FACV No. 11 of 1998
IN THE COURT OF FINAL APPEAL OF THE
HONG KONG SPECIAL ADMINISTRATIVE REGION
FINAL APPEAL NO. 11 OF 1998 (CIVIL)
(ON APPEAL FROM CACV No. 194 OF 1997)
|LORD ENERGY LIMITED
|Chief Justice Li, Mr Justice Litton PJ, Mr Justice Ching PJ, Mr Justice Bokhary PJ, and Lord Hoffmann NPJ
Date of Hearing: 9 December 1998
Date of Judgment: 21 December 1998
J U D G M E N T
Chief Justice Li:
1. The question in this appeal is whether specific performance of a contract for the purchase of a flat and carpark should have been decreed in favour of the respondent ("the purchaser") against the appellants (collectively "the vendor"). The purchaser succeeded in the courts below. The vendor's case is that the decree should not have been granted since it had lawfully terminated the contract on the ground that the purchaser failed to complete. The purchaser's case is that the vendor was not entitled to terminate since it was the vendor who was in breach. It had failed to show good title, having failed to answer satisfactorily two requisitions. The crucial issue is whether the vendor had provided satisfactory answers and thereby shown good title.
2. On 1 August 1991, the parties concluded a provisional agreement for the sale and purchase of a flat and a carpark, namely Flat D, 24th Floor, Block 25, Baguio Villa, 550 Victoria Road, Hong Kong ("the flat") and the covered carpark No. 157 on the Second Lower Ground Floor ("the carpark") for the price of $2.5 million ("the agreement"). A deposit of $50,000 was paid. The agreement provided for the payment of a further deposit of $200,000 upon the signing of a formal agreement on or before 10 August 1991. But no formal agreement was signed and no further deposit was paid. Nothing turns on this. The agreement provided for the payment of the balance of the price on or before 15 September 1991, which the parties accept, was the completion date.
The Conditions of Exchange
3. The flat and carpark were part of a residential development known as Baguio Villa on Inland Lot No. 8334 ("the lot"). It is common ground that title in this case commenced with Conditions of Exchange No. 10485 governing the lot ("the Conditions of Exchange"). They were executed between the Government and the developer in July 1973 and included the conditions for the development of Baguio Villa. The blocks in which the flat and carpark are situated were completed in 1979.
4. Special Conditions 16 and 17 obliged the developer to provide and to maintain carparking spaces in the development. They provided:
"(16)(a) Space shall be provided within the lot to the satisfaction of the said Director [of Public Works] for the parking of motor vehicles at the rate of not less than one and one half cars per flat in the building or buildings erected or to be erected on the lot. The space so provided shall not be used other than for the purpose of parking private motor vehicles belonging to the residents of the building or buildings erected or to be erected on the lot.
(b) Car ports under the building or buildings at or above ground level will be permitted and any storey designed and used solely for this purpose will not be regarded as a storey for the purpose of calculating coverage limitations.
(17) A lay-out plan indicating the parking spaces or car ports to be provided within the lot in accordance with Special Condition No. (16) and approved by the Building Authority, or a copy of such plan certified by an authorized architect, shall be registered by the grantee by memorial in the Land Office. No transaction affecting the lot or any part thereof or any building or part of any building erected or to be erected thereon shall be entered into prior to such registration. The parking spaces or car ports indicated on the said approved plan shall not be used for any purpose other than the purpose set out in Special Condition No. (16). The grantee shall maintain the parking spaces or car ports in accordance with the said approved plan and shall not alter the layout except with the prior written consent of the said Director."
General Condition 8 gave the Government a right of re-entry in the event of breach of condition. General Condition 10(a) provided that when the conditions have been complied with to the satisfaction of the Director of Public Works and the Registrar-General (Land Officer), the developer shall be entitled to a Crown Lease of the lot.
The relevant correspondence
5. On 2 September 1991, the vendor's solicitors sent to the purchaser's solicitors the title deeds.
6. On the next day, the purchaser's solicitors wrote raising two requisitions. First, they asked for Letter Memorial No. 1599984 or a certified copy thereof ("the first requisition"). Secondly, noting that the Conditions of Exchange were issued after 1970, they asked for a certified copy of the certificate of compliance to prove that the developer was entitled to a grant of the Crown Lease pursuant to section 14(3) of the Conveyancing and Property Ordinance, Cap. 219 ("the second requisition").
7. The Letter referred to in the first requisition was a letter dated 20 October 1978 from the authorised architect attaching carpark layout plans relating to Blocks 25, 26 and 27 of Baguio Villa and registered in the Land Office on 25 October 1978 ("the letter attaching the carpark layout plans"). The letter stated that the attached plans were presented for registration pursuant to Special Condition 17.
8. The second requisition asked for a certificate of compliance referred to in section 14(3) of the Conveyancing and Property Ordinance ("the Ordinance"). Under section 14(3)(a), where under an agreement for a Crown Lease entered into on or after 1 January 1970, a person has a right to a Crown Lease upon compliance with any conditions precedent, (and the Conditions of Exchange here is such an agreement):
"he shall be deemed, for the purposes of this section, to have complied with those conditions
(a) upon the issue by the Crown of a certificate that those conditions have been complied with and the registration of that certificate in the Land Registry under the Land Registration Ordinance (Cap. 128)."
Sections 14(3)(b) and (c) provide for two alternatives for the purpose of the deeming provision. Section 14(3)(b) provides for the endorsement by the Crown of a note to the effect that those conditions have been complied with and the registration of a copy of that endorsement in the Land Registry. Section 14(3)(c) provides for the entry on the register in the Land Registry of a note to that effect.
9. The replies to the requisitions contained in the vendor's solicitors' letter dated 9 September 1991 were in the following terms:
"1. Our client is not prepared to supply you with certified copy of Letter Memorial No 1599984 as the same does not affect title to the above property.
2. There is no Certificate of compliance issued up to date hereof."
10. By an exchange of letters on 11 September 1991, the purchaser's solicitors maintained that the requisitions have not been answered and stated that they must be resolved before completion, whilst the vendor's solicitors maintained that they have been satisfactorily answered and insisted on completion on 15 September 1991.
11. On 12 September 1991, the purchaser's solicitors wrote:
" We are still looking forward to your client's satisfactory answers to other outstanding requisitions and in particular written document proving that the conditions under the Conditions of Exchange No. 10485 have been complied with to the satisfaction of the Director of Public Works and the Registrar General (Land Officer)."
12. The vendor's solicitors responded on the same day. They maintained that the requisitions were invalid and did not raise any doubts on title. They insisted on completion on 15 September 1991 which was a Sunday.
13. The purchaser did not complete on that day. On 16 September 1991, the vendor terminated the agreement and forfeited the deposit on the ground of the purchaser's failure to complete.
14. On the next day, 17 September 1991, the purchaser issued a writ claiming specific performance of the agreement. By maintaining this claim, the purchaser was prepared to accept the vendor's title.
The vendor's obligation
15. In a contract for the sale of land, the obligation is of course on the vendor to show good title. Counsel for the vendor accepted...