Missing title deeds: showing good title in accordance with section 13 of the Conveyancing and Property Ordinance

In Zhang Xueshai v Lai Chin Wing ([2015] HKEC 295, CA) LCW had been appointed as the Committee of the estate of his mentally incapacitated brother (LMW) and was authorised to sell LMW’s flat. The flat had been acquired under the Home Ownership Scheme. The mortgage had been paid off. There had been two later agreements to sell the property to financial institutions (which may well have been connected with each other). These agreements had been cancelled. A charging order nisi and a charging order absolute had also been registered against the property but these had been discharged by LCW.

LCW agreed to sell the property to the plaintiff (ZX). The agreement required LCW to prove title in accordance with section 13 of the Conveyancing and Property Ordinance. LCW was unable to provide the originals of any of the title deeds and offered to provide a statutory declaration to address this problem. ZX was not satisfied with the statutory declaration and sought declarations that LCW had failed to answer his requisition and to prove and show a good title. ZX also sought the return of the deposits.

Cheung CJHC referred to the Court of Final Appeal decision in De Monsa Investments. Missing title deeds are only a problem if this gives rise to a real possibility of the successful assertion of an encumbrance against the property after completion (such as the risk of the creation of an equitable mortgage by deposit of title deeds ([30])). Where there is a problem, it may be possible to address it either by a statutory declaration or by the production of any other type of evidence that is sufficient to dispel the doubt that has arisen ([31]).

There was a real risk, on the facts of this case, that LMW might have tried to raise finance on the security of an equitable charge. All of the title deeds were missing. The cancelled ‘sales’ to financial institutions may well have been disguised loan arrangements. The charging orders also suggested that LMW needed to raise funds ([35] – [37]). LCW did not have the personal knowledge needed to give a statutory declaration that would deal with this risk ([38]).

LCW argued that there was no risk of the successful assertion of an encumbrance against the property since it had been acquired under the Home Ownership Scheme and any unauthorized dealing would be void (section 17B of the Housing Ordinance). The argument failed in this case because it had been raised too late; if LCW intended to rely on this legal provision he should have mentioned it. The argument also failed  because no evidence had been produced to show that there had been no approval.

Michael Lower

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