Good title: not affected by ‘fanciful’ risks of a successful legal challenge

In Jovian Corporate Communications Ltd v Link Wide International Investment Ltd ([2016] HKEC 808, CA) the dispute arose out of a contract for the sale of an office unit. The building had been jointly developed by four developers. One of the developers was a charity and it needed the consent of the Governor of Hong Kong for any dealing with its land, including any partition. The developers had entered into a series of agreements at the time of the development in the 1980s. One of these bore the title ‘Deed of Mutual Covenant and Partition’ (‘DMC & P’). The purchaser of the office unit raised a requisition asking for evidence that the Governor had consented to this partition. The seller argued that this requisition was misconceived. Completion did not take place and the seller sought a declaration that it was entitled to forfeit the deposit and to damages. It was successful at first instance and on appeal.

In the Court of Appeal, the principal question was whether the title was good or not even in the absence of some specific written approval directed at the charity’s involvement. The question had to be approached ‘from the standpoint of a willing purchaser and a willing vendor, both possessed of reasonably robust commonsense, both intending to see the transaction through to completion in terms of their own bargain. (Mexon Holdings Ltd v Silver Bay International Ltd, per Litton PJ). The title is good unless there is the risk of the successful assertion of an encumbrance against the purchaser. When assessing the level of risk, regard must be had to the circumstances of the case (De Monsa Investments Ltd v Whole Win Management Ltd, Litton NPJ).

Here the Government was well aware of the transaction. The MTR Corporation was a party to some of the agreements and the Governor’s approval was endorsed on them. The DMC & P had the approval of the Registrar General (Lands Office) as required by the agreement with the MTR Corporation. In these circumstances, it was fanciful to suggest that the DMC & P had not been approved by the Government ([17] per Lam V-P). There was no prospect that the Government could successfully assert that it had not approved the DMC & P ([18]). The written approval of the Governor on an assignment to the MTR agreement which was one of the core agreements relating to the development provided any approval which might be necessary ([19] – [20]). Even if it could challenge this, neither the Government nor any other interested party had any reason to do so ([21]).

In any event, ‘partition’ in the DMC & P bore its technical legal meaning as an arrangement that brought an end to co-ownership. The DMC & P (despite its title) did not do this.

Michael Lower

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