CITIWARD LTD. v. TAI PING WING

1995, MP No. 86

IN THE SUPREME COURT OF HONG KONG

MISCELLANEOUS PROCEEDINGS

HIGH COURT

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J U D G M E N T

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1. This is a vendor and purchaser summons. It concerns an agreement to purchase Flat A on the 2nd Floor and Car Parking Space No.11 Ground Floor, Karly Court, No. 10 Verbena Road, Kowloon. It suffices to say that the vendor's obligation under the agreement was to show good title. The completion date has been fixed by the vendor for the 30th January 1995 and that is next Monday. The summons was taken out on the 11th January. By the summons the purchaser seeks a declaration that the requisition No. 1 of the Plaintiff (ie, the Purchaser) contained in the solicitor's letter dated 21st April 1994 in respect of title to the property referred to in the Agreement of Sale has not been sufficiently answered by the Defendant (ie, the Vendor). It further asks for a declaration that good title has not been shown and for the return of the $3,000,000.00 deposit which has been paid together with interest as well as the costs of investigating the title.

2. At first it seemed that a point might be taken that this summons was premature. On inquiry it emerged that the Defendant would not have anything further to add between now and the completion date and was content to rest its case relating to the establishment of the title on what it had at present.

3. The vendor's duty is to provide a good title. The authorities relating to what is meant by good title are referred to Giant River Ltd. v Asie Marketing Ltd [1990] 1 HKLR 297 and Active Keen Industries Limited v. Fok Chi Keong [1994] 1HKLR 396.

4. The dispute in this case concerns the Crown Lease. The relevant provision is that:-

"........the lessee will not erect or allow to be erected any building or buildings on the said piece or parcel of ground except one detached or semi-detached private residence of European style (the composition of which should be decided by the said Director) with or without a private garage and other usual outbuildings and appurtenances and will expend not less than $27,500 on the erection of such residence such sum to exclude the cost of the said piece or parcel of ground and the cost of the site formation."

5. It is not disputed that the erection of a building with flats is a breach of that covenant and it is not disputed that a block of flats has been built on that site. The original house was apparently demolished in about 1989. The new block of flats was put up in 1990. The Purchaser therefore says that there is here a clear breach of the Crown Lease and the Vendor has been unable to satisfy them that the breach has either been waived or cannot be relied upon by the Crown for any other reason. Mr. Chow on behalf of the Defendant said two things: first of all that the Crown would be estopped; secondly that the vendor would be entitled to rely on wavier and that right can be passed to the purchaser.

6. Turning first to the question of estoppel, the Defendant says that positive things have been done by the Government and have been relied on. They say that it is both proprietary and promisory estoppel and that there is almost a representation that this clause, which I have referred to, in the Crown Lease was obsolete. They say that the estoppel would accrue to the developer and the successors in title to the developer. They rely on three things. First that the government has stood by and watched the developer build the building. Secondly, that the occupation permit has enabled the flats to be sold. Thirdly, that a control card was opened up in the Land Registry again allowing the division of shares in respect of the block and the subsequent dealing with the flats.

7. For promisory estoppel it seems to me that there must at least be evidence of a promise or representation. I cannot say whether a promise or representation exists in this case but there is no sufficient evidence before me for me to say that there is a clear promise or representation. One of the questions which was rightly asked by Miss Yuen on behalf of the Plaintiff was "What promise was given and to whom?"

8. Furthermore, with promisory estoppel the problem often is that the promise can be withdrawn on reasonable notice. The question which would arise here is whether, in the circumstances of this case, the promise of a promisory estoppel, if it exists, could be withdrawn. Again for propriortary estoppel, there must be conduct usually in the form of a promise or a representation. Indeed the person seeking to set up the estoppel must have relied upon such conduct.

9. My attention was drawn both to a number of passages in Snell and to the judgment of Lord Cranworth in Ramsden v Dyson Law Reports 1HL 129 at 140 which is cited in the A.G. to His Royal Highness the Prince of Wales v. Collom [1916] 2 KB 193. The passage shows that the person raising the estoppel must be mistaken and the person against whom the estoppel arises must at least be wilfully passive for an estoppel to arise.

"If a stranger begins to build on my land supposing it to be his own, and I, perceiving his mistake, abstain from setting him right, and leave him to persevere in his error, a Court of Equity will not allow me afterwards to assert my title to the land on which he had expended money on the supposition that the land was his own. It considers that, when I saw the mistake into which he had fallen, it was my duty to be active and to state my adverse title; and that it would be dishonest in me to remain wilfully passive on such an occasion, in order afterwards to profit by the mistake which I might have prevented. But it will be observed that to raise such an equity two things are required, first, that the person expending the money supposes himself to be building on his own land; and, secondly, that the real owner at the time of the expenditure knows that the land belongs to him and not to the person expending the money in the belief that he is the owner. For if a stranger builds on my land knowing it to be mine, there is no principle of equity which would prevent my claiming the land with the benefit of all the expenditure made on it. There would be nothing in my conduct, active or passive, making it inequitable in me to assert my legal rights."

10. Next it was asked by the Defendant "Whether there is a realistic risk?" For this the correspondence which was produced is relevant. The vendor's solicitors have approached the Lands Department and they wrote on two occasions to the Legal Advisory and Conveyancing Office. On the second occasion on 23rd November 1994 they wrote,

"In order to resolve the dispute between our client and his purchasers, we shall be grateful if you can also seek the direction of the District Lands Office/Kowloon West to let us have your written confirmation that the government will also not take action in respect of the above existing flatted development."

11. The reply on 14th December 1994 was as follows:-

"We are instructed by the District Lands Office to reiterate that it is only the current policy not to enforce the covenant referred to in paragraph (a) our letter of 26.10.1994 to Tong Chan and Co. Each case must be considered separately and what is said in one case may not be applicable to other cases notwithstanding that their leases may contain the same or similar covenants."

12. On this basis, it is said on behalf of the Defendant that it is not the policy of the Government to take enforcement action in respect of a breach of this lease. All I can say on looking at this letter is that the Government has clearly reserved its position. It said it is not the current policy but it is not binding itself for the future. Whether or not in the future it could come back and enforce this covenant remains to be decided on another day. I certainly could not decide it now.

13. Mr. Chow on behalf of the Defendant then relied upon Section 8 of the Crown Rights (Re-entry And Vesting Remedies) Ordinance. I should start by referring to Section 6 which provides that

"The acceptance of rent by or on behalf of the Crown shall not operate as a waiver by the Crown of any right of re-entry accruing or of any forfeiture incurred by reason of either the breach of covenant in a Crown Lease or the breach of any condition or stipulation in any tenancy of land held of the Crown."

14. Under Section 8(1) provides that

"Subject to subsections (3) and (4), where a memorial of re-entry has been registered under Section 4 in the Land Registry, the former owner may-

(a) ..........

b) apply to the High Court in its equitable jurisdiction for relief against the re-entry-

(i) ............

(ii) if the circumstances are such that he would have been entitled to apply for relief against re-entry had the lessor been a private party and exercised his right of re-entry."

15. Sub-section (2) is also relevant:

"Subject to sub-sections (3) and (4), where a vesting notice has been registered under Section 7 in the Land Registry, the former owner of a relevant interest which is the subject of the vesting notice may -

(a) ...........

(b) apply to the High Court in its equitable jurisdiction for relief against vesting-

(i) ..........

(ii) if the circumstances are such that he would have been entitled to apply for relief against re-entry had the lessor been a private party and exercised his right of re-entry."

16. The simple point on this is that in the circumstances of this case Section 8 cannot be a good defence on behalf of the Defendant because the Plaintiff would have to ask for relief. They say rhetorically "How can it be a good title if it is a defeated title and then relief has to be asked for?"

17. My view of the matter is that the risk of Government re-entry in this case is probably low. But the purchaser is entitled to be cautious. There is a breach of a Crown Lease. This has not been sorted out. It needs to be sorted out. It may well be that many purchasers are prepared to take that risk, but it seems to me that I cannot say good title has been made out. I cannot foist upon the purchaser this title which does have some doubt about it. Therefore it seems to me that I have to grant the relief sought by the Plaintiff.