinct from those companies aiming to maximize business profit in property transactions.

b. We don’t quite understand what you mean in saying ‘your interpretation of paragraph 3 of the Memorandum of Association is self-serving’. In the absence of unambiguous wording, we presume you are saying that the Vendor in Assignment Memorial No. UB8210531 had already a fraudulent mind-set to manufacture the Memorandum so as [to] take advantage of its members prior to acquiring the Property. If that be the case, you need hard evidence to support your allegation.

c. We fail to understand your allegation that Section 2- [20] of CPO is irrelevant and we shall be delighted if you will advise us on what legal grounds that the signatories in the circumstances had to declare their interest before their respective Board of Directors and that such declaration must be produced to prove good title to satisfy subsequent purchasers/assignees.” (emphasis added)

14.To this, the Plaintiff’s solicitors replied at about 1.19 p.m. on 26^th April 2011 , i.e. the Completion Date (“1.19 p.m. Letter”) as follows:

“2a. There is no evidence ever adduced showing that the two companies are related companies as alleged. Further there is no evidence showing every members of the Association are exactly all the members [of] the Incorporated Owners at he [sic.] material time. There is a risk that such member not being an owner of the Incorporated Owners is entitled to set aside if his/her jeopardized [sic.] because of the undervalued sale.

b. We reiterate that there is no evidence so far being adduced to show that they are related companies as alleged, merely have similar objectives (which we never admit) does not suffice. We never imply any fraud in the transaction, our point is the sale was prima facie made ultra virus [sic.] and hence void.

c. Contrary evidence i.e. the same executing directors for both parties in an undervalue sale have been adduced. We reiterate our request.

….In the meantime, all rights of our client [are] hereby reserved.” (emphasis)

15.At about 4.11 p.m. of the same day, the Defendant’s solicitors wrote to the Plaintiff’s solicitors to refute on the 2^nd Requisition only as follows (“4.11 p.m. Letter”):

“In response to your letter dated 26^th April 2011, we wish to reply that

1. That the parties to the Assignment are related companies is beyond dispute because

a) They bear similar names and were set up with the same objectives’

b) The signatories of the parties thereto are the same persons.

2. We fail to understand how and why the Purchaser cannot be said to be bona fide in the absence of fraud and we fail to understand on what basis to [the] transaction thereof is alleged to be ultra vires.”

16.At about 4.56 p.m. of the same day, the Plaintiff’s solicitors sent a reply letter to the Defendant’s solicitors to refute on the latter’s view (“4.56 p.m. Letter”) as follows:

“1. With respect, (a) and (b) do not suffice without showing the members and/or shareholders of the two companies. Even if they are related which we never admit, they cannot do anything which is ultra virus [sic.] or jeopardize the interests if its member(s).

2. Whether the purchaser is bona fide or not in immaterial if the Vendor’s act is ultra virus [sic.] or the execution is improper.

Your reply is therefore unsatisfactory.

All rights of our client are hereby reserved.” (emphasis added)

17.The transaction did not go ahead on the Completion Date. On 27^th April, the Plaintiff’s solicitors wrote to the Defendant’s to put on record that:

“despite completion was scheduled to take place yesterday, your client have failed to prove good title and/or answer our requisition on title fully and satisfactorily prior to completion. All rights of our client are hereby reserved.”

18.Two days later on 29^th April, the Defendant replied and said (“29^th April Letter”):

“We refer to our previous correspondence and regret to inform you that our client’s position as stated in our previous two letters has remained unchanged.

We take this opportunity to state our view that the Vendor following the objectives of its Memorandum in assigning the Property to the Purchaser [IO] cannot be said to be ultra vires. Perhaps we must add for your information that shortly after the transfer of the Property, the Vendor was dissolved following the completion of its objective.” (emphasis added)

19.On 3^rd May, the Plaintiff’s solicitors formally informed the Defendant’s solicitors that the Plaintiff accepted the Defendant’s repudiatory breach and asked for refund of the deposit. The Defendant’s solicitors did not agree to this proposition and on 12^th May wrote to inform the Plaintiff’s solicitors that the deposit would be forfeited.

Due Execution Only

20.Despite the fact that the correspondences between the solicitors set out above had covered such points as the alleged undervalue of the transaction, alleged ultra vires of the Association and due execution of the 2000 Assignment, Counsel for the respective parties focus on the due execution point only in the hearing before me. The issue thus boils down to whether a board resolution authorizing the the said Lee Ying Choi and Tse Wai Sum to sign the 2000 Assignment on behalf of the Association should be provided by the Defendant to the Plaintiff or not.

21.It is perhaps useful to set out at this stage the execution clause in respect of the Association in the 2000 Assignment as follows:

“SEALED with the COMMON SEAL )

of the Vendor and SIGNED by Lee Ying ) (Sg.) (Lee Ying Choi)

Choi and Tse Wai Sum its Director and ) (Sg.) (Tse Wai Sum)

Secretary respectively for and on behalf )

in the presence of:- )

(Sg.)(Chong Ting Kin)

Clerk to Littlewoods,

Solicitors, Hong Kong SAR”

The Defendant’s argument

22.Mr. Ng, Counsel for the Defendant, puts forward an argument which he says would also umbrella the 1^st Requisition (to be discussed below). For convenience, I shall call this “time for completion extended” argument. His argument, if I understand him correctly, runs like this. Though the completion was fixed for 26^th April 2011 under the Agreement, the conduct of the parties on the Completion Date had in effect extended the completion to beyond the Completion Date of 26^th April 2011. He explains that since the Plaintiff raised further requisitions on the 2000 Assignment by way of the 1.19 p.m. and 4.56 p.m. Letters, the Defendant should be allowed reasonable time to reply. In that sense, completion must have been extended for a reasonable period of time in order to give the Defendant reasonable time to respond. And if I was to agree on this point, Mr. Ng submits, the Plaintiff’s case must fail as the Plaintiff’s whole case rests on the premise that completion was to take place on the Completion Date.

23.On top of the “time for completion extended” argument, Mr. Ng submits two more points on the 2^nd Requisition as follows. First, he argues that since the 2000 Assignment was signed by the director and secretary of the Association, the execution falls within the deeming provisions under Sections 20(1) and 23 of Conveyancing and Properties Ordinance, Cap. 219 (“CPO”). As a result, due execution was presumed and the board resolution unnecessary. He relies on Hiller Development Ltd. v Tread East Ltd. [1992-1993] CPR 416 at 416F-G, 425A-427H.

24.Second, since the completion date was extended due to his “time for completion extended argument”, the Defendant’s reply given in the 29^th April Letter should be considered. The reply therein revealed that the Association was already dissolved[1]. Thus there is no real risk of any claim by the Association against the Property. He draws my attention in particular to Hui Yuk Chun v Tang Wai Hang Henry & another, HCMP 1 of 1998 where the sealing provision of the article of association in that case is basically the same as in this case before me.

The Plaintiff’s argument

25.Ms. Yeung, Counsel for the Plaintiff, submits that the Defendant should produce the board resolution of the Association. She frames her argument in the following way.

26.The presumption of due execution under Section 20 of the CPO is a rebuttable one. See Butterworths Hong Kong Conveyancing and Property Law Handbook, 2^nd Edition, at p. 117, para. [20.04].  Ms. Yeung is adamant in saying that presumed due execution of the 2000 Assignment has been rebutted by Article 17 of the Article of Association (“AA”) of the Association. In order to have due execution of the 2000 Assignment, she submits that two things are required under Article 17: (1) a board resolution authorizing the use of the seal; and (2) signed in the presence of the designated signatories.

27.She further argues that Section 23 of the CPO cannot be invoked by the Defendant in this case because on the face of the execution clause of the 2000 Assignment, the signatories were not described as “authorized by the Board of Directors”. On this front, she relies on Grand Trade Development Ltd. v Bonance International Ltd. [2001] 3 HKC 137 at 149-150; followed in Well Billion Development Ltd. v Chu & Lau (A Firm) [2004] 3 HKC 23 at 31-32.

“Time for Completion Extended” Argument

28.The correspondences between the parties have been set out above and I do not propose to repeat them here. Suffice for me to say is that during the hearing, I have asked Mr. Ng to point out to me the “further requisitions” allegedly raised by the Plaintiff by way of the 1.19 p.m. and 4.56 p.m. Letters. In reply, Mr. Ng points submits that in paragraphs 20 and 22 of the Affirmation of the Plaintiff dated 16^th June 2011, the Plaintiff described both the 1.19 p.m. and 4.56 p.m. Letters as “raising further requisitions and objections” on title with the Defendant. He further argues that the Plaintiff had asked further requisitions in these two Letters by raising their concern on (1) no evidence showing the Association and the IO were related companies; (2) no evidence showing members of the Association and the IO were the same; (3) the risk that a member not being an owner of the IO might set aside the transaction; (4) no evidence to show the transaction was not ultra vires; (5) due execution of the 2000 Assignment.

29.I note that Clause 3 of the Agreement provides “completion shall take place on or before the 26^th day of April 2011 at the office of the Vendor’s solicitors at …. between the hours of 9.30 a.m. and 5 p.m. if the completion date is a weekday”.

30.Clause 9 of the Agreement further states that “time shall in every respect be of essence of this Agreement”. 

31.I have carefully considered all the correspondences set out so far in my Judgment. And I think it is pertinent for me to say that the correspondences did not evince any express agreement between the parties to extend the time for completion.

32.While I acknowledge that the Plaintiff described both the 1.19 p.m. and 4.56 p.m. Letters as “raising further requisitions and objections” on title, such wording, in my view, is neither here or there; nor is it conclusive at all. One has to go back to the history of correspondences between the respective solicitors to see if the content of the 1.19 p.m. and 4.56 p.m. Letters denotes “further requisitions” in a true sense, or a mere repetition, clarification or elaboration on what had already been asked/answered.

33.With respect to Mr. Ng, I fail to see that the Plaintiff’s solicitors had raised further or new requisition by way of the 1.19 p.m. or 4.56 p.m. Letters. It seems to me clear that the Plaintiff’s solicitors have already raised all the points mentioned by Mr. Ng in the aforesaid paragraph 28 prior to the 1.19 p.m. or 4.56 p.m. Letters. For example, the “ultra vires” point was mentioned in the last paragraph of the 13^th April Letter, whereas the lack of evidence showing members of the Association and the IO were the same was already touched on by the Plaintiff in penultimate paragraph of the same letter.

34.Therefore, I do not agree with Mr. Ng that the Plaintiff had raised further requisitions by way of the 1.19 p.m. and 4.56 p.m. Letters. I take the view that the content therein are mere repetitions, clarifications or elaboration on previous-asked requisitions and/or answers thereto.

35.In the circumstance, I do not agree with Mr. Ng that the time for completion was extended as a result of the 1.19 p.m. and 4.56 p.m. Letters. I find that the time for completion was all along as stipulated in the Agreement, being the Completion Date.  

Sections 20 and 23 CPO

36.Section 20 (1) of the CPO reads as follows:

“In favour of a person dealing with a corporation aggregate in good faith, his successors in title and persons deriving title under or through him or them, a deed shall be deemed to have been duly executed by the corporation if the deed purports to bear the seal of the corporation affixed in the presence of and attested by its secretary or other permanent officer of the corporation and a member of the corporation's board of directors or other governing body or by 2 members of that board or body.”

37.Section 23 of the CPO provides that:

“An instrument appearing to be duly executed shall be presumed, until the contrary is proved, to have been duly executed.”

38.It is beyond dispute that both Sections 20(1) and 23 of the CPO are deeming provision on due execution by a corporation, but the presumption provided therein is a rebuttable one. The question here is: is there rebuttable evidence on due execution in this case?

39.My answer is simply “yes”, because Article 17 of the AA of the Association provides that:

“The Seal of the Association shall not be affixed to any instrument except by the authority of a Resolution of the Board of Directors and in the presence of a Director and of the Secretary or such other person as the Directors may appoint for the purpose; and the Director and the Secretary or other person as aforesaid shall sign every instrument to which the Seal of the Association is so affixed in their presence.” (emphasis added)

40.In my view, the wording of Article 17 is plain and clear. There are two conditions to satisfy if the seal of the Association is to be affixed: (1) there is a resolution of the board of directors authorizing the sealing and signing; and (2) the document must be signed by (i) a director and a secretary, or (ii) any other person appointed by the directors. The use of the word “except” and “and” (see italics in the above paragraph) denotes that neither condition can be dispensed with.

41.I borrow support on this view of mine from Peking Fur Store Ltd. v Bank of Communications [1993] 1 HKC, which is referred to by Hartmann J (as he then was) in the case of Hui Yuk Chun (supra). In Peking Fur Store Ltd., Godfrey J (as he then was) read an article (Article 79) which was of exact wording as Article 17 in our case. The learned Judge (as he then was) explained Article 79 in the following way:

“Article 79 requires: first, the authority of a resolution of the board of directors (that creates no difficulty since evidence has in fact been provided that there was such a resolution here); and secondly, that the seal be affixed in the presence of a director and some other person. Such other person may be the secretary; or, failing the secretary, such other person as the directors may appoint for the purpose. In either case, both persons are required to sign the instrument to which the seal of the company is so affixed in their presence.” (emphasis in italics added)

42.Further, I agree with Ms. Yeung for the Plaintiff that Section 23 of the CPO cannot apply here because the 2000 Assignment is not an instrument “appearing to be duly executed” for the same reason that I have set out in the preceding paragraphs 40 and 41. Perhaps, I would perhaps add that the execution clause would be “appearing to be duly executed” if it bears the words such as “duly authorized or appointed by the Board of Directors”.

43.In Grand Trade Development Ltd. (supra) at p. 149-150, Le Pichon JA (as she then was) explained on Section 23 and co-incidentally commented on Hillier Development Ltd (supra) which Mr. Ng has referred me to in his submission. The learned Madam Justice says:

“This section only applies where, on its face, the instrument appears to be duly executed…. Had the relevant signatory signed with a description such as “the person duly authorized by the board of directors” rather than simply as one of its directors, section 23 would have been engaged.  Failing such specific words appearing on the face of the assignment, sections 23 cannot apply.  In Tread East Ltd v Hillier Development Ltd., HCA No. A907 of 1991 unreported, the assignment was sealed by the company and signed by Chan, described as “one of its directors as directed and authorized by the board of directors to sign”.  The relevant article provided that instrumentsrequiring the seal of the company had to be “signed by two of its directors orin such manner as the directors shall from time to time by resolutiondetermine”.  It was held by Godfrey J (and this point was not the subject matter for the appeal), the presumption of due execution in section 23 applied.  In the present case, the absence of the additional words indicating that the director was the person authorized by the board to sign distinguishes it from the facts in Tread East and, in my view, is fatal to the application of section23.” (emphasis added)

44.Further, since this is not the case where the sealing provision of the AA had been satisfied, whether the Association had later been dissolved or not (as disclosed by the Defendant’s solicitors in the 29^th April Letter) is, in my view, irrelevant.

45.Due to the above analysis, I am of the view that the requisition was properly raised by the Plaintiff but the Defendant had failed to provide the board resolution of the Association. I find that the Defendant had not answered this requisition satisfactorily.

The 1^st Requisition: Failure to provide original 2011 Agreement

Correspondences between Solicitors

46.The land search records of the Property show that the 2011 Agreement was executed between the Defendant and one Hung Hiu Ha. The land search records also show that the 2011 Agreement was later cancelled pursuant to a cancellation agreement dated 8^th March 2011 and registered at the Land Registry by memorial No.11031702120103.

47.It is trite that a title document registered successfully with the Land Registry must have been duly stamped and must bear a memorial number. However, on 12^th April 2011, when the Defendant’s solicitors delivered the title documents of the Property to the Plaintiff’s solicitors, only an original but plain copy of the 2011 Agreement (which did not bear a stamp duty chop and the memorial number).

48.By way of the 13^th April Letter, the Plaintiff’s solicitors raised the following requisition:

“Missing Title Deeds

Please let us have the original Agreement for Sale and Purchase memorial No. 11021600430120 upon completion to give title.”

49.By the 19^th April 2011 Letter, the Defendant’s solicitors replied to the requisition as follows:

“We shall let you have the certified copy Agreement for Sale and Purchase memorial No. 11021600430120 together with a Statutory Declaration in due course.”

50.The Plaintiff’s solicitors replied by their letter of 20^th April 2011 in the following words:

“We put on record that up to the present moment we have not received the Agreement for Sale and Purchase memorial No. 11021600430120 or the Statutory Declaration from you for perusal.”

51.The Defendant’s solicitors replied by the 21^st April Letter like this:

“We undertake to let you have the certified copy Agreement for Sale and Purchase memorial No. 11021600430120 together with the relevant Statutory Declaration within seven working days after the completion of the sale and purchase….” (emphasis added)

52.To this, the Plaintiff’s solicitors replied by the 1.19 p.m. Letter as follows:

“We put on records that we have not yet received anything from you up to date.

….(on the 2^nd requisition)

….In the meantime, all rights of our client [are] hereby reserved.” (emphasis added)

53.Since then, further correspondences between the parties did not touch on the 1^st Requisition any more. 

Argument of the Parties

54.Ms. Yeung, Counsel for the Plaintiff, argues that in order to fulfill the obligations to show and to give good title, the Defendant is obliged to produce the original or certified true copy of the 2011 Agreement before completion for showing good title. Further, the Defendant is also obliged to deliver the original of the 2011 Agreement upon completion to give good title. The Defendant is in breach of both obligations and thus committed a repudiatory breach of the Agreement.  

55.Mr. Ng, apart from relying on his “time for completion extended” argument (which I have rejected for the reasons set out above), submits that the Plaintiff has waived his right to obtain the original or certified true copy of the 2011 Agreement before completion. This is proven by the fact that in reply to the Defendant’s undertaking in the 21^st April Letter to provide the same within 7 working days after completion, the Plaintiff’s solicitors have simply answered in the 1.19 p.m. Letter that they “have not yet received anything from you up to date”. In any event, Mr. Ng says, by offering to give the Plaintiff a certified copy of the 2011 Agreement and a statutory declaration within 7 days after completion, the Defendant has satisfactorily answered the requisition.   

56.In reply, Ms. Yeung submits that there cannot possibly be any waiver on the part of the Plaintiff because there lacks a clear and unequivocal act on the Plaintiff to show that he had abandoned his right to the requirement of giving good title. She refers me to Large Land Investment Ltd. (supra) at 661 to 662.

Waiver

57.It is trite law that a vendor has a duty to show as well as to give good title, and that the two obligations are separate and independent (See: Profit World Trading Ltd. v Ho So Yung [2011] 2 HKLRD 773; Smart Max Enterprise Ltd. v Speedy Way Ltd. [2011] 1 HKLRD 796; Active Keen Industries Ltd. v Fok Chi Keong [1994] 1 HKLR 396).

58.The legal burden of giving good title is on the vendor (Strong & Associates Ltd. v Flywin Co. Ltd. [2002] 1 HKC 54 affirmed by the Court of Final Appeal in Flywin Co. Ltd. v Strong & Associates Ltd. [2002] 5 HKCFAR 356).

59.It therefore cannot be disputed that the Defendant has a duty to show the original 2011 Agreement bearing memorial No. 11021600430120 to the Plaintiff before completion; and to give the same upon completion. However, the copy provided by the Defendant to the Plaintiff before the Completion Date was just plain original copy which did not bear the said memorial number. That said, I think the Plaintiff was perfectly justified to raise the 1^st Requisition.

60.Unless between execution of the contract and completion, the Plaintiff as purchaser has waived the requirement of giving good title, the Defendant as vendor must give a good title upon completion (Large Land Investments Ltd. v Cheung Siu Kwai Pansy [2002] 4 HKC 652 at 661).

61.In Large Land Investment Ltd. (supra), Yuen JA has set out succinctly the law on waiver by election which is helpful to re-produce as follows:

“(1) A waiver by election occurs “in the context of a binding contract, when a state of affairs comes into existence in which one party becomes entitled, either under the terms of the contract or by the general law, to exercise a right, and he has to decide whether or not to do so.  His decision, being a matter of choice for him, is called in law an election” (The Kanchenjunga at 398).

(2) It is a prerequisite of election that the party making the election must first be aware of the facts which have given rise to the existence of his right (The Kanchenjunga at 398). 

(3) It may be that the party must also be aware of his legal right of affirming or rescinding the contract when there has been a repudiation by the other party (Peyman v Lanjani [1985] 1 Ch 457 - although this aspect was not disputed and therefore not considered by the House of Lords in The Kanchenjunga).

(4) Further, since a party who elects not to exercise a right which has become available to him is abandoning that right, he will only be held to have done so if he has so communicated his election to the other party in clear and unequivocal terms (The Kanchenjunga at 398).”

62.The burden is on the party alleging waiver [the Defendant] to show that the other party [the Plaintiff] had unequivocally abandoned his rights.

63.The Defendant, as I see it, relies heavily on the 1.19 p.m. Letter from the Plaintiff. In my Judgment, the words “we put on record that we have not received anything from you up to date” and “In the meantime, all rights of our client hereby reserved” appearing at the end of the 1.19 p.m. Letter, if read together, cannot be taken to mean that there was a clear and unequivocal abandonment of the Plaintiff’s right to require the production of the 2011 Agreement. It is distinguished from the facts of Dunpower Tading Ltd. v Apexcom Ltd. [2009] CPR 377 quoted by Mr. Ng where the purchaser replied by the word “Noted” to the vendor’s answer to his previous requisition. The trial Judge therein found that the word implied agreement with the vendor’s statement/reply to requisition. 

64.In Large Land Investment Ltd. (supra), Yuen JA rules that a letter expressly reserving rights to raise further requisitions cannot possibly be said to be an unequivocal abandonment of those rights. And here, the Plaintiff has expressly reserved his rights in the 1.19 p.m. Letter.

65.In the premises, I find that the Plaintiff had not by way of any of his letters waived his right to obtain the 2011 Agreement before or upon completion. The Defendant had a duty to show and give the same to the Plaintiff, failing which the Defendant could not be said to have answered the requisition satisfactorily.

Relief Sought by the Plaintiff

66.Ms. Yeung sets out the relief that the Plaintiff prays for in paragraph 87 of her submission. She confirms that the Plaintiff will waive the claim for damages for breach of contract to be assessed. But in so far as damages that have already incurred, the Plaintiff is asking for return of the all deposits as well as compensation to the stamp duty, cancellation fee of a loan facility, conveyancing legal fees and commission payable to the estate agent.

67.In his submission, Mr. Ng has not focused much on the relief and damages sought by the Plaintiff except the amount of conveyancing legal fees incurred by the Plaintiff in the sum of $15,000. But after taking instructions from those instructing him, Mr. Ng confirms that the Defendant will not challenge the quantum of this item.

68.I note that Clause 22 of the Agreement provides the following:

“If the Vendor shall for any cause (other than the default of the Purchaser) fail to complete the sale and purchase in accordance with the terms and conditions herein contained all deposits and other monies paid by the Purchaser pursuant to this Agreement shall be returned to the Purchaser in full forthwith but without prejudice to the right of the Purchaser to recover from the Vendor damages (if any) which the Purchaser may sustain by reason of the failure on the part of the Vendor to complete the said sale and purchase and it shall not be necessary for the Purchaser to tender an Assignment to the Vendor.” (emphasis added)

69.I am of the view that the damages prayed for the Plaintiff are all covered under Clause 22 of the Agreement. It does not seem to me that Mr. Ng has argued the otherwise. Thus, I have no difficulty in granting the said sums.

Conclusion

70.To sum up, I find that the Defendantwas in breach of his obligation to show and prove good title and to answer the requisitions satisfactorily. The Plaintiff is entitled to accept the Defendant’s repudiatory breach and rescind the Agreement.

71.I shall thus grant a declaration that the Plaintiff is entitled to relief of rescission of the Agreement dated 21^st March 2011 and registered in the Land Registry by Memorial No. 11032801850097 (“Agreement”).

72.I shall further make an Order that the Defendant do:

(1)   return deposits in the total sum of $170,000 paid by the Plaintiff under the Agreement forthwith;

(2)   indemnify the Plaintiff stamp duty of $100 and cancellation fee of the loan facility of $3,000 paid by the Plaintiff to the extent that the Plaintiff is not able to obtain a refund from the Collector of Stamp Revenue and/or Nanyang Commercial Bank upon due efforts being made;

(3)   indemnify the Plaintiff conveyancing legal costs including the costs of investigating title incurred by the Plaintiff in the sum of $15,000; and

(4)   indemnify the Plaintiff estate agency commission in a  sum of $17,000 if and in so far as the same becomes payable by the Plaintiff.

73.There be interest on the aforesaid sumsof (1) $170,000; (2) $100 and $3,000; and (3) $15,000 in paragraph 72 above at 8% per annum from the date of Originating Summons to the date hereof and thereafter at judgment rate until the date of payment.

74.I also declare that a lien on the Property (as more particularly described and defined in paragraph 1 of the Amended Originating Summons herein) for payment of the said sums of items (1) to (3) set out in paragraph 72 and interests thereon set out in paragraph 73 above. 

75.In view of the declarations granted above in paragraphs 71 and 74, I am not minded to grant any other declaration prayed by the Plaintiff, as I do not find it necessary to so grant.

76.There be a costs order nisi that the Defendant shall pay the Plaintiff’s costs of these proceedings, to be taxed if not agreed, with certificate for counsel.If no application is made to vary the costs order nisi within 14 days from today, the said costs order nisi will be made absolute.

Ms. Eleanor Yeung, instructed by Messrs. Ong & Chung, for the Plaintiff

Mr. Tony Ng, instructed by Messrs. Littlewoods, for the Defendant

[1] The 29^th April Letter mentioned that the Association was dissolved but no further details were provided. But in Mr. Ng’s written submission, it is said that the Association was dissolved in February 2003.