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CACV 172/2009
IN THE HIGH COURT OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
COURT OF APPEAL
CIVIL APPEAL NO. 172 OF 2009
(ON APPEAL FROM HCMP NO. 2095 OF 2008)
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BETWEEN
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DONPOWER TRADING LIMITED |
Plaintiff |
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and |
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APEXCOM LIMITED |
Defendant |
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Before : Hon Cheung JA, Lunn and Wright JJ in Court
Date of Hearing : 13 January 2010
Date of Judgment : 27 January 2010
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J U D G M E N T
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Hon Cheung JA :
Vendor and purchaser summons
1. The defendant purchaser entered into an agreement dated 7 June 2008 (‘the agreement’) with the plaintiff vendor to purchase from the plaintiff 40 shops in the basement of Pearl House in Prince Edward Road West, Kowloon for the sum of $15 million. A deposit of $1.5 million was paid by the defendant. Completion of the sale was originally scheduled for 30 September 2008. There was suggestion that completion had been extended, but it is not necessary to decide on this, it is sufficient to say that eventually completion did not take place. The plaintiff then issued a vendor and purchaser summons seeking a declaration that the defendant had repudiated the agreement and the plaintiff was entitled to forfeit the deposit of $1.5 million.
2. The defendant contended that the plaintiff had failed to answer the requisitions and objections to title and the defendant was entitled to rescind the agreement which it did by letter dated 3 October 2008. The defendant asked for the return of the deposit.
3. The matter was heard by Saunders J and he found for the plaintiff. The defendant now appeals.
Vendor giving title
4. In the Hong Kong system of conveyancing the vendor’s obligation in a sale is to make or give a good title to the purchaser. This simply means that the vendor has to provide or confer a good title of the property to the purchaser.
5. In England where the Hong Kong system has its origin, this involves two steps. The first is for the vendor to show that he has a good title to sell to the purchaser by supplying to the purchaser an abstract of title i.e. a summary of the history of the title of the property up to the time of the sale. The second is for the vendor to prove the title shown in the extract by producing the actual title documents or other evidence that are necessary to give a good title. Hong Kong slightly modifies the system in that the vendor’s solicitors will not prepare the abstract of title but will instead provide all the title deeds and other supporting documents to the purchaser.
The intermediate root of title
6. As a property may be acquired many years ago, section 13(1) of the Conveyancing and Property Ordinance (Cap. 219) does not require the vendor, as proof of title to the property, to provide to the purchaser all the title documents from the date of the first acquisition of the property by his predecessors from the government. Instead, production of the Crown Lease by which the property was first disposed by the Government to the first owner and title documents of the property (such as assignment, mortgage by assignment or a legal charge) of not more than 15 years before the contract of sale of the property is sufficient. The latter documents are known as the intermediate root of title documents.
7. In the present case the first owner of the property acquired the property from the government by Government Leases in 1978 and 1979. Later on the plaintiff acquired the property from the mortgagee of the property who sold the property to it by exercising the power of sale under the mortgage on 14 February 1987.
8. The vendor’s solicitors, Leung, Tam & Wong (‘LTW’) supplied to the purchaser’s solicitors, Louis K.Y. Pau & Co. (‘Pau’) on 12 August 2008 eight title documents which included the Government Leases of the property, the Assignment to the plaintiff and a Legal Charge by the plaintiff in favour of United Chinese Bank Limited dated 20 March 1993.
9. These documents were obviously supplied with the provision of section 13(1) in mind. As the agreement was dated 7 June 2008, the 15 year period under section 13(1) will begin in 1993. Mr. Albert Yau, counsel for the defendant, accepted that the Legal Charge dated 20 March 1993 is the ‘head title document’ which started the intermediate root of title. Following from this, the plaintiff has to show and prove titles that came into existence after the Legal Charge dated 20 March 1993.
The correspondence
10. On 18 August 2008, Pau, by way of requisitions of title, requested LTW to supply the original or certified copy of other documents totalling 68 in number. Seven of these came into existence after the intermediate root of title, while the rest were pre-intermediate root of title documents.
11. LTW on 26 August 2008 replied that it was not required to supply the pre-intermediate title documents. Of the seven post intermediate root of title documents, document (v) which is Charge Memorial dated 11 April 1994 was said to be kept by the plaintiff’s mortgagee bank, Bank of China (‘BOC’). This document is accepted by Mr. Lau, counsel for the plaintiff, as a document which the plaintiff was required to produce in order to prove title. The issue that arises in this appeal is the non-production of document (v) by the plaintiff. The obligation to produce the document is part of the plaintiff’s obligation to show a good title to the property. As Li CJ observed in Chen & Another v. Lord Energy Ltd [1999] 1 HKLRD 205 at 211
‘ The legal position was that the obligation was squarely upon the vendor to show good title. Where a document needs to be produced by the vendor as proof of title, it is no answer for him to say to the purchaser that he could easily obtain it himself.’
12. Thereafter the solicitors entered into a debate on whether the pre-intermediate root of title documents needed to be produced. The defendant insisted that these documents needed to be produced while the plaintiff maintained that they were not. However as far as document (v) was concerned, Pau on 29 August 2008 wrote,
‘ (ii) Please let us have a certified true copy thereof for our approval.’
13. By letter dated 4 September 2008, LTW maintained that it was not obliged to produce the pre-intermediate root of title documents. In respect of document (v), it stated that,
‘ (ii) As we mentioned in our letter dated 26th August 2008, document (v) is now kept by Solicitors for the mortgagee bank. Document (v) would be sent to you upon our usual undertaking at completion. Please let us know if you do insist obtaining a certified copy of document (v).’
14. The reply of Pau came on 9 September 2008. Paragraph 1 of the letter stated that
‘ 1. With due respect, please let us have plain copies of documents (g) and (s) for perusal before we are in a position to consider your allegation that they are counted as one and the same documents. Further, for avoidance of any doubt, please let us have all the plain copies documents (save and except documents (x) and (y)) enumerated in item 1 of our letter to you of 18th August, 2008 for our perusal.’ (emphasis added)
The documents of which plain copies were required included document (v) as identified in the first request of 18 August 2008. Then specifically in respect of LTW’s question on document (v), Pau stated,
‘ (ii) Noted.’
15. On 12 September 2008, LTW replied to Pau’s 9 September 2008 letter repeating that it was not obliged to produce the pre-intermediate root of title documents. This is repeated in its letter of 23 September 2008.
16. On 23 September 2008 Pau repeated the request for documents which included document (v),
‘ We write to put on record that, up to now, we do not receive a satisfactorily reply to all our outstanding requisitions, in particular, set out in items 1.(i) and 2 in our letter to you of 29th August, 2008 and items 1 and 2 in our subsequent letter to you of 9th September, 2008. In order to avoid any unnecessary delay, we shall be much obliged if you will kindly expedite the matter i.e. (a) let us have all the outstanding title deeds and documents (at least plain copies first) as specified in item 1 of our first letter to you of 18th August, 2008 for our approval.’ (emphasis added)
17. The reference to Item 1(i) of Pau’s letter dated 29 August 2008 was related to the pre-intermediate root of title documents. Item 2 dealt with the location of the various shops. The reference to Item 1 of Pau’s letter of 9 September 2008 was the request for plain copies of the documents first asked for in Pau’s letter of 18 August 2008. This included document (v).
18. On 24 September 2008 Pau repeated the earlier request for documents which included document (v),
‘ Further, we reiterate that up to now we have not received from your goodselves all the outstanding title deeds and documents as specified in item 1 of our letter to you of 18th August, 2008 for our approval and raising requisitions thereof.’
The issue
19. The issue below and in this Court is whether the plaintiff had satisfactorily answered the requisition for the production of document (v).
The decision
20. The Judge dealt with Pau’s response of ‘Noted’ to LTW’s question whether Pau wanted the certified copy of document (v) in this way :
‘ 51. First, the expression was used in response to a particular statement setting out a manner in which a particular document might be dealt with. No disagreement to the proposal was expressed.
52. Second, a specific offer was made in relation to the document, namely to supply a certified copy, to which there was no response. There was no subsequent assertion that the certified copy had not been supplied. The purchaser remained quite silent about the matter. In the absence...
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