KOK CHONG HO AND ANOTHER v. DOUBLE VALUE DEVELOPMENTS LTD

[An objection as to title based on non-compliance with the Buildings Ordinance will not be entertained if the Court is satisfied there is no real risk of enforcement proceedings]

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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1. This is a vendor and purchaser summons. The purchasers have raised a requisition on title which they claim the vendor has not satisfactorily answered. In these circumstances the purchasers want to rescind the contract and to recover their deposit.

2. The contract is dated 7th August 1990. The subject property is described as "the Ground Floor of 51 Seymour Road".  The building of which it forms part lies between Caine Road and Seymour Road and comprises 54 units. On the Caine Road side of the building there are 10 floors. On the Seymour Road side of the building there are only 7 floors. The building incorporates 140, 140A, 142 and 142A Caine Road and 51 and 53 Seymour Road.

3. The history of the matter is briefly as follows.

4. The land on which the building stands (Inland Lot No. 2330) was the subject of a Crown Lease made on 7th September 1922.  There were no buildings on the land at the date of the Crown Lease. The lease contains no covenant restrictive of the user of land material to these proceedings, although it does contain the usual covenant in restraint of noisy and offensive trades.

5. On 10th May 1960, the Building Authority approved the plans of a new building on the land.

6. On 20th May 1960, a permit to occupy the new building was granted to the Grand Universal Land Investment Co., c/o Mr S.S.L. Yue (an architect). In this occupation permit, the Building Authority permits the occupation of what is described as "the new building at 140 Caine Road on Inland Lot 2300" for the following purposes :-

There is no way in which this can be satisfactorily reconciled with the units in the new building in fact built on the land.

7. On 14th June 1960, there was an assignment of the Ground Floor, 51 Seymour Road, annexed to which there is a plan prepared by the same architect as the architect to whom the occupation permit was addressed. This plan shows the creation of two units, the lower ground floor flats, which have given rise to the difficulty, because the plans of the building approved by the Building Authority allowed, at this level, for a children's playground and not the two lower ground floor flats.

8. By a Deed of Mutual Covenant made on 3rd November 1960, provision was made for all the 54 self-contained units in the building, including the two lower ground floor flats.

9. The purchasers are concerned that if there are, within this building, two units, the creation of which was not authorised, then the Building Authority will be entitled to take enforcement measures which will operate to their prejudice. In those circumstances, the purchasers, by their solicitors, raised the requisition which I have now to consider.

10. In a letter of 20th August 1990 to the vendor's solicitors, the purchasers' solicitors wrote this :-

"Assuming that the Ground floor in the Occupation Permit corresponds to the Lower Ground Floor of Caine Road as shown on the Assignment Plan, the 3rd Floor in the Occupation Permit should be the 2nd Floor according to the Assignment Plan. The Occupation Permit only permits 'Four European type flats for domestic use' on third Floor. But it appears on the said Plan that. there are 6 flats/units on the Second Floor. If this is the case, two of the flats/units must have been unauthorized structure which have never been certified for occupation. The 1st Schedule to the Deed of Mututal Covenant (which was executed about 5 months after Occupation Permit) shown that there are 6 units/flats on the 2nd Floor all of which presumably have been sold and are in occupation.

 

You will appreciate the significance that unauthorised structure renders the Crown Lease liable for forfeiture and/or results in the present co-owners (including our client if she does purchase) being held liable for waiver penalty pending removal of the unauthorised structure.

 

These discrepancies must be resolved before completion. We shall be pleased if you will clarify such discrepancies."

11. In a reply made on 21st August 1990, the vendor's solicitors claimed that the requisition raised on 20th August 1990 was raised out of time; but they added as follows :-

"We, on an entirely without prejudice basis, are of the view that the Plan annexed to the Assignment Memorial No. 318811 was in fact certified by the authorised architect after the approval by the Building Authority of the Government of Hong Kong. The site plan appears therein corresponds exactly to the Ground Floor Plan of Seymour Road, Nos 51 and 53. There is no room for any suspicion on two of the flats/units been erected unauthorised. Further, from the said Plan, the street nos.51 and 53 of Seymour Road were allotted to the respective flat/unit of the building thereon and from the Land Office search record a separate register reveals the Ground Floor of 51 Seymour Road Hong Kong is registered against the said property in the Land Office with 1/54th part or share. The total undivided shares of the building are 54 parts or shares, since each flat/unit was assigned one equal undivided share, the total shares of each flat/unit in the Building according to the respective flats/units in the said Plan added up together are 54 shares or parts which are consistent to the land search record in the Land Office.

 

In the circumstances, we do not agree with your viewpoint that if there is any unauthorized structure existed in the building, the same should not appear in the said approved Plan and the Land Office's search record.

 

As regards the Occupation Permit, the main purpose of which is to certify the user purpose of a particular building, the same just refers to 140 Caine Road, however, it should cover No.140, 140A, 142 and 142A Caine Road and Nos.51 and 53 Seymour Road; by the same analogy, therefore it cannot be conclusively to say that the absence of two flats/units thereunder are deemed to be illegal structure. So far as we understand, the same are for identification purpose only."

12. The purchasers were not content with that answer and have launched these proceedings accordingly.

13. The purchasers say that it has not been established to their satisfaction that the building work required to adapt the relevant floor for use as six flats was authorised under the Buildings Ordinance. What appears to have happened is that the area set aside for use as a children's playground has been taken for two additional flats without any approval; and therefore, say the purchasers, there is a real risk of enforcement action by the Building Authority.

14. The obvious way to deal with this is to find out from the Building Authority what it. has to say about the matter. To their credit, the vendor's solicitors did make an attempt to sort the matter out in that way. They wrote to the Building Authority on 29th August 1990. They referred to the occupation permit. They pointed out that the relevant floor was said to cover four European type flats for domestic use whereas in the Assignment plan to which I have already referred a total of six flats was shown. The Buildings Ordinance Office replied on 4th September 1990 to the effect that no alteration and additional works had been approved under the Buildings Ordinance subsequent to the issue of the occupation permit. But it confirmed that the floor numbers shown on the permit did not agree with those shown on the plans that were approved under the Buildings Ordinance on 10th May 1960.

15. Those are the material facts. In relation thereto the vendor has put in evidence an affidavit of one Ma Kin tang. He says that he is an architect and that he has examined the approved plans for the building. He discovered that the space occupied by the lower ground floor flats was shown in one of the drawings as "children's playground". He suggests that because of section 41(3) of the Buildings Ordinance, they may have been created under the exemption which that section creates to the general requirement that building work must not be carried out without the approval of the Building Authority. However, I am far from satisfied that that suggestion is correct. He goes on to say that if the Crown were entitled to re-enter and did re-enter the building because of the possible irregularity, it would re-enter only on the offending unit (in our case, these two lower ground floor flats) and not on unrelated units (such as the property the subject of the contract between the parties). I am doubtful about that, too. It seems to me that if the Crown were to re-enter, it would re-enter upon the premises comprised in the Crown Lease, which includes all the land on which the building stands. He finally says that he believes that in the event of a breach of the lease conditions (though I point out that is not what is involved here) within a particular premises in a building with multi-ownership, the Crown would first ascertain the ownership of the particular premises and would take action, including re-entry against those particular premises only. How it does that in a case of a building in multi-ownership, where the co-owners own the whole building between them but have only a right of exclusive possession as to part, I do not know.

16. The purchasers chose to put in no evidence to answer this evidence and gave no notice to cross-examine Mr Ma upon it; so for what it is worth, that is what the evidence is.

17. The real issue in the case, however, and certainly the first issue in the case, is, as it seems to me, whether there, is a real rather than fanciful risk of enforcement action herein relation to these two flats.  The question, the purchasers accept, is one of fact and degree; and of common sense. If there is a real risk, then the Court will not force the title upon the purchaser. The case which frequently arises in Hong Kong is a case where the property the subject of the contract or the building of which it forms part is shown to have been "improved", if that is the right word, by the erection thereon of illegal structures. In such a case, the purchaser might well find that he is at risk buying a property in that condition and is accordingly held entitled to take objection to the title based upon the existence of the illegal structures: see, for example, Grant River Limited v. Asie Marketing Ltd. [1990] 1 HKLR 297. This, say the purchasers here, is a similar case.

18. But is there a real risk in the present case? It is perfectly plain on the evidence that these flats have existed for 30 years. The Building Ordinance Office has been apprised (if not before, by the letter of 29th August 1990 from the vendor's solicitors) of the position and seems quite uninterested in taking any steps about it. I have come to the conclusion that there is theoretically the possibility of proceedings for enforcement here, but that the possibility is so remote and so unlikely to eventuate that the vendor is entitled to ask the Court to say that it should be ignored.

19. The sort of doubt upon the title which justifies a Court in refusing to force it 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) 4 Y. & C. Ex 237. As Fry points out in his work on on Specific Performance (at paragraph 891, p.419) the Court would not consider a title to be doubtful :

"where the probability of litigation ensuing against the purchaser in respect of the doubt is not great. In that case, the Court, to use Lord Hardwicke's language in one case 'must govern itself by a moral certainty, for it is impossible in the nature of things that there should be a mathemetical certainty of a good title. "

20. This present case seems to me to be, in the words of Lord Justice Lindley in In re Heaysman and Tweedy's Contract (1893)69 LT89, more one of a theoretical than a practical blot on the title. Accordingly, I am satisfied that, adopting the burden of proof which is applicable here, that is to say, that the vendor must satisfy the Court beyond a reasonable doubt that there will be no objection to the purchasers' title, I am satisfied that the vendors have discharged that burden. So on the first issue in the case, the purchasers fail.

21. The second point in the case is whether the answer given by the vendor to the purchasers' requisition was satisfactory. It does not matter that the vendors have turned out to be right, if they did not satisfactorily answer the requisition.

22. In my judgment, the answer given by the vendor to the purchasers in respect of their requisition was a satisfactory answer; and accordingly, on this second issue the purchasers fail too.

23. For the reasons I have endeavoured to state, I will declare that the vendors have satisfactorily answered the requisition. If necessary, I will declare that the vendors have shown a good title to the property in accordance with the contract, assuming there is no other objection to the title other than the one which has been the subject of this judgment. The point taken by the purchasers was however, a reasonable one; and I do not think fit to order them to pay the vendor's costs.