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A A
DCCJ 361/2008
B B
C IN THE DISTRICT COURT OF THE C
HONG KONG SPECIAL ADMINISTRATIVE REGION
D D
CIVIL ACTION NO. 361 OF 2008
E ____________ E
F F
BETWEEN
G G
ELSUN LIMITED Plaintiff
H and H
CHIN MARGARET Defendant
I I
____________
J J
K
Coram: His Hon Judge Leung in chambers (open to public) K
Date of hearing: 10 July 2008
L L
Date of judgment: 28 July 2008
M M
JUDGMENT
N N
O 1. Elsun (the Plaintiff) is the purchaser and Chin (the Defendant) is the O
P
vendor of the middle floor of a 3-storey small village house in Sai Kung, P
New Territories, under a preliminary sale and purchase agreement in 2007.
Q Q
Elsun commenced this action essentially for specific performance of the
R preliminary agreement. Chin contends that she has exercised her R
contractual right to cancel the transaction. Elsun now applies for summary
S S
judgment.
T T
U
BACKGROUND U
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A A
2. The preliminary agreement was dated 24 September 2007. The
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purchase price was HK$1,920,000. Initial deposit in the amount of
C HK$100,000 was paid upon signing of the preliminary agreement. Parties C
agreed to enter into a formal agreement on or before 8 October 2007 when
D D
a further deposit of HK$92,000 would be paid. Completion would take
E place on 5 November 2007 when the balance of the price would be paid. E
F F
3. On 5 October 2007, Elsun’s solicitors requested Chin’s solicitors for
G G
the draft formal agreement. The draft was supplied on 8 October 2007, i.e.,
H the contractual date for signing the formal agreement. The agreement was H
not signed on that day; yet Elsun still tendered the further deposit subject to
I I
the undertaking of Chin’s solicitors not to release the same to their client
J unless and until a formal agreement was signed. J
K K
4. The formal agreement was never signed. Yet the parties chose to
L L
proceed. On 27 October 2007, Chin’s solicitors sent the title deeds and
M documents in respect of the property to Elsun’s solicitors. On 2 November M
2007, Elsun’s solicitors raised various requisitions. The requisitions in
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issue were Nos. 4(b) and 7.
O O
P
5. Requisition No.4 consisted of various questions concerning the P
certificate of exemption attached to the letter from the District Lands
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Office dated 6 December 1989. Of them, No.4(b) read:
R “We further note that the above Certificate was granted on condition that the lot R
owner will comply with the terms and conditions in the letter dated 25th January
1988 governing the lot by the District Lands Officer, Sai Kung. Please let us
S S
have the said letter dated 25-1-1988 for our perusal.”
T T
6. Requisition No.7 concerned the discrepancy in the identity card
U number of Chin recorded in various documents. In the previous formal U
V V
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A A
sale and purchase agreement between Chin and her predecessor in title as
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well as the preliminary agreement between her and Elsun, the 6 th digit of
C her ID card number put down was 9. In the previous assignment by her C
predecessor-in-title to her, that digit was 8. Elsun’s solicitors therefore
D D
made the following request:
E “……Please procure the said Agreement for sale and purchase and the said E
Assignment with the one which bearing the incorrect identification of your
F client to be rectified by the Senior Partner of Messrs. Lau, Chan & Ko and return F
both of them (with one of them duly rectified) to us before completion together
with the confirmation letter by the said Senior Partner coupled with copy of the
G G
Hong Kong Identity Card of your client for clarification of the discrepancy of
the identity of your client in the above documents in order to remove such
H doubt.” H
I I
7. Hearing nothing from Chin’s solicitors on the scheduled completion
J date, 5 October 2007, Elsun’s solicitors wrote to Chin’s solicitors to put on J
record that the requisitions were yet to be answered. They claimed to be
K K
entitled to have 7 working days after the date of receipt of any reply from
L Chin’s solicitors to raise further requisitions. Elsun also claimed to be L
M
entitled to postpone the completion date to within 7 working days after the
M
requisitions have been satisfactorily answered. Meanwhile, Elsun’s
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solicitors sent to Chin’s solicitors a draft assignment for their approval.
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8. Later on the same day, Chin’s solicitors answered the requisitions by
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letter. Regarding Requisition No. 4(b), Chin’s solicitors undertook to
Q provide certified copy of the 1988 DLO letter within 7 days from their Q
receipt of the same from the Lands Department. Regarding Requisition No.
R R
7, Chin’s solicitors wrote:
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“The signatures appeared in the Agreement for S&P …… and Assignment ……
were identical. There can be no doubt on the identity of the Purchaser.
T However, we shall procure our client to rectify her identity card no. in the said T
Assignment by initialling the correction.”
U U
9. On the following day, Elsun’s solicitors replied to the above:
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“4(b) We only accept your undertaking to let us a certified copy of the said
B letter dated 25/1/1988 within 45 days after completion provided copy of the B
same shall be produced for perusal/approval of title before completion.
……
C C
7. We are of the view that the signatures were identical does not exonerate your
client’s duty to clarify the doubt of identity in the documents. Please let us have
D a certified copy of [the identity card of] your client to confirm the identity card D
number appearing in the Assignment …… is incorrect first before we accept
E
your undertaking to return to us the Assignment …… duly rectified and E
initialled by your client and the attested solicitor/senior partners of Messrs. Lau,
Chan & Ko within 45 days after completion.”
F F
G 10. Later on the same day, Chin’s solicitors wrote further regarding G
Requisition No.7:
H H
“……We can provide a certified copy of our client’s identity card for your
information. Rectification by way of initialling the correction of her identity
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card no. in the said Assignment by our client will be sufficient.”
J
In the meantime, they returned the approved draft assignment to Elsun’s J
K solicitors. They also asked for the draft undertaking as soon as possible. K
No mention was however made in this letter regarding Requisition No.
L L
4(b). Therefore Elsun’s solicitors wrote to Chin’s solicitors on the same
M day again. M
N N
11. The next letter from Chin’s solicitors came only about a week later
O on 12 November 2007. However by this letter, they claimed that their O
P
client instructed them to demand for the return of all the title deeds and P
documents for onward return to Chin’s mortgagee bank. They repeated
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their request on 20 November and 11 December 2007.
R R
12. On 12 December 2007, Elsun’s solicitors, without prejudice to their
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client’s position, informed Chin’s solicitors that their client was ready
T willing and able to complete. They gave notice to complete by the usual T
U
undertakings on or before 24 December 2007. Time was of the essence. U
For such purpose, they enclosed the draft assignment (again) and the draft
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undertakings for the approval by Chin’s solicitors. They also demanded a
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completion statement, split cheque instruction and pre-completion
C inspection of the property. C
D D
13. Amongst other terms, the draft undertakings required Chin’s
E solicitors to provide several documents within 30 days (i.e., after E
F
completion) including the previous assignment to Chin duly rectified and F
initialled as well as the certified copy of the 1988 DLO letter.
G G
H 14. Despite the reminder by Elsun’s solicitors on 22 December 2007, H
Chin’s solicitors replied that they were still awaiting their client’s
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instruction. They gave the same reply on 27 December 2007, i.e., after the
J last completion date imposed by Elsun. Yet on 28 December 2007, they J
K
informed Elsun’s solicitors that they stopped acting for Chin since then. K
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15. The further correspondence between the parties in early 2008
M concerned Chin’s request for the return of the title deed and documents for M
onward return to Chin’s mortgagee bank. Elsun’s solicitors did so on 21
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February 2008.
O O
P
THE DISPUTE P
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16. In court, Mr Yao for Elsun confirmed his client’s stance that it is
R seeking specific performance of the preliminary agreement. He abandoned R
the claim for damages, whether in lieu or in addition. Chin opposes. As
S S
one can discern from her Chinese affirmations and her clarification in court,
T she essentially puts forward the following points: T
U
(1) Elsun failed to complete on the scheduled completion date
U
and was guilty of unreasonable delay.
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A A
(2) She has already exercised her right to cancel the deal
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pursuant to clause 18 of the preliminary agreement. Clause 18 was
C written by hand in the preliminary agreement: C
“如樓契不完整買賣相方有權取消合約交易”.
D D
E E
THE PRINCIPLES
F F
17. The court has to determine whether the defence raises real issues in
G G
dispute which ought to be tried or there are some other reasons for which
H the case ought to proceed to trial: O.14, rr.3-4 and O.86, r.4 of the Rules of H
the District Court. The test is whether the defence is a credible one but the
I I
court will not embark on a mini-trial on affidavits: see Hong Kong Civil
J Procedure 2008 Vol.1 at 14/4/8-14/4/9 and 86/4/1; The legal principles J
K
applicable to an application for summary judgment under O.14 and O.86 K
are the same: see Super Town Investments Ltd v Ives Development Ltd &
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Ors, HCA 86/2006, 22 May 2007.
M M
FAILURE TO COMPLETE
N N
O 18. The scheduled completion date of 5 November 2007 was not O
P
adhered to. From the correspondence, this appeared to be the result of the P
requisitions on title raised by Elsun. The following questions are therefore
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relevant:
R (1) Whether Elsun was entitled to raise requisitions as to title. R
(2) Whether the requisitions were reasonably raised and, if yes,
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whether Chin has satisfactorily answered the requisitions.
T T
U
Right to raise requisitions as to title U
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A A
19. Parties have failed to sign a formal sale and purchase agreement on
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or before 8 October 2007. However they were still bound by the
C preliminary agreement to complete as agreed. In fact, they did proceed C
with the transaction in the absence of the formal agreement.
D D
E 20. The preliminary agreement provides that the property is to be sold E
F
free from encumbrances (clause 3). By necessary implication, there is an F
obligation on the part of Chin as the vendor to show a good title: see Active
G G
Keen Industries Ltd v Fok Chi Keong [1994] 1 HKLR 396 at 405. Mr Yao
H for Elsun submitted that in the absence of contrary agreement, title should H
be proved in the manner as stipulated under section 13 of the
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Conveyancing and Property Ordinance, Cap.219. I agree with him.
J J
K
21. In discharge of her duty as the vendor, Chin has the duty to answer K
the requisitions and objections as to title. Such requisitions should be
L L
raised and answered within a reasonable time: see Active Keen (above) at
M 405; 406. M
N N
22. Elsun’s requisitions were raised 3 days before the schedule
O completion on 5 November 2007. However, Chin’s solicitors did not O
P
supply the title deeds and documents to Elsun’s solicitors until 27 October P
2007, which was a Saturday. Elsun should have a reasonable time to raise
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the requisitions upon receipt of the title deeds and documents. In the
R circumstances, Elsun should not be criticised for being late in raising the R
requisitions: see Goldmex Ltd & Ors v Edward Wong Finance Co. Ltd
S S
[2006] 2 HKLRD 795 at 801B-802B.
T T
U
23. Of the requisitions raised, the controversial ones were Requisitions
U
Nos. 4(b) and 7. Requisition No.4 concerned the certificate of exemption
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that the DLO gave in respect of the erection of the house. The certificate
B B
stipulated that the exemption of the building works from the provisions of
C the Buildings Ordinance, Cap.123 was granted on condition that the C
building to be erected would in all respects comply with the conditions set
D D
out in various documents including the 1988 DLO letter. Requisition
E No.4(b) related to the conditions set out in this letter that had yet to be E
F
provided. F
G G
24. The certificate of exemption is a necessary document for proof of
H title to a property like the present one: see Lo Chun Tak v Chan Foon Tai H
[1992] HKDCLR 47 at 49 (lines 31-42). If the certificate of exemption
I I
was granted subject to conditions specifically stipulated in some other
J documents, these documents were referable as integral part of the J
K
certificate. It was therefore necessary to investigate what they were. In my K
judgment, this requisition was as to title and was reasonably raised.
L L
M 25. Requisition No.7 concerned the discrepancy in respect of the M
identity card number of Chin recorded in the title documents. Such
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discrepancy should not be considered as immaterial to title. It was
O reasonable for Elsun to expect adequate conveyancing evidence to resolve O
P
the doubt. The requisition was a reasonable one. P
Q Q
On the completion date
R R
26. The answer from Chin’s solicitors came by their letter on the
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scheduled completion date. The facsimile record on the letter shows the
T time of transmission was 4:35 pm, though Elsun’s solicitors claimed to T
U
have received it later than that.
U
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27. Regarding Requisition No.4(b), Chin’s solicitors undertook to
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provide certified copy of the 1988 DLO letter within 7 days from their
C receipt of the same from the Lands Department. In my judgment, an C
undertaking like this failed to address the concern behind this requisition
D D
prior to completion. Regarding Requisition No. 7, Chin’s solicitors sought
E to remove the doubt as to the identity of the purchaser in the title deed by E
F
comparing the signatures in the documents. Again I fail to see how this F
was a satisfactory answer to the requisition.
G G
H 28. It is clear to me that Chin has failed to satisfactorily answered H
Requisitions Nos. 4(b) and 7 on or before the scheduled completion date.
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In the circumstances, there is no basis for blaming Elsun for failing to
J complete on the scheduled completion date. J
K K
After the completion date
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M 29. Neither party sought to cancel the deal notwithstanding the passing M
of the scheduled completion date. Instead, their solicitors still
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corresponded with each other in respect of the outstanding requisitions.
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P
30. In their letter on the day following the scheduled completion date, P
Elsun’s solicitors were prepared to agree to an undertaking by Chin’s
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solicitors to produce a certified copy of the 1988 DLO letter and the
R previous assignment duly rectified within 45 days after completion if R
Chin’s solicitors would provide a copy of the letter and a certified copy of
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Chin’s identity card for their perusal prior to completion.
T T
U
31. In their reply on the same day, Chin’s solicitors agreed to provide a
U
certified copy of Chin’s identity card for Elsun’s information; and to
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procure the rectification of the discrepancy in the previous Assignment. In
B B
the meantime, they returned the approved draft assignment to Elsun’s
C solicitors and they also asked for the draft undertakings proposed by C
Elsun’s solicitors. Clearly Chin still intended to proceed.
D D
E 32. However, since nothing was said about the 1988 DLO letter in the E
F
above reply from Chin’s solicitors, Elsun’s solicitors asked again on the F
same day. Nothing was heard from Chin’s solicitors until a week later
G G
when they requested for the return of the title deeds and documents.
H H
33. Prior to their request for the return of the title deeds and documents,
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there was no suggestion by Chin’s solicitors that their client was treating
J Elsun to be in repudiation of the agreement for failing to complete on the J
K
scheduled completion date or any other date. After the completion date, K
either party was entitled to serve a notice to complete and to make time of
L L
the essence again. Elsun did that. Despite Elsun’s notice dated 12
M December 2007 to complete on 24 December 2007 and numerous M
reminders, Chin’s solicitors simply replied that they were awaiting
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instruction from Chin. Suddenly, they informed Elsun’s solicitors that
O they ceased to act for Chin. O
P P
34. Now Chin claims to have already exercised her right to cancel the
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deal pursuant to clause 18 of the preliminary agreement. Her solicitors
R also never stated that position at all before. R
S S
CLAUSE 18
T T
U
35. It is common ground that the agreement was made on what parties
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also describe as a “ 必 買 必 賣 ” basis, namely, there is no condition
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providing for either of them to back out from the deal on terms, in case
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either of them fails to perform. In line with this basis, the standard terms
C contained in the preliminary agreement (clauses 7 and 8) were deliberately C
deleted.
D D
E 36. The wordings of clause 18, properly construed, also do not confer E
F
such right on either party to back out from the deal unilaterally. The F
wordings are “買賣相方有權取消合的交易”. The term “相方” could
G G
only be a mistake and should be “雙方” instead. This refers to both parties.
H H
Had the agreement been that either party still had the right to unilaterally
I cancel the deal, the clause should have referred to either party or “買賣任 I
何的一方”.
J J
K K
37. In view of the above, construing clause 18 to give either of Elsun and
L Chin the unilateral right to cancel the deal would be inconsistent with the L
parties’ intention. There is no dispute that there has never been any
M M
agreement between the parties to cancel the deal.
N N
38. Chin has never communicated to Elsun that she sought to exercise
O O
the alleged right to cancel the deal pursuant to clause 18. Chin refers to
P P
various correspondence between her and her solicitors and her mortgagee
Q bank in November and December 2007, suggesting that the deal has fallen Q
through. While Chin’s solicitors requested Elsun’s solicitors to return all
R R
the title deeds and documents, they made no suggestion in the
S correspondence that Chin has unilaterally cancelled the deal pursuant to S
clause 18 or for any reason. No mention was ever made regarding the
T T
deposit that Elsun has paid to Chin. The fact is that as at today, Chin is still
U U
holding the deposit.
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A A
B B
39. Even assuming that clause 18 afforded the right to unilaterally
C cancel the deal, the clause might be invoked only “如樓契不完整”, i.e., if C
D
the title deeds were incomplete. D
E E
40. Insofar as the 1988 DLO letter is concerned, Chin’s solicitors never
F suggested the non-existence of this letter. On the contrary, they undertook F
to provide it. In offering this undertaking, Chin’s solicitors did not indicate
G G
at all whether they have already requested for the copy of the letter or when
H they expected the letter to arrive. The fact was that they have never at any H
stage suggested either the impossibility or any difficulty in obtaining a
I I
copy of the letter from the authority. Chin fails to show that the title deeds
J J
were incomplete as a matter of fact.
K K
41. The same is even truer insofar as Chin’s identity card is concerned.
L L
Elsun’s solicitors last requested for a certified copy of Chin’s identity card
M prior to completion before they agreed to accept an undertaking by Chin’s M
solicitors to provide the rectified assignment after completion. Chin’s
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solicitors also agreed but have eventually never done so. There was again
O O
no suggestion of either the impossibility or any difficulty in providing copy
P of Chin’s identity card or the previous assignment duly rectified. There P
was again no question of incomplete title deeds as a matter of fact.
Q Q
R OTHER ALLEGATIONS R
S S
42. Chin also raised argument about alleged non-payment of stamp duty
T T
by Elsun. This is factually incorrect and in any event irrelevant. She also
U argued that Elsun has also purchased the other floors of the same house and U
therefore should be satisfied with the title of her property. Even assuming
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that that happened, I do not agree that that absolves her from the
B B
obligations owed to Elsun under this agreement. There is also allegation of
C dishonesty or ulterior motive behind Elsun’s delaying the completion. In C
my view, the position of the parties was adequately evidenced by the
D D
contemporaneous correspondence between their solicitors.
E E
F
CONCLUSION F
G G
43. In my judgment, Chin was not entitled to cancel and had never
H validly or effectively cancelled the transaction as alleged. By her stance, H
Chin has simply evinced an intention not to be bound by the preliminary
I I
agreement.
J J
K
44. By his notice to complete and the present action, Elsun opted not to K
terminate but to press on the performance of the agreement. There is no
L L
suggestion or evidence to show that specific performance should not be
M ordered in the circumstances of this case. M
N N
45. In line with the minutes of order with some slight amendments, I
O order: O
P
(1) that the agreement in writing dated 24 September 2007 P
mentioned in the writ of summons be specifically performed and
Q Q
carried into execution;
R (2) that Chin do pay Elsun its costs of this action, including this R
application and costs of this order, such costs to be summarily
S S
assessed by the Master in chambers or alternatively to be taxed, with
T certificate for counsel; T
U U
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(3) that the said costs when assessed or alternatively taxed be
B B
deducted from the amount of the balance of purchase price to be paid
C by Elsun and the net balance certified; C
(4) that it appearing that Elsun has accepted the title of Chin to the
D D
property comprised in the agreement subject to Chin duly
E discharging the legal charge/mortgage in favour of HKCB Finance E
F
Limited, Chin do within 7 days after service upon her of this Order F
execute all necessary documents for the purpose of carrying this
G G
Order into effect, including the execution of an assignment of the
H property as an escrow such assignment to be in the form of the draft H
assignment which is exhibited as “WWHD-8” to the Affirmation of
I I
Wong Wang How Dennis affirmed herein;
J (5) that upon Elsun paying to Chin the net balance so certified at J
K
the office of Messrs. Gary Mak, Dennis Wong & Chang, Elsun’s K
th
solicitors, at 4 Floor, China Insurance Group Building, 141 Des
L L
Voeux Road Central, Hong Kong at a date and time to be fixed by
M the Court, Chin do at the same time and place redeem the said legal M
charge and deliver to Elsun the said assignment so executed and the
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legal charge duly receipted and discharged and all other deeds,
O writings and documents of title in her possession or power relating O
P
solely to the property; P
(6) that Chin thereafter give to Elsun vacant possession of the
Q Q
property;
R (7) that the parties are to be at liberty to apply to carry this Order R
into effect.
S S
T 46. The preliminary agreement should be construed in its English T
U
version in case of ambiguities (clause 17). English was also the language
U
used in the correspondence between the parties’ solicitors and the
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A A
requisitions as to title. During the hearing, Chin indicated she understands
B B
some English. I therefore give this judgment in English. In case Chin
C requires, interpreter’s assistance could be arranged when the judgment is C
handed down.
D D
E E
F
Simon Leung F
District Court
G G
Representation:
H Mr Eric Yao instructed by Messrs Gary Mak, Dennis Wong & Chang for H
the Plaintiff
I I
The Defendant appearing in person, present
J J
K K
L L
M M
N N
O O
P P
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R R
S S
T T
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