Virtue Union Company Ltd v. Soo Moon Kuen and Another
|
HCMP 2810/2013 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE MISCELLANEOUS PROCEDDINGS NO 2810 OF 2013 ______________________ BETWEEN
______________________
_________________ J U D G M E N T _________________ Introduction 1.The plaintiff/purchaser (“P”) issued the present vendor and purchaser summons in relation to the title to the whole of a building at No 16C Shan Kwong Road, Happy Valley, Hong Kong (“Property”). Background 2.The Property was erected in about 1953. It is a 4-storyed tenement building. The ground floor has been used for commercial purpose, and the upper floors have been used for residential purposes. 3.By an assignment dated 24 February 1960, the Property was acquired by one Madam So Kwai Yung[1]. According to the defendants, since that date, the Property has all along been used as the “ancestral home” of the So family, and different family members have been residing on different floors and units, and there has been no sub-division of undivided share amongst the various floors of the Property. 4.Subsequently, by deed of gift dated 12 January 1983, the Property was assigned by way of gift, by Madam So Kwai Yung to her two brothers Soo Moon Kuen (“D1”) and Soo Kwok Kuen (“Deceased”), as tenants-in-common[2]. 5.The Deceased died on 19 May 2000 leaving his wife Madam So Wong Tak Hing Daphne (“D2”) and three grown up children, whom I shall simply call Kevin, Edward and Wendy (“Children”). Prior to his death, the Deceased made his last will on 27 November 1998 in Canada (“Will”)[3], which was handwritten using what appeared to be a standard form with space for writing. D2 was appointed as the sole executrix under the Will. 6.Probate was subsequently granted on 11 June 2002 under the Probate Jurisdiction of the High Court of Hong Kong to D2 (“Probate”)[4], and was duly registered in the Land Registry. 7.Under the Will, the Deceased specifically devised and/or bequeathed to D2, the following :-
8.Doubt had arisen as to whether the Property was the property where Deceased was “currently residing” at the time he made the Will, as the Deceased was at that time in Canada. Further his address stated in the Will was an address in North Vancouver, and his address stated on the Probate was at only the 3rd floor of the Property. It would appear that D2 and the Children recognised there was this doubt, and to remove such doubt, a Deed of Renunciation was signed on 30 June 2002 by the Children, being the only other persons apart from D2 entitled to share in the intestacy estate of the Deceased, and, in consideration of $1 and love and affection for their mother, jointly and severally renouncing, and relinquishing etc any interest they may have or be entitled to in the Property in favour of D2 (“Deed of Renunciation”)[5]. 9.Subsequent thereto, D2, as executrix of the Deceased’s estate, assigned the Deceased’s half interest in the Property to herself by way of an Assent dated 26 July 2002 (“Assent”)[6]. 10.Some time in 2013, the defendants received offers from potential purchasers interested in the Property, among which was P. 11.According to P’s director, Mr Yip Kwai Sheung, he approached the defendants through an intermediary called Karla. D2’s 2nd son, Edward, was responsible for carrying out negotiations on behalf of the defendants. 12.During the course of negotiations and by sometime in May 2013, both sides had had solicitors advising them, Messrs King & Wood Mallesons (“KWM”) for P, and Messrs Liu, Choi & Chan for the defendants (“LCC”). 13.It would appear that P first forwarded to LCC through Karla on about 20 May 2013 a provisional agreement dated 7 May 2013 signed by P containing the proposed price and terms together with a cheque of the same date in the sum of HK$6m in favour of LCC, being the 1st deposit payable upon acceptance and signing by the defendants (“1st Draft”)[7]. 14.This was followed by a letter dated 21 May 2013 from KWM asking for, among other things, a copy of the instrument executed by the Children relinquishing their interest in the Property[8]. This letter would indicate that P had already been told about the existence of such an instrument, namely the Deed of Renunciation. 15.Mr Foo, a solicitor and partner of LCC, then made various amendments to the 1st Draft and forwarded to P through Karla a revised draft dated 22 May 2013 (“2nd Draft”)[9]. The 2nd Draft contained a number “special terms” in an attachment, including, in particular, a provision that P was not to raise any objection or requisition in relation to the Deed of Renunciation not having been authenticated by the relevant authorities in Canada (“DR Point”). On 24 May 2013, LCC also sent a copy of the Deed of Renunciation to KWM. 16.Thereafter, KWM sent a letter dated 4 June 2013 with an amended 2nd Draft containing various amendments (“3rd Draft”)[10]. In particular, KWM deleted the provision about the DR Point and further added a new provision to the effect that as the Probate did not deal with the entirety of the interests in the Property, prior to completion, D2 should apply to the Probate Registry to revoke the Probate and to apply for a Letters of Administration with Will Annexed, in order for D2 to sell the entire interests in the Property as executrix (“LA Point”). 17.The defendants had through Karla conveyed to P that KWM’s proposed amendments were not acceptable to them. P tried to insist by sending a deposit cheque and a signed provisional agreement. Thereafter, negotiations seemed to break down, with LCC returning to KWM the deposit cheque and signed provisional agreement on 18 June 2013[11]. This was, however, followed by an urgent letter by KWM dated 21 June 2013 with another draft agreement (“4th Draft”)[12]. In the 4th Draft, the provision on the DR Point was re-instated, and the provision on the LA Point excluded. 18.Mr Foo then added a new provision on about 25 June 2013, providing that P was not to raise any verification, requisition or objection to D2’s title and the Probate to the 4th Draft (“Title Point”)[13]. Eventually, P accepted this new provision, which was then added. 19.The Provisional Agreement for the Sale and Purchase of the Property was finally signed on 3 July 2013 (“Provisional Agreement”), by Mr Yip on behalf of P, and the defendants by an attorney, and a deposit of HK$6m was paid by P upon signing of the Provisional Agreement[14]. 20.To summarise, under the heading “Other Terms” in the signed Provisional Agreement, the provision on the LA Point was excluded, and the following provisions were re-instated/included :
21.The Formal Sale and Purchase Agreement (“Formal S & P”) should have been signed on 5 July 2013, but was subsequently postponed by consent to 17 July 2013. The completion date was stated in the Provisional Agreement to be on or before 20 November 2013 (“Completion Date”). 22.On 9 July 2013 LCC sent to KWM a draft Formal S & P. The draft had contained, among other things, the same provisions as Clause (ii) and Clause (iii) in the Provisional Agreement. Thereafter followed a series of correspondence between KWM and LCC relating to various requisitions, which I will set out hereinafter. Suffice to say, no Formal S & P was signed by the parties. 23.On 22 October 2013, P issued the originating summons herein (“OS”). Subsequently, the parties agreed to extend the Completion Date to 14 days after this court’s determination herein. The Relevant Correspondence 24.After receipt of the draft Formal S & P from LCC, on 10 and 12 July 2013, KWM made amendments on the draft, among which was the addition of a Clause 31 as follows:
25.Further, KWM claimed that they were instructed that the parties had agreed to remove Clause (ii) and Clause (iii) in the Provisional Agreement, and also the relevant provisions in the draft Formal S & P. 26.In reply, LCC denied to there being any agreement on the deletions as above mentioned. Further, on 17 July 2013, LCC amended Clause 31 to a shorter version, namely only that D2 agreed to provide reasonable assistance upon written reasonable assistance to P, provided such assistance was within her power to do and would not be contradictory to any of the terms and conditions of the Formal S & P. LCC further commented that the proposed Confirmatory Assignment in Clause 31 would not help P for the purpose of D2’s title of and in the Property. They referred to the Will, the Probate, and the Assent, and said there was nothing D2 could confirm and assign as suggested for proof of title, and offered instead, without any admission of liability, a statutory declaration by D2 to the effect that, among other things, the property “currently residing” by the Deceased prior to his death was the Property[16]. 27.Due to the various issues raised, including the above, the Formal S & P could not be signed on 17 July 2013, but without prejudice to its rights, P sent over to the defendants a cheque for the 2nd deposit of HK$6m, as provided under the Provisional Agreement. 28.On 24 July 2013, KWM wrote saying that they shared LCC’s view that a Confirmatory Assignment could not remedy the defect, nor could the proposed statutory declaration. They then set out their observations about the defect in title arising out of the Will and going back to their earlier LA Point, namely that to remedy the defect, D2 should take out a grant of letters of administration in respect of those parts of the estate not disposed of by the Will. 29.LCC replied on 3 August 2013 pointing out that the above title matter was what P had agreed not to raise under Clause (iii) in the Provisional Agreement, but on an entirely without prejudice basis, and by way of courtesy only they responded to the various points raised by KWM and reiterated that no one could have any right of assertion of title against D2, and thus the title was “fully protected”[17]. In short, D2 did not agree to apply for a letters of administration in respect of the “undisposed estate”. 30.On 11 September 2013, LCC sent over the relevant title deeds, and then on 19 September 2013, KWM raised a number of further requisitions, among which again they insisted on D2 applying for a grant of letters of administration in respect of the “undisposed estate”[18]. 31.LCC replied on 4 October 2013 again pointing out that Clause (iii) in the Provisional Agreement to which P had agreed and signed, and also Clause (ii). 32.The matter then came to a standstill. At this stage, the main requisition was on the alleged title defect arising out of the Will and the Probate, namely whether the Property had been disposed of under the Will, and whether D2 should take out a letters of administration with will annexed in relation to the undisposed of estate. Main Issues 33.As set out by P’s Senior Counsel, Mr J Mok, in his skeleton submissions, the issues were [19]:
34.Mr J Mok had also submitted that the defendants were not entitled to rely on Clause (iii) for 3 reasons:
35.At the commencement of the hearing, Mr J Mok, after considering the skeleton submissions of the defendants’ Counsel Mr YC Mok, in particular paragraph 11 (“Paragraph 11”) thereof, no longer insisted on D2 having to take out letters of administration with the Will annexed prior to completion. He further agreed that the issues could be narrowed down to mainly those in sub-paragraphs (d) and (e) of Paragraph 11. What he then proposed was that to meet P’s concerns, a confirmatory deed of renunciation should be executed by the Children (“Confirmatory Deed”). 36.After the hearing, I was informed that the wording of the draft Confirmatory Deed was agreed by the parties, subject to the decision of this court as to whether it was necessary. 37.Sub-paragraphs (d) and (e) of Paragraph 11 which Mr J Mok was not able to agree were as follows :
38.Section 4 (3) of the Intestates’ Estates Ordinance (“IEO”) Cap 73 states as follows:
39.Section 8(1) of the IEO then provides for cases of partial intestacy, subject to the modifications stated therein :
40.Section 8(1) thus takes one back to section 4, in respect of the part of the property not disposed of by the will. 41.Section 62 of the Probate and Administration Ordinance Cap 10 (“PAO”) then set out the duties of representatives, and in particular section 62(1) and (2) provides that:
Discussion 42.It is established law that the vendors are under an obligation to prove a good title which includes the duty to sufficiently answer requisitions[20] and it is trite law that in proving good title, the standard is that of “beyond reasonable doubt”. Clause (iii) 43.Clause (iii) states that “In respect of the title of SO WONG TAK HING DAPHNE and Probate of the deceased, the Purchaser shall not seek verification, or raise nay requisition or objection”[21]. 44.On the construction of Clause (iii), Mr J Mok relied on the contra proferentum rule, and submitted that the requisitions were not on the Probate or on D2’s title to the Property, but on her power to deal with the Property[22]. 45.Mr J Mok referred to what Lord Hoffman NPJ had explained in Jumbo King Ltd v Faithful Properties Ltd (1999) 2 HKCFAR 279, namely that it was inconceivable that a term would be construed on enabling a vendor to impose upon a purchaser a serious defect in title of which he actually knew[23]. 46.Mr J Mok further submitted that if a vendor wanted to rely on an exemption clause forbidding or restricting a purchaser from raising requisitions on a particular issue, the vendor must first make full and frank disclosure of the latent defect known to him[24]. 47.In the present case, however, it is quite clear from those correspondence referred to earlier, the defendants were aware of the Title Problem, and in fact, had disclosed such problem to P, and a copy of the Deed of Renunciation was sent over to KWM as early as shortly after 21 May 2013. It was stated clearly in the recital of the Deed of Renunciation that doubt had arisen as to whether the Property was the property where the Deceased was “currently residing” at the time of making of the Will. 48.Although D2 did not make it clear where the Deceased was then residing, she and the Children had recognized the problem that the Property might not have been disposed of under the Will, and that was why the Children executed the Deed of Renunciation. In fact, P was at one stage insisting on the provision on the LA Point, and was clearly aware of the Title Problem. There was thus in my view no lack of full and frank disclosure on the part of the defendants of the Title Problem before the signing of the Provisional Agreement. 49.Clause (iii) was added in the 4th Draft and conveyed to KWM around 25 June 2013. Although P did not initially accept this provision, he eventually agreed to it and signed the Provisional Agreement. He had had the benefit of legal advice. Thus, in my view, by agreeing and signing the Provisional Agreement, he should not thereafter raise any requisitions on D2’s title, at least arising out of the Probate. 50.As to whether D2 had waived reliance on Clause (iii), Mr J Mok pointed out that as D2 had tried to deal with the Title Problem raised by P, there was waiver on her part. In this respect, Mr J Mok relied on the earlier mentioned letter of 17 July 2013 from LCC when D2 offered without admission of liability a statutory declaration instead of the proposed Confirmatory Assignment. As pointed out by Mr YC Mok, it was only when a requisition/objection had been clearly raised and the vendor (a) did not rely on a clause barring title requisition/objection and (b) provided answers to that title requisition/objection, that the question of waiver could arise. Having considered what was said in the letters, in particular LCC’s letters of 17 July 2013 and 3 August 2013, I am unable to see there had been a waiver on D2’s part. 51.Mr J Mok had also submitted that the requisitions did not fall within Clause (iii) as they were not on the Probate, but on the Will, and the requisitions were not on D2’s title but on her power to deal with the Property. As I have mentioned earlier, at the hearing, he no longer maintained that D2 should apply for letters of administration (with the Will Annexed) as KWM had insisted in their requisition, but submitted there was still a matter of conveyance, in that the Children should execute the Confirmatory Deed. The Deed of Renunciation and the Assent 52.Sub-paragraphs (a), (b) and (c) of Paragraph 11 which Mr J Mok said he had no problems with, stated as follows :
53.In relation to (a) above, Mr YC Mok had referred this court to Re Skeats, Thain v Gibbs [1936] Ch 683. In that case, there was a will made on a printed form which contained an appointment of the testator’s wife as executrix and a direction to pay debts and funeral and testamentary expenses, but no gift or disposition of property to any person. It was held in that case that the executrix took the testator’s estate as trustee for the persons entitled to the property of an estate, including her as set out in s 46 of the Administration of Estate Act 1925[25] (“1925 Act”), which was the equivalent of section 4 of IEO. 54.Mr YC Mok had also referred to In re McKee, Public Trustee v McKee [1931] 2 CH 145 which was a case with a will with a partial intestacy. It was held in that case that section 49 of the 1925 Act (the equivalent of section 8 of our IEO) filled up the gap left in the will where it became ineffective as to a part of the property passing under it, and further the section prescribed to the personal representative what his duties were with respect to the estate, subject always to the express provision of the will, where applicable, superseding its terms[26]. 55.It was clearly stated in the Probate that D2 was granted “administration of all and singular the estate and effects of the said deceased…” (emphasis added) to D2. The Property was also set out in the Schedule in the Probate. 56.Having considered what was said in Re Skeats and also In re McKee and the wording in the Probate, I accept Mr YC Mok’s submission in sub-paragraph (a) in Paragraph 11, namely that the Probate had vested the Deceased’s entire estate, including the Deceased’s interest in the “intestate” estate in D2 as the executrix. There was/is thus no need for D2 to apply for a grant of letters of administration (with the Will annexed) over the Deceased’s “intestate” estate, as P and/or KWM had insisted. 57.As accepted by Mr YC Mok in sub-paragraph (b) of Paragraph 11, and I agree, a partial intestacy occurred in so far as the Will did not dispose of the entire estate of the Deceased. Apart from the doubt over the Deceased’s interest in the Property, there was clearly another asset, namely a Car Parking Space, which had not been disposed of under the Will. 58.I further accept, as submitted by Mr YC Mok in sub-paragraph (c), that the applicable statutory provisions governing partial intestacy would have been read into the Will, thus imposing a legal obligation on D2, as executrix, to hold the Deceased’s “intestate” estate, as part of the residuary estate for the benefit of D2 and the Children, being those entitled under partial intestacy by the operation of the above statutory provisions. 59.Mr J Mok had pointed out that under section 62(1) of the PAO, the duty of an executrix shall be to hold on the death of a person intestate, as to any immovable property “upon trust to sell the same” subject to section 54 of PAO (which does not apply in the present case). 60.Mr J Mok thus submitted that D2 should only hold the Deceased’s share of the Property upon trust to sell, but in the present case, D2, instead of selling the Deceased’s share of the Property as personal representative, she executed the Assent assigning that interest to herself, and then sold to the Property to P as “beneficial owner”, and not as executrix. 61.Further, it was his submission that the Children did not have any direct interest in the Property, they only had an interest in the residuary estate. 62.Mr J Mok submitted that this was a procedure matter, or a matter of conveyance rather than of title. He had referred to the case of Au Wai Ming and Kam Tze Ming Alfred [2010] 1HKLRD 198, CACV 278 of 2008. It was held by the majority of the Court of Appeal in that case that a defect which did not detract from the vendor’s ownership, but was removable as of right by the vendor was a matter of conveyance rather than of title, and where the defect was a matter of conveyance, the vendor had shown good title, but must still remove the defect by completion to give good title[27]. 63.When discussing as to whether defect was a matter of conveyance and not of title, Yuen JA had said:
64.Yuen JA then further went on to say:
65.Thus, it was Mr J Mok’s submission at the hearing that the Children should sign the Confirmatory Deed in order to confirm that they renounce all interest in the residuary estate of the Deceased. 66.Mr YC Mok had referred to the Deed of Renunciation and submitted that since it was not disputed that D2 and the Children were the only beneficiaries under intestacy, once the Children had waived all their entitlements and claims, no other person would have any claims against the Property. 67.In case of partial intestacy, under the IEO, the Deceased’s ‘intestate’ estate, as part of the residuary estate, was to be held, subject to the provisions in section 4(3), as to one half in trust for D2, and as to the other half on the statutory trusts for the Children. 68.Further, it is provided in the IEO that:-
69.In other words, subject to s 4(3) of IEO, D2 was to hold one half of the ‘intestate’ estate in trust for the three Children in equal shares. This would mean that one half of the Deceased’s share in the Property would be so held. 70.The operative paragraph of the Deed of Renunciation states that the Children jointly and severally “renounce, relinquish, waive and disclaim whatever and any and all estates, title, interests, rights, benefits, entitlements and claims they may have and be entitled of and in” the Deceased’s half share of the Property with the intent that D2 shall become the sole owner thereof absolutely. 71.Although the Deed of Renunciation did not refer to the entire residuary estate, so far as the Deceased’s share in the Property was concerned, D2 held half of that share for herself and under the Deed of Renunciation she would end up holding the other half. By the Assent, she had conveyed to herself the entirety of the Deceased’s interest in the Property, and after that D2, in her personal capacity, became legal and beneficial owner of what was the entirety of the Deceased’s interest in the Property. In any event, the Children could well have not wanted to renounce other assets in the residuary estate 72.Mr YC Mok submitted that D2 did not have to sell under section 62(1) of the PAO. In the case of In re McKee, it was held section 33 of the 1925 Act, the equivalent of our section 62(1), was not applicable, although I accept in that case, the Lord Justices were dealing with an ‘intestate’ reversionary interest, and there was already a valid trust for sale and conversion in the will. At first instance, Maughan J, when considering the effect of the 1925 Act , and sections 33, 46, 47, 48 thereof, had said that the object of the legislature in passing the 1925 Act was of a remedial character; and there was ample authority for the view that if in such a case the intention of Parliament was not clear, the court would be justified in giving a benevolent interpretation to the language used with a view to avoid grave inconvenience or injustice, provided that this could be done without violence to the express terms and to the spirit of the statute. 73.In the present case, under the Deed of Renunciation, D2 in effect held the entirety of the Deceased’s share in the Property in trust for herself. She could have sold as executrix, but if she chose to vest Deceased’s interest in the Property in herself first and sold as sole beneficial owner, I do not see why an immediate trust for sale should be imposed upon her. I thus accept what was submitted by Mr YC Mok, that the law does not impose on the executrix anything unnecessary. In any event, this did not appear to be P’s major concern at the time of raising the requisitions and further after pointing out this issue under section 62 at the hearing, it now appears that P only asks for a Confirmatory Deed to be executed. 74.As to whether under the Deed of Renunciation, the Children had renounced all their interests to the Property, I accept the submissions of Mr YC Mok that as the Deed of Renunciation was worded quite widely to cover all interests and claims, I am of the view that the Title Problem created by the undesirable wording of the Will was removed by the Deed of Renunciation and the Assent, and that D2 was/is able to pass to P a good title in the Deceased’s share in the Property. 75.To conclude, I accept sub-paragraphs (d) and (e) of Paragraph 11, and in my view that it is not necessary for the Children to execute the Confirmatory Deed, in so far as the Deceased’s share and interest in the Property is concerned. 76.As mentioned earlier, there is, however, at least, another property, namely a car parking space, which clearly falls within the ‘intestate’ estate of the Deceased. I will leave it for D2 and the Children to decide whether the Confirmatory Deed should be executed in any event to cover all other residuary estate. 77.The defendants have asked the court to dismiss the OS with damages being interest on the outstanding balance of HK$108m from the Completion Date of 20 November 2013 to the actual date of completion at the usual banker’s lending rate. 78.Mr J Mok submitted that both sides had agreed to the extension of the Completion Date and since in the meantime, the defendants had been collecting rent and enjoying the Property, they should not be entitled to interest. I accept Mr J Mok’s submission in this respect, and will not order any damages or interest. 79.I order the OS to be dismissed. The completion of the sale and purchase of the Property should take place within 14 days from today. 80.As for costs, I order P to pay the costs of the OS. This is a costs order nisi which shall be made final after 21 days. 81.Lastly, I thank both Counsel for their very helpful assistance to the court.
Mr Johnny Mok SC and Mr Lee Yee Hung, instructed by King & Wood Mallesons, for the plaintiff Mr Mok Yeuk Chi, instructed by Au Thong & Tsang, for the 1st and 2nd defendants [1] B2:360-362 [2] B2:363-367 [3] B1:321-322 [4] B1:320-326 [5] B:335-337 [6] B:343-348 [7] B2:397-400 [8] B1:93 [9] B2:401-406 [10] B1:98-105 [11] B1:106 [12] B1:115-116 [13] B2:438 [14] B1:85-91 [15] B1:189 [16] B1:223 [17] B1:250-251 [18] Item (e), B1:255-256 [19] Paras 8- 21, P’s skeleton submissions [20] Per Litton JA, as he then was, Active Keen Industries Ltd v Fok Chi-Keong [1994] 1 HKLR 396(CA) at 405, lines 4-7 [21] See English translation at A:82-19 [22] Para 39, pg 12, P’s skeleton submissions [23] At pg 299 E-G [24] See Chi Kit Co Ltd v Lucky Health International Enterprise Ltd (2000) 3 HKCFAR 268 at 286 J-H, (per Bokhary PJ and Sir Anthony Mason NPJ); Goldenwick Ltd v Standard Chartered Bank (Hong Kong) Ltd [2008] 3 HKLRD 266 at 288 (per Poon J ); Emmet and Farrand on Title, Volume 1 para 4.020 [25] See headnote and holding, Re Skeats [26] Per Lord Hansworth MR, at pg 159 [27] Holding (3), at pg 199 [28] At para 32, pg 207 [29] Para 33, at pg 208 |
Cases cited in this judgment