Introduction

It is not uncommon to find mistakes in assignments and rectification will be particularly important when the owner who acquired title under the imperfect assignment wants to sell the property.  Where the defect in the assignments is such that the legal or equitable estate has remained vested in the ex-owner due to the defective execution of or omission in the assignment, a confirmatory assignment may need to be executed by the ex-owner to rectify the error.  However, complications may arise when such ex-owner is dissolved later on.  In a recent decision of Lau Yun Lin v Kwan Tseung Company Limited [2017] HKEC 577, the Court of First Instance looked into this problem.

Background

In 2012, the Plaintiff as the purchaser and the Defendant as the vendor executed an assignment in respect of some shop spaces on the ground floor of Man Cheong Building in Tuen Mun (the “Subject Property”) with a plan annexed thereto (the “Assignment Plan”).  The Plaintiff later discovered that there was a discrepancy between the ground floor plan annexed to the Deed of Mutual Covenant and the Assignment Plan.  Physical inspection of the Subject Property confirmed that the Assignment Plan was wrong.  The Plaintiff wanted to rectify the mistake in the Assignment Plan by a confirmatory assignment as he intended to sell the Subject Property.  However, when the assignment was executed in 2012, the Defendant vendor was already in voluntary liquidation and its liquidators were parties to the assignment. The Defendant was formally dissolved on 31 October 2013 and there left no one to execute the confirmatory assignment.

Section 25A of the High Court Ordinance (“HCO”)

The Plaintiff therefore initiated the current action and argued that given the Defendant was dissolved and no long in existence, it fell within the meaning of “cannot after reasonable inquiry be found” in s.25A of HCO so the Court could order the Court’s nominees to execute the confirmatory assignment.

S.25A(1) of HCO provides that, “[w]here the Court of First Instance has given or made a judgment or order directing a person to execute any conveyance, contract or other document,  … , then, if that person… (b) cannot after reasonable inquiry be found, the Court of First Instance may, …, order that the conveyance, contract or other document shall be executed, …, by such person as the Court may nominate for that purpose.”

Decision

Application of s.25A of HCO

The Court disagreed with the Plaintiff’s argument.  To begin with, a company that is dissolved ceases to exist as a legal entity and is not normally in a position either to sue or be sued or indeed to do any other legal act.   S.25A of HCO is premised upon the Court having given or made “a judgment or order directing a person to execute any conveyance, contract or other document, …” but there is no legally existent person in the present case.

The Court also distinguished the present case from the cases Goldsteady Investment Ltd v Fatima Estates Ltd [2000] 1 HKC 819 and Li Kwan Chuen v Vector Development [2009] 3 HKLRD 511 where reliefs under s.25A of HCO were granted.  In those cases, there was no suggestion of dissolution although the defendants thereof were either not found or struck off the register in the British Virgin Islands.

In Chu Po Chuen v Kwong Yip Company Limited & Anor (unreported) DCMP 1062/2015, 21 July 2015, the defendant developer was dissolved 35 years before the proceedings were brought, an order sought under s.25A of HCO for executing a confirmatory assignment was granted by relying upon the cases Goldsteady and Li Kwan Chuen above and a passage in Hong Kong Conveyancing Law and Practice, 2015, where the authors observed that: “In a case where the party who is required to execute the confirmatory (remedial) assignment is no longer in existence or cannot be found, the Court may, under section 25A of the High Court Ordinance, order the Registrar of the High Court to execute the relevant deed”.  However, Deputy High Court Judge Douglas Lam SC in the present case declined to follow Chu Po Chuen, he considered that the judge in Chu Po Chuen was not drawn to the distinction between the circumstances in Goldsteady and Li Kwan Chuen and those where a company had already been dissolved and the passage referred above was actually wrong.

The Proper Solution

Deputy High Court Judge Douglas Lam SC therefore dismissed the Plaintiff’s application.  But he went on to discuss what a party might do in such a situation where the ex-owner was dissolved.  Pursuant to s.752 of the Companies Ordinance (Cap 622) (“CO”), as long as a company is and remains dissolved, its property is bona vacantia and belongs to the Government.  The Government is now the legal owner of any residual interest in the Subject Property that may have been vested in the Defendant before its dissolution.  Therefore, the Plaintiff can start afresh an action against the Government instead and will not be left without any solution.

Alternatively, Deputy High Court Judge Douglas Lam SC also suggested that the Plaintiff might apply under s.765 of CO for restoration of a dissolved company.  S.765 of CO provides that a director, a member, a creditor, an aggrieved party by the dissolution/deregistration of the company or a party who has interest in the matter may apply to the Court for restoration of a dissolved/deregistered company.  Therefore, even the Plaintiff in this case is not a director or member of the ex-owner company, it has standing to apply for restoration as an aggrieved party.

Conclusion

The case gives good insight on how to properly rectify a property transaction by a confirmatory assignment when the ex-owner is dissolved.  Surely it will be the most ideal if the parties’ solicitors checked the assignment more carefully and rectified any mistake in the assignment in the first place, but if it really happens to be the case when the ex-owner is dissolved but a confirmatory assignment is necessary, party should consider engaging in either of the 2 solutions suggested by Deputy High Court Judge Douglas Lam SC above.

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Important: The law and procedure on this subject are very specialised and complicated. This article is just a very general outline for reference and cannot be relied upon as legal advice in any individual case. If any advice or assistance is needed, please contact our solicitors.