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Standard Chartered Bank (Hong Kong) Ltd v Goldenwick Ltd

Judgment Cited authorities 5 Cited in Precedent Map Related
Vincent
Judgment Date20 March 2008
Year2008
Citation[2008] 3 HKLRD 266
Judgement NumberHCA2645/2004
Subject MatterCivil Action
CourtHigh Court (Hong Kong)
HCA002634/2004 GOLDENWICK LTD v. STANDARD CHARTERED BANK (HONG KONG) LTD

HCA2634/2004
& HCA2645/2004

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 2634 OF 2004

---------------------

BETWEEN

GOLDENWICK LIMITED Plaintiff
and
STANDARD CHARTERED BANK (HONG KONG) LIMITED Defendant

---------------------

AND

ACTION NO. 2645 OF 2004

---------------------

BETWEEN

STANDARD CHARTERED BANK (HONG KONG) LIMITED

 Plaintiff
and
GOLDENWICK LIMITED Defendant

---------------------

(Consolidated pursuant to the Order of Master de Souza dated 26 January 2005)

Before : Hon Poon J in Court

Dates of Hearing : 25, 28 and 29 May and 17–19 December 2007

Date of Decision : 20 March 2008

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J U D G M E N T

----------------------

A. Introduction

1. This is a conveyancing dispute.

2. In 2004, SCB (the plaintiff) operated a branch office at the Hunghom Commercial Centre, Nos. 37–39 Ma Tau Wai Road, Kowloon (“the Building”). It wanted to purchase suitable property for operating its bank business. Having identified various properties including the subject matter of this action, SCB engaged FPD Savills (Hong Kong) Limited (“FPD”) to follow up on the matter. Mr Christopher Chan Chin Keung, associate director of FPD (“Mr Chan”), then contacted Mr Tong Ping Nam (“Mr Tong”), officer and representative of Goldenwick (the defendant) in about early August 2004. Negotiations ensued.

3. On 6 August 2004, representatives of SCB and Mr Chan inspected the Property[1] at the presence of Mr Tong (“the 1st Inspection”). It is SCB’s case that the representatives who attended the inspection were Mr Stewart O’Hoy, (“Mr O’Hoy”), senior facilities manager, Mr Eddie Chan, senior project manager and Mr Andrew Tsang, senior interior designer. Goldenwick’s case is that only two representatives of SCB came with Mr Chan.[2] Later on a day between 21 and 23 August 2004, Mr Samson K.C. Heau (“Mr Heau”), leasing manager, Property Management of SCB and Mr Chan inspected the Property again (“the 2nd Inspection”). Mr Tong was not aware of the 2nd Inspection at the time.

4. Subsequently, SCB and Goldenwick entered into a provisional sale and purchase agreement dated 6 September 2004 (“the Provisional Agreement”) for :

“All those 21 equal undivided 12,841st parts or shares of and in the Remaining Portion of Section O of Kowloon Marine Inland Lot No.40 (‘the Land’) and of and in the Building, together with the right to the exclusive use occupation and enjoyment of the following parts in the Building—

(1) Unit 42 on Ground Floor (‘Unit 42');
(2) An Entrance Hall (including the Staircase, Landing and Lift Shaft leading to the Second Floor) next to Unit 42 (‘the Entrance Hall');
(3) Portions forming the Staircase, Landing and Lift Shaft on the First Floor leading to the Second Floor (‘the 1/F Portions')

subject to and with the benefit of a deed of Mutual Covenant registered in the Land Registry by Memorial No.2380654 (‘the DMC’) and Sub-DMC of Mutual Covenant Memorial No.5909240 (‘the Sub-DMC’)”. (“the Property”)

5. The parties later executed a formal sale and purchase agreement dated 3 November 2004 (“the Agreement”).

6. The price was HK$25,800,000, of which SCB had paid HK$2,580,000 as initial deposits to Goldenwick’s solicitors, T&W, as stakeholders.

7. Completion was fixed at 16 November 2004. However, SCB refused to complete on the ground that Goldenwick had failed to satisfactorily answer Requisitions 7 and 12 raised on title. SCB then rescinded the Agreement on 17 November 2004.

8. Goldenwick immediately commenced HCA2634/2004, claiming for specific performance, forfeiture of the deposits and damages. SCB then commenced HCA2645/2004, claiming for repayment of the deposits and damages. The two actions were subsequently consolidated.

9. At the trial, Goldenwick no longer pursued the claim for specific performance. The parties’ claims for damages are relative minor in monetary terms. What remain substantially, insofar as relief is concerned, are the parties’ claims for the deposits.

10. The key witness for Goldenwick is Mr Tong. By consent, the witness statements of two further witnesses, namely, Stanley Hau Kwok Yiu, associate director of Centaline and Christine Leung Kam Lan, Mr Tong’s personal assistant, were admitted. But their evidence, which is of little significance to the real issues before the court, can be safely ignored.

11. The witnesses for SCB were Mr Chan and Mr Heau. It also sought to rely on a witness statement of Mr O’Hoy admitted by the hearsay rules.

B. MisrepresentationS

12. Central to the parties’ disputes is the question whether Goldenwick had failed to show good title to the Property. In its pleadings, SCB relied on a further ground for rescinding the Agreement and the Provisional Agreement, namely, misrepresentations by Mr Chan on behalf of Goldenwick made during the 2nd Inspection of the Property thus :

“In or about August, while they were carrying out an inspection of the Property, [Mr Chan] on behalf of [Goldenwick] orally represented to Mr Heau Ka Chun of [SCB] (‘Mr Heau', who was then the leasing manager, property management) that—
(a) the escalator situated at the Entrance Hall on the Ground Floor leading to the First Floor of the Building could be demolished by [SCB] after it had purchased the Property and replaced by a landing (I will call this the Escalator Representation);
(b) the staircase situated at the Entrance Hall on the Ground Floor and the First Floor leading to the Arcade of the Building could be demolished and exclusively used by [SCB] after it had purchased the Property (I will call this the Staircase Representation).”

13. SCB must not only prove the Representations but also the essential element that they had induced them into entering into the Provisional Agreement and the Agreement.

14. The following emerged from the oral testimony of Mr Heau. During the 2nd Inspection, Mr Chan told him that both the escalator and the staircase could be demolished after SCB purchased the Property. The parties later entered into the Provisional Agreement. About two weeks thereafter, Mr Chan gave a copy of the Sub-DMC to SCB’s solicitors, Deacons. Deacons then advised Mr Heau to the effect that both the escalator and the staircase had to be used by co-owners as common passageways and that any demolition of the same had to be approved by all co-owners. He was shocked to learn this. Deacons then corresponded with the other side to see if the problem could be resolved but of no avail. SCB nevertheless went ahead and entered into the Agreement later.

15. In my view, given Mr Heau’s evidence, SCB must have discovered the falsity of both Representations by Mr Chan, even if proved, before they entered into the Agreement. It follows that SCB could not have been induced by them to enter into the Agreement at all. Having failed to prove inducement, SCB cannot possibly succeed on any claim based on the misrepresentations insofar as the Agreement is concerned.

16. As to the Provisional Agreement, even if both Representations were proved, it would not assist SCB. Under Clause 13 of the Agreement, the Provisional Agreement was superseded by the Agreement. It follows that any complaint that the Provisional Agreement was entered into because of the Representations is purely academic and should not be entertained.

17. For the above reasons, SCB’s case on misrepresentations must fail. I dismiss it accordingly.

18. I now turn to the substantial disputes between the parties and begin with Requisition 7.

C. Requisition 7

C.1. The requisition and the issue arising

19. Under Clause 6 of the Agreement, Goldenwick had to show a good title to the Property.

20. By Requisition 7, Deacons sought production of a mortgage memorial no. 4030664 dated 25 February 1989 and a duplicate letter memorial no. 4138927 dated 12 July 1989 (collectively “the Missing Documents”). The land search showed that the Missing Documents were listed under the section “deeds pending registration” with the remark “registration withheld”. It is not in dispute that the Land Registry did not have any copy of the Missing Documents.[3]

21. T&W replied that Goldenwick was under no obligation to produce the Missing Documents as they did not affect title. In fact, they were never produced as Goldenwick simply did not have them and as noted, they could not even be found at the Land Registry.

22. This issue arose : Were the Missing Documents, which appeared in the land record as deeds pending registration but which registration was withheld, documents affecting the Property?

C.2. The prima facie approach

23. Mr Ho, SC, counsel for Goldenwick, submitted that the Missing Documents were not registered against the Property. That may well be the case because their registration had been withheld. However, that is not the end of the matter.

24. In my view, when an instrument is properly registrable within the meaning of section 2(1) of the Land Registration Ordinance, Cap. 128, even if it is not formally registered, the mere fact that it appears in the land search record as a document pending registration is prima facie sufficient to introduce a doubt on the good title of the property.

25. I derive this proposition from Wong Kum Chi v. Lee Tit Ying [2003] 1 HKLRD 594.

26. There, the estate of the deceased included a property. A beneficiary of the estate took possession of the property without the consent of the administratrix. She successfully obtained judgment for possession. The beneficiary then appealed, relying on a letter issued by the deceased instructing his solicitors to prepare documents...

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