XCHRX BOFAI DEVELOPMENT LTD. v. SUMMIT LEADER LTD.

HCA 4378/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 4378 OF 1998

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J U D G M E N T

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1. This is an application by the Plaintiff for summary judgment pursuant to O. 86 of the Rules of High Court. The property, subject matter of the present proceeding, is the property known as Office B on the 6th Floor of Bank of America Tower, No. 12 Harcourt Road, Hong Kong.

Chronology

2. By an assignment dated 26th November 1980 registered in the Land Office by Memorial No. 1995965 Extrawin Ltd. (the first owner) assigned to Bylamson & Associates (Nominee) Ltd. & Bank of America, various floors and car parking spaces (including the 6th Floor). In respect of the 6th Floor the Lift hall was also assigned.

3. By a Deed of Mutual Covenant dated 5th June 1981 and registered in the Land Office by Memorial No. 2095605 the aforesaid 3 parties pursuant to the provisions of S. 2A of the Multi-Storey Buildings (Owners Incorporation) Ord. Cap. 344 entered into a Deed for the purpose of making provisions for the management and maintenance of the said building.

4. The 6th Floor has since been partitioned into Office A & Office B.

5. By an assignment dated the 15th May 1997 and registered in the Land Office by Memorial No. 7163778 the Defendant was assigned Office B on the 6th Floor. The plan attached to the said assignment showed that Office B included half of the Lift Hall.

6. By a Provisional Agreement for Sale and Purchase dated the 17th November 1997 and entered into between the Plaintiff as Purchaser and the Defendant as the vendor the Plaintiff agreed to purchase Office B on the 6th Floor together with car parking space on the 4th Floor.

THE REQUISITION

7. On the 6th January 1998 by letter the Plaintiff's solicitors Messrs. Charles Yeung Clement Lam & Lo raised requisitions in respect of title. The subject requisition in the present proceeding is requisition No. 24 which is as follows: -

"In the Agreement Memorial No. 1981397, there is a corridor on the Plan which is not part of the property agreed to be sold under the said Agreement. In the subsequent Assignment Memorial No. 1995965, the corridor has disappeared and becomes part of the Property assigned under the said Assignment. Please confirm whether there is a change of plans and the areas to be assigned and that the parties have all agreed to the same without any compensation.

In view that the actual colouring is not shown on the documents, it is also doubtful whether the area of the 6th Floor assigned under this Assignment Memorial No. 1995965 includes the toilets and the Lift Hall. In the Plan annexed to the Deed of Mutual Covenant Memorial No. 2095606, the Plans are not in the same layout or dimensions as that annexed to Assignment Memorial No. 1995965. In the said Deed of Mutual Covenant memorial No. 2095606, "The Building Common Areas" on Page 4 thereof is defined as including (for the 5th Floor to 36th Floors) the service lift and lift hall. On Page 7 of the said Deed of Mutual Covenant, the Offices and Toilets and Lift Halls on each floor are however defined as "Each Floor's Exclusive Areas". It is therefore unclear whether your client has the right to assign the Lift Hall. Please let us have the certified copies of the said Agreement Memorial No. 1981397, Assignment Memorial No. 1995965, Deed of Mutual Covenant Memorial No. 2095606 with Plans respectively annexed thereto duly coloured for our perusal and let us have the confirmation as requested in our letter to you of 9th December 1997."

8. The Defendant's then solicitors Messrs. John Ho & Tsui on 19th January 1998 in respect of requisition 24 replied as follows: -

"The Architect's Certificate together with a plan attached properly certified that the partitioning does not constitute any structural alteration and delineated on the plan the Ex. Lav. & half of the Lift Hall are assigned to the exclusive use by Office B. Please read the Deed of Mutual Covenant carefully, "the Office and the Toilets and Lift Halls on each floor of the Commercial Tower is the exclusive areas are coloured pink on the Floor plans. In which, please note that there are clear colour code shown on the FLOOR 6 PLAN."

9. With respect the Architect's Certificate is not helpful as it only certified that the partitioning did not constitute any structural alternation. The requisition raised doubt whether Office B included the toilets and the Lift Hall.

10. The Plaintiff's solicitors were not happy with the reply, by letter dated the 24th January 1998 in respect of requisition No. 24 further raised the following enquiries: -

"You have not addressed to the 1st part of our requisition concerning Agreement Memorial No. 1981397 and Assignment Memorial No. 1995965. Please let us have your confirmation as to whether there was change of Plan and the areas to be assigned after the Agreement was signed and that the parties have all agreed to the Assignment without making any compensation.

As to the 2nd part of our requisition, we re-iterate that the fact that the Plans annexed to the Deed of Mutual Covenant Memorial No. 2095606 are not in the same lay-out or dimension as that annexed to the Assignment Memorial No. 1995965 - make it doubtful whether the lift hall is common area or exclusive area. This is because the Deed of Mutual Covenant Memorial No. 2095606 makes reference to the lift hall in two areas, one on Page 4 where "the Building Common Areas" is defined to include (for the 5th Floor to 36th Floors) the service lift and lift hall; and the other on Page 7 where "Each Floor's Exclusive Areas" includes the offices and toilets and lift halls on each floor. Please let us know whether there is any other documents which can assist you to prove that the lift hall purported to be owned by your client is not "the Building Common Areas" but is "Each Floor's Exclusive Areas". We also repeat our request for certified copies of the said Agreement Memorial No. 1981397, Assignment Memorial No. 1995965, Deed of Mutual Covenant Memorial No. 2095606 with Plans respectively annexed thereto duly coloured for our perusal."

11. The Defendant's then solicitors by letter dated 16th February 1998 replied reiterating their previous view mentioned in their letter dated 19th January 1998.

THE DMC

12. The following clauses in the DMC are relevant for the purpose of this proceeding: -

Cl. 1(a)(h) of the definition section "the Building Common Areas" in respect of the 5th to 36th Floors, except 17th & 27th Floors, was defined as "The Service Lift and Lift Hall, The Staircases "A", "B" & "C" and landings.

"Each Floor's Exclusive Areas" was defined as "The Office and the Toilets and Lift Halls on each Floor of the Commercial Tower".

13. Section I Cl. 3(a) stated "The Building Common Areas shall be deemed to be common areas for the benefit of the owners of the Building which areas, may, subject to the provisions relating to the 17th Floor & the 27th Floor as mentioned in Cl. 3(e) & Cl. 3(f) hereof, and subject to the provisions of Cl. 8 & 11 hereof, be used by each owner in common with all other owners and occupiers of the Building or any part thereof".

14. Cl. 5 "The Owners shall at all time hereafter be bound by and shall observe and perform the covenants, provisions and restrictions herein contained and the benefit and burden thereof shall be annexed to every part of the lot and the Building ......"

15. Cl. 9 "There is reserved unto the Manager its successors and assigns the right and privilege to put up rest rooms for the watchman of the Building at such Building Common Areas as it shall in its absolute discretion think fit".

16. Cl. 10 "The registered Owners and the Beneficial Owner shall assign and confirm unto the Manager 4,300 equal undivided 10,000th parts or shares of and in the Lot and the Building together with the full and exclusive right and privilege to hold use occupy and enjoy the Building Common Areas and Facilities, ...... as soon as practicable after the execution of this Deed".

THE ISSUES

17. The crux of this application are

1) whether the Defendant has proved good title and

2) whether the Defendant had satisfactorily answered Requisition No. 24

18. The DMC has already defined the common area as the service lift and lift hall, and by Sec. I Cl. 10 the registered Owner & the Beneficial Owner agreed to assign to the Manager with the full and exclusive right and privilege to hold use occupy and enjoy the Building Common Areas. The DMC binds all subsequent owners as they are assigned the property subject to the DMC. Since the plan attached to the assignment of Office B on the 6th Floor includes half of the lift hall this is inconsistent with the definition of Common Area in the DMC. It is doubtful whether the Defendant has a good title to that part of 6th Floor.

19. The Defendant in reply to the requisition referred to "Each Floor's Exclusive Areas" in the DMC. In my judgment the definition of "Each Floor's Exclusive Areas" in the DMC meant only that those parts were to be used exclusively by owners and occupiers of that floor. It has nothing to do with title to common parts as by the DMC, the then owners had already agreed to assign the common parts to the Manager.

20. Even if I am wrong in interpreting that clause as I did aforesaid, there still raises doubt as to whether the Defendant can pass a good title in respect of that part of the property.

21. It is trite law that there is an obligation on the part of the vendor to show a good title as well as an obligation to answer requisitions to satisfy the purchaser as to title. The Court will not force the title upon the purchaser if there is a real risk of litigation.

22. I find as a fact that the Defendant's then solicitors had not answered the requisition No. 24 satisfactorily as they had not addressed the apparent conflict in the definition of "Building Common Areas" and "Each Floor's Exclusive Areas".

23. In Kok Chong Ho & another v. Double Value Developments Ltd. 1990 MP 2857 unreported per Godfrey J., as he then was, at p. 8

"The sort of doubt upon the title which justifies a Court in refusing to force upon an unwilling purchaser is (as Baron Alderson put it) a case where there is "a reasonable decent probability of litigation" see Cattell v. Corrall (1840) 4Y.&C. Ex. 237"

CONCLUSION

24. For reasons I have given above, I come to the following conclusions: -

1) There is a real risk of litigation, and

2) Requisition No. 24 has not been satisfactorily answered.

25. In the premises there be an order in terms of the minutes of judgment, annexed hereto as "Annexure I" save and except para 2(d).

26. Order nisi that the costs of this action be the Plaintiff's.