Archive for the ‘requisitions on title’ Category

Same name, different person?

November 8, 2012

In Cho Tak Po v Chan Kwok Wai ([2012] HKEC 1516, CFI) a husband and wife bought property as joint tenants. They subsequently broke up. As part of the arrangements following the divorce, the wife assigned the property to the husband. The couple had moved to the US and the wife remained there. Perhaps under this western influence the elements of her name were transposed when she signed the assignment (her family name appearing last). The title deeds included a notarial document declaring that the wife (with her name given in western style) was the person who had executed the assignment (annexed to the declaration). Next to the wife’s signature on the assignment was her Hong Kong ID number and this was the same number as that shown in the assignment of the property to her and her husband. Title to the property subsequently changed hands and there was now a contract for the further sale of the property. The buyers raised, and persisted in, a requisition concerning an alleged doubt as to whether the person who assigned the property to the ex-husband was the same person who had bought the property as joint tenant with the ex-husband (the doubt said to arise from the transposition of the names). Ultimately this led the purchasers to allege that the seller had repudiated by failing to show good title and to seek the return of the deposits paid. This claim got short shrift from the court. There was no substance in the alleged doubt.

Requisitions concerning the identity of the seller

September 12, 2012

Chan Hei Leung Thomson v Kuo Yu Chien ([2012] HKEC 1255, DC) was a vendor and purchaser summons. The question was whether two of the buyer’s requisitions had been answered satisfactorily.

The first requisition concerned the identity of the seller. In the 2007 assignment to him he was identified by reference to his Taiwanese passport number. His 2012 agreement to sell the property identified him by reference to his Hong Kong ID number. There was also a suggestion of some differences between his signature on the two documents. The buyers sought a statutory declaration to confirm that the 2007 buyer and the 2012 seller was one and the same. This was not necessary in the circumstances. The same firm of solicitors (and the same person within the firm) had acted in both transactions and they were willing to confirm that the 2012 seller was the same as the 2007 buyer. This was sufficient; there was no real risk of a third party coming forward claiming to be the true owner ([8]):

‘In my view, approaching the matter from the stand-point of a willing purchaser and a willing vendor, both possessed of reasonably robust common sense and both intending to complete the transaction … the plaintiffs ought to have been satisfied that the defendant has satisfactorily answered any concern that they may have in respect of the defendant in the two instruments.’ ([14])

The second requisition asked for certain pre-intermediate root of title documents. The buyers argued that the sellers had not identified the document that was to be regarded as the intermediate root. The court held that the sellers had no duty to teach the buyer’s solicitors how to identify an intermediate root of title ([18]).

Requisitions raised out of time cannot be ignored if the underlying concern is inability to give good title or deliver title deeds

July 27, 2012

Big Most Ltd v Chau Wah Hung ([2012] HKEC 1057, CFI) concerned three requisitions that the buyer alleged had not been answered. The buyer had refused to complete. The question was whether the seller had shown that it could prove and give good title. The first issue was that the seller refused to deliver the original of a 2010 mortgage which the seller claimed had been discharged. This was a legitimate cause for concern and the buyer succeeded on this point. A buyer is entitled to original title deeds ‘as a matter of proprietary interest.’ ([11]) The seller was required to produce the charge and evidence of reassignment or discharge. The time limit in the agreement for raising requisitions had no effect on the duty to give a good title on completion.

The second issue concerned a second charge. The seller undertook to deliver the charge and evidence of discharge on completion. This was not enough and, again, the requisition could be insisted on even if it had been raised late.

The third issue was that the title to the car parking spaces showed that the area they occupied was subject to a right of way that would render one of them unusable. There was a risk that the Government would re-enter. The seller should have dealt with this requisition but had refused to do so on the basis that it was raised late and the property was sold ‘as is’ but:

‘A requisition can be raised out of time if it goes to the root of the contract or on matters not apparent from title documents provided by the vendor but only come to the knowledge of the purchaser through his own search or enquiry.’ ([37])

When a property is sold ‘as is’ that refers to its physical state and condition ([38]).

Requisition as to due execution of assignment by corporate vendor

July 13, 2012

In Jones v Bohmann International Ltd ([2012] HKEC 919, CFI) a purchaser refused to complete a purchase on the grounds that his requisitions had not been properly answered and the seller had failed to show a good title. The first requisition concerned the assignment to the seller by a corporation.

The corporation’s articles required the authority of the board to the execution of a deed. It also required that the seal should be affixed in the presence of a director who was then to sign the deed. The corporation had a corporate director which had affixed its seal and the corporate director’s seal had been countersigned by an individual, Z. In response to a requisition, the seller produced evidence that Z was the sole director of the corporate director.

The court found that the requirements of the article had been complied with. The article was unlike that encountered in other cases where the articles required the company seal to be countersigned by  director who had been specifically authorised to do so. Here there was no requirement for a director to be specifically authorised and it was enough for the execution clause to record that the seal had been countersigned by a director.

If it had been necessary, it was not, the seller could have relied on section 23 of the Conveyancing and Property Ordinance.

A second requisition concerned the stamp duty certificate. The court thought that there was no merit to the requisition but that, in any event, stamp duty was not a matter of title.

Less is more: Common sense when raising and answering requisitions

December 22, 2011

There is an implied obligation, in an open contract, both to show good title and to answer requisitions which might be material to the title. A vendor’s solicitors should try to display candour and common sense when answering requisitions. If there is a blemish and they have no further information or documents to supply then they should simply say so. Inviting the buyer to agree that there is no question to be answered when there clearly is can make matters worse for their client.

In Active Keen Industries Ltd v Fok Chi-Keong ([1994] 1 HKLR 396, CA) F had agreed to sell a flat to A. The occupation permit for the building allowed for seven flats on each floor. The DMC and first assignment divided each floor into nine flats and there were, in fact, nine flats on each floor. A’s solicitor raised a requisition concerning this discrepency and expressed concern that the result was that there were unauthorised structures that might be the subject of enforcement action and that this risk constituted a defect in title. F’s solicitor pointed out that the question affected all of the flats, that the situation had persisted for around thirty years and that the authorities were well aware that there were nine flats and had not expressed concern. The Court of Appeal appeared to indicate that had F’s solicitors left matters there then they might have complied with their duty to answer requisitions. There was in fact no defect in title and they would have done all that they could to deal with the requisition.

Unfortunately, they muddied the waters by, inter alia, producing architect’s certificates, purporting to show that the works complied with Building Regulations. Production of these unhelpful certificates and a failure simply to acknowledge that they understood the reason for the requisition but had no material or information in their possession that could shed any further light on the matter were positively unhelpful. As a result, even though F had good title, he had failed to show it. Litton JA called on conveyancers to show ‘candour and common sense’ in their approach to answering requisitions.

Conveyancing: caution when answering ‘late’ requisitions and the burden of proof when clearing up doubts concerning title

October 31, 2011

A seller’s solicitors should not answer late requisitions merely out of courtesy. Where the requisition is clearly out of time, the seller’s solicitors should either refuse to answer it or should make it clear that the answer is ‘without prejudice’ to their right to take the point that the buyer was out of time and had no right to raise the requisition. The burden of proof is not on the buyer to show that there is a problem with title. The burden is on the seller to show beyond reasonable doubt that the title is good. The standard to be employed is whether an experienced and prudent solicitor could advise that the buyer was not subject to the risk of the successful assertion against him of any encumbrance.

Chinawell Management Ltd v Strong Huge Corp Ltd ([2011] HKEC 1403), concerned an agreement for the sale and purchase of two village houses. The buyer raised requisitions concerning: (a) alleged illegal structures; and (b) a notice posted by a third party at the property claiming to be the owner of it. The seller had not dealt with the requisitions by the completion date. The seller argued: (a) that the buyer had not shown beyond reasonable doubt that there was an encumbrance affecting the title; and (b) that the requisition had been raised late.

The seller’s arguments failed. The burden is on the seller to show beyond reasonable doubt that the title is good. The standard to be employed is whether an experienced and prudent solicitor could advise that the buyer was not subject to the risk of the successful assertion against him of any encumbrance. It was not clear that the requisition concerning the third party was late since the third party claim had been raised with the sellers as soon as it came to the buyer’s attention. In any event, the buyer had attempted to answer the requisitions and so had waived its right to argue that they had been raised late. When a seller believes that a requisition has been raised too late it should either refuse to answer or else answer on a ‘without prejudice’ basis (stating that the reply is given without prejudice to the seller’s right to argue that the requisition had been raised late so that the seller had no duty to answer).

Time to be allowed for considering answers to requisitions on title

July 25, 2011

A seller must reply to requisitions within a reasonable time. The purchaser must be left with a reasonable time to consider the reply given. Where the contract specified that the purchaser had 7 days to reply to the seller’s answers that was a good guide as to the reasonable time to be allowed.

In Smart Max Enterprise Ltd v Speedy Way Ltd ([2011] HKEC 734, CA) a seller delayed several months before replying to requisitions raised by the buyer. The buyer waived the contractual time for the reply. The seller eventually replied two hours before the deadline for completion and the buyers complained that they had not been given sufficient time to consider the reply. The seller’s offered another day for completion but the buyers refused to complete within that deadline. The Court of Appeal held that the sellers had not given the buyers enough time to consider their reply (even though the reply did not raise a complex issue). The contract gave the buyers 7 days to respond to requisitions and so 7 days was the reasonable time to be allowed.

Execution of assignment by PRC Company

May 28, 2011

If a company has a metallic common seal, the corporate name must be clearly engraved on it. The Court cannot take judicial notice of mainland law and practice concerning the execution of assignments.

Wang Zhidun v Tsoi Ming Pui ([2011] HKEC 611, DC) concerned requisitions raised on the sale of a property. One of the assignments in the chain of title was by a Hong Kong company. The corporate name was not legible on the common seal used on the assignment. Wang Zhidun asked for a confirmatory assignment but the defendants did not procure this. The Court held that the purchaser’s objection was valid. On Hong Trading Company Ltd v Bank of Communications  was authority for the proposition that execution is defective when a company uses a metallic seal and the corporate name is not clearly engraved on it.

Another relevant assignment was by a PRC company that had used a rubber chop instead of a common seal. The purchaser had asked for a legal opinion by a qualified PRC lawyer to confirm that this was a valid mode of execution by a PRC company. The seller refused to comply. Again, the Court agreed that this requisition had been valid and had not been properly answered. The Court cannot take judicial notice of PRC law concerning the mode of execution of documents by PRC companies.

Approach to raising and answering requisitions

May 6, 2011

When deciding whether or not a requisition has been satisfactorily answered, robust common sense is to be applied and there is an assumption of a willing seller and buyer.

In So Mariko v Tse Chun Chung John ([2011] HKEC 541, CA) Mr Ho died intestate and letters of administration were granted to his widow (Madam Ho). In 2001 Madam Ho assigned a flat forming part of the estate to herself and another (the 2001 assignment). Three persons joined as confirmors. There was a recital to the effect that the confirmors were the only people with an interest in Mr Ho’s estate. The flat was assigned twice more and came to be owned by the seller. The buyer’s solicitors raised a requisition seeking proof that there were no other people, other than the confirmors in the 2001 assignment, with an interest in Mr Ho’s estate. Madam Ho’s affirmation (which would have been the best proof) could not be obtained. Instead the seller proferred a statutory declaration made by the solicitor who prepared the 2001 assignment. The question was whether the requisition had been answered properly.

The Court of Appeal held that it had. The perspective is one of robust common sense and there is an assumption of a willing buyer and a willing seller. This was not a case of a necessary document of title but of corroboration of a statement in a recital in the 2001 assignment. There was no need for the best possible proof. In the circumstances, could the court be sure beyond reasonable doubt that that there was no risk of a beneficiary other than the confirmors coming forward to make a claim? The Court of Appeal held that this question could be answered affirmatively.