LAM CHUNG YAN v. WU YUK YING AND ANOTHER

HCMP1011/2005

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 1011 OF 2005

J U D G M E N T

Introduction

1.  This is a vendor and purchaser summons taken out by the purchaser.  The defendants are the owners of a flat in Dundas Street, Mong Kok.  By the originating summons the plaintiff asked for a declaration that the defendants have failed to answer the requisitions and objections to the title of the flat as contained in a letter issued by the plaintiff’s solicitors on 15 April 2005 in sufficient time before the date of completion.  Alternatively, the plaintiff sought a declaration that Requisitions Nos. 2, 5, 6, 8 and 9 as contained in the said letter had not been sufficiently answered by the defendants by the date of completion.

2.  Pursuant to either declaration, the summons further asked for a declaration that the agreement had been determined on 29 April 2004 and an order that the defendants do refund the deposit of $122,800 and pay the plaintiff’s costs for investigating the title of the flat and the costs of these proceedings.

3.  The sale and purchase agreement was made on 23 March 2005.  Clause 20(a) on giving of good title reads:

“20(a) The Vendor shall show and give a good title to the Property and shall prove his title to the Property at his own expenses and he shall at the like expense make and furnish with the Purchaser such certified copies of any deeds or documents of title Wills and matters of public record as may be necessary to complete such title in accordance with Section 13 of the Conveyancing and Property Ordinance (Cap. 219).  …”

4.  Requisition on title is governed by clause 12(a).

“12(a)  In the event where the Purchaser is separately represented, any requisition or objection on title shall be delivered to the Vendor’s solicitors within seven working days after the date of receipt of the title deeds by the solicitors of the Purchaser and any further objection or requisition arising upon any reply to a former requisition shall be so delivered within seven (7) working days after the date of the receipt of such reply by the Purchaser’s Solicitors otherwise the same shall be considered as waived.”

5.   Completion was to take place on 29 April 2005 and clause 4 provided that time should in every respect be of essence. 

The requisitions

6.  The title deeds were delivered to the plaintiff’s solicitors on 8 April 2005 and they raised a number of requisitions by a letter of 15 April 2005.  The relevant requisitions relate to four issues.  The plaintiff’s solicitors regarded the most fundamental one being the lack of reference to the balcony of the flat in several assignments leading up to the one by which the defendants obtained title.

7.  It is useful to refer to the operative words and the parcels and the first assignment of this flat which is registered in the Land Registry by Memorial No. 503552.  They read: 

“NOW THIS INDENTURE WITNESSETH that in pursuance of the said agreement and in consideration of DOLLARS TWENTY NINE THOUSAND --- to the vendor now paid by the purchaser (the receipt whereof the Vendor doth hereby acknowledge) the Vendor HEREBY ASSIGNS unto the purchaser FIRSTLY ALL THAT one equal undivided 132nd part or share of and in ALL THOSE pieces or parcels of ground situated at Kowloon aforesaid and registered in the Land Office respectively as THE REMAINING PORTION OF KOWLOON INLAND LOT NO. 1520 and THE REMAINING PORTION OF SECTION A OF KOWLOON INLAND LOT NO. 1424 AND of and in the messuages erections and buildings thereon known at the date hereof as TSUI YUEN MANSION, BLOCK II (翠園大厦二座) (hereinafter referred to as “the said Building”) TOGETHER with  all rights of way as are now existing and all other rights and all privileges easements and appurtenances thereto respectively belonging or appertaining or therewith at any time used held occupied or enjoyed AND all the estate right title interest property claim and demand whatsoever of the Vendor therein and thereto EXCEPT AND RESERVED as in the said two several Crown Leases are accepted and reserved AND in further pursuance of the said Agreement and for the consideration aforesaid the Vendor HEREBY ASSIGNS unto the Purchaser SECONDLY ALL THAT the full right and privilege to hold use occupy and enjoy to the exclusion of the other co-owners of the said Remaining Portion of Kowloon Inland Lot No. 1520 and the said Remaining Portion of Section A of  Kowloon Land Inland Lot No. 1424 ALL THAT the whole of the FLAT No. “8” on the Seventh Floor of the said Building as is shown on the No. 3 Plan hereto annexed and thereon coloured Pink and Numbered “8” AND ALSO the balcony appertaining thereto erected over Crown Land under Permit from the Crown as is shown on the said No. 3 Plan and thereon coloured hatched Red (hereinafter collectively referred to as “the said Premises”).”

8.  The same parcels appear in subsequent assignments up to the one dated 29 December 1981 and registered by Memorial No. 2216166.  There is no dispute that the reference to the balcony which was “shown on the said No. 3 Plan and thereon coloured hatched Red” was not repeated in a mortgage executed also on 29 December 1981 and henceforth in the reassignment and all subsequent assignments including the one by which the defendants obtained title.  This issue was raised in requisitions nos. 5(b)(i), 6 and 8.  They are:

“5.	Assignment Memorial Number UB5289938.
(b)	As shown on the first Assignment Memorial No. UB503552, the above property should include a balcony appertaining thereto erected over Government land under permit from the Government as is shown on the No. 3 Plan annexed to such Assignment and thereon coloured hatched Red (please see page 3 of the said first Assignment).  However, the property being dealt with in the said Assignment Memorial No. UB5289938 was “ALL THAT FLAT NO. “8” on the SEVENTH FLOOR of TSUI YUEN MANSION, BLOCK II as shown on the No. 3 plan annexed to an Assignment registered in the Lands Office by Memorial No. 503552 …… and thereon coloured Pink and number “8””.  The balcony coloured hatched Red was omitted.  In fact, we managed to find out that such omission first appeared in Assignment Memorial No. UB5289938.  As such, title to the balcony coloured hatched Red has remained with the Vendor under Assignment Memorial No. UB5289938 (viz, Shum Koon Sang, Sham Yat Hung and Hui Chun Lin).
(i)	We require a confirmatory assignment of the balcony coloured hatched Red from the said Shum Koon Sang, Sham Yat Hung and Hui Chun Lin in favour of your client.”

9.  Requisitions 6 and 8 were on the same issue but related to the later assignments.

10.  The other three issues are in Requisitions Nos. 5(b)(ii), 2 and 9.  They read:

“5.	Assignment Memorial Number UB5289938.
(b)	(ii)   Please also let us have a certified copy of the permit under which the balcony was allowed to be erected over Government land.
2:	Reassignment Memorial Number UB2582641.
The reassignor, Hang Seng Finance Limited, affixed its Common Seal onto the said Reassignment and executed the same by two persons without mentioning their capacity.  Please let us have a certified copy of the relevant Board Resolution of Hang Seng Finance Limited and its Articles of Association to prove due execution.
9.	Internal alterations.
We are instructed that the kitchen and the toilet of the property have been substantially altered.  Please produce evidence to prove that such alterations are non-structural and did not contravene Clause 8 of the Deed of Mutual Covenant Memorial No. UB487573.  Copy extract of the said Deed of Mutual Covenant is enclosed for your reference.”

11.  The defendants’ former solicitors replied to the requisitions on 26 April 2005.  The answers on Requisition 5(b)(i) 6, 8, 5(b)(ii) 2 and 9 are as follows.

“	5.	Please refer to the Agreement for sale and purchase signed by our respective clients that our client only sell the Flat No. 8 on the Seventh Floor of Tsui Yuen Mansion, Block II, and no mentioned any balcony to yours.  Your request is not necessary.
	6.	Reply same with above 5.
	8.	Reply same with above 5.
	2.	Please refer to section 23A of CPO.
	9.	Your client has fully aware of the existing basis before signing the formal Agreement for sale and purchase.”

Delayed answers resulting in repudiation?

12.  The plaintiff’s solicitors responded on the 27 Aprilby saying that the answers which came at about 5:30 p.m. on 26 April was too late and the lateness deprived them of the 7 working days to raise further requisitions.  They thus took the delay as the defendants’ repudiation and they, on behalf of the plaintiff, accepted the repudiation and put an end to the agreement.  I note that prior to receiving the answers, the plaintiff’s solicitors had not made any request or demand for early answers. 

13.  Furthermore, after accepting the purported repudiation, they then commented on the defendant’s answers, though on a without prejudice basis.  They said they did not accept all the answers to the requisitions.  They in particular referred to the answer to Requisitions 5, 6 and 8.  They said that the flat as sold by the defendants and purchased by the plaintiff included the balcony and they never doubt that the balcony did not form part of the flat.  However, they said that there was a title defect as stated in Requisition 5(b).  They then said that the answer given by the defendants was inadequate and the defendants had, therefore, failed to show a good title.  Hence, the plaintiff also terminated the agreement on this further basis.

14.  From this reply, it is obvious that regardless of the sufficiency of the answers to the requisitions, the plaintiff’s solicitors had enough time to consider these answers and also responded to them. 

15.  The plaintiff relies on Tang Wing Lam David and Another v Chung Chi Keung [1999] 3 HKC 553 and argued that the lateness in the provision of answers to the requisitions alone amounted to a repudiation which had been accepted by the plaintiff.

16.  The facts in David Tang were different.  The vendor there, on the day before completion, supplied a layout plan and a copy of a power of attorney to the purchaser.  The purchaser asked for seven days to consider these documents.  The vendor rejected the request and insisted on completion on the scheduled date.  It was held that the vendor had not answered the requisitions in time and to allow a reasonable time for the plaintiff to consider the answers before completion.

17.  The present case is very much different from David Tang.  Though the replies came quite late, the plaintiff’s solicitors never complained that there was not enough time for them to consider and deal with the answers.  Their response to the answers in their letter of 27 April was, as admitted by her counsel, a well thought out one.  They had no difficulty in dealing with the answers in a proper manner.  The plaintiff had also not served the defendant with any reminder for early answers.  In these circumstances, I do not think the plaintiff can argue that the lateness of the answers alone can amount to repudiation by the defendants.

Answers to requisitions

18.  The defendants’ former solicitors replied also on 27 April, but the letter only reached the plaintiff’s solicitors on 28 April.  Their further answer to Requisition Nos. 5, 6 and 8 is as follows:

“In respect of your requisitions, No. 5, 6 and 8, we would like to set out our comments as in the following: -
5(b)	We take the view that there is no doubt that the subject balcony is part and parcel of the captioned property.  As such, the Assignment does not require any rectification.  Your attention is also drawn to the fact that: -
(i)	the land search record also described the captioned property as “Flat 8, 7th Floor, Tsui Yuen Mansion, Block II, Nos. 83-87, Dundas Street, and Nos. 2-20 Kwong Wa Street, Kowloon” and no reference was made to the balcony; and
(ii)	the description in the Schedule in the Assignments, easements and other appurtenant rights the benefit of which is assigned with the Property.
We trust all your requisitions should have been satisfactorily answered and let us have your draft Assignment and undertaking letter for our approval as soon as possible.”

19.  The plaintiff’s solicitors replied on 28 April, which was without prejudice to their stance that they had already terminated the Agreement.  They said:

“2.	Without accepting your client’s purported answers to our requisitions, regarding what you have stated in Item 5(b): -
(i)	As mentioned in the second paragraph of page two of our letter dated 27th April 2005, we were not saying that the balcony does not form part of the Property.  We were not taking issue on the general description of the Property as “Flat 8 on 7th Floor, Tsui Yuen Mansion, Block II, Nos. 83-87 Dundas Street and Nos. 2-20 Kwong Wah Street, Kowloon”.  However, when the property was particularized in the first Assignment, and delineated in the floor plan annexed thereto as comprising two parts - one, coloured pink erected on the lot and the other coloured hatched red appertaining thereto erected over Government land, but only the part coloured pink was dealt with in Assignment Memorial No. UB5289938 (and subsequent assignments), a title defect arose.  Apart from that, we were also asking for a certified copy of the permit under which the balcony was allowed to be erected over Government land.
	In the circumstances, we reiterate that the agreement has come to an end by reason of your client’s wrongful repudiation and failure to show good title,”

20.  The defendants’ former solicitors, by a letter of the same date, disputed that view.  This letter again only reached the plaintiff’s solicitors on the following day which was the completion date of 29 April.  They said:

“Further, we would like to emphasise our reply as stated in 5(b) as follows: -
(i)	We do not share your view as stated in your said letter.  We are opined that the said balcony is part of the appurtenance belonging or appertaining or therewith at the time use hold occupied or enjoyed to the Property, whether or not it was mentioned in the subsequent Assignments, the said balcony is still belonging to the Property.  ….
(ii)	We would like to point out in the Schedule of the Assignments under the heading “Easements and other appurtenant rights, if any” which provide that subject to and with the benefit of all rights of way (if any) and, … and appurtenances belonging to the Property (including the said balcony) and those as are more particularly defined and described in the Assignment Memorial No. 503552.  In view of the above, the said balcony is the same assigned with the Property to the then Purchaser.  Therefore, rectification of the Assignments is not necessary.
	We trust all your requisitions should have been satisfactorily answered and let us have your draft Assignment and undertaking for our approval as soon as possible.”

Title of the balcony

21.  The plaintiff was arguing that the flat was standing on the two lots but the balcony was on government land.  The title of the flat thus did not cover the balcony.  However, the defendants were arguing that the balcony was part of the description of Flat No. 8 on the 7th Floor.  They therefore said that it was sufficient for the parcels to refer to Flat No. 8 on the 7th Floor and it was not necessary to refer to the balcony.  Counsel for the defendants further said that the reference to the balcony in the early assignments was superfluous. 

22.  Such an argument is only correct if the balcony is also within the two lots and the shares of the lots were attributed to the flat including the balcony.  Since the balcony lies outside the lots and overhangs government land and not covered by the shares of the lots as assigned to the flat, this argument is flawed.

23.  Furthermore, the reference to the flat in the parcels is “Flat No. 8 on the 7th Floor of the said building as is shown on the No. 3 Plan and thereon coloured pink and numbered ‘8’”, whilst the reference to the balcony is “the balcony appertaining thereto erected over Crown Land under permit from the Crown as is shown on the said No. 3 Plan and thereon coloured hatched red”.  The descriptions are specifically for different parts which are identified by different colourings.  The description for the flat cannot include the balcony which has a different colouring.  The existence of the balcony stems from the government’s permit for it to be erected over government land.  It does not stem from the Government Lease for the two lots.

24.  Counsel for the defendants further argued that the plaintiff’s requisition on the balcony was not precise enough.  I agree that the terms of the requisition can be improved.  The plaintiff’s solicitors could have stated that the assignment of the shares in the lots and the right to the exclusive occupation of a flat would not include the right to occupy the balcony which lied outside the lots. 

25.  However, I accept the submission of the plaintiff’s counsel that the plaintiff’s solicitors in the correspondence and, in particular, in the letter of 28 April, have made it clear that the flat was standing on the two lots and the balcony was over government land, and they needed a confirmatory assignment to assure the plaintiff that she would be entitled to occupy the balcony.  I accept that this requisition is clear enough to demonstrate the problem created by the omission of the balcony from the parcels of the later assignments.  I agree that on the evidence of title available, it is necessary to have a confirmatory assignment to confirm the defendants’ rights to occupy the balcony. 

26.  On this finding alone the plaintiff has succeeded in these proceedings, but I would also deal with the remaining three requisitions.

Permit for the balcony to overhang Government land

27.  Requisition No. 5(b)(i) sought a copy of the permit for the balcony to overhang government land.  The defendants referred to the Assignment dated 15 September 1965 and registered by Memorial No. 503552 which described the balcony as erected over government land under permit from the government.  The defendants then referred to section 13(4) of the Conveyancing and Property Ordinance.  The section reads:

“(4)

A recital, statement, and description of any fact, matter or party contained in any document of title, mortgage, declaration or power of attorney relating to any land and dated or made not less than 15 years before the contract of sale of that land shall, for the purposes of any question as to proof of title concerning the parties to that contract and unless the contrary is proved, be sufficient evidence of the truth of that recital, statement and description.”

28.  The defendants then argued that the description of a balcony in the said Assignment was sufficient evidence of the truth of the description and thus it was not necessary to produce a copy of the permit.  The defendants further argued that since the building had been erected for more than 40 years and there was no evidence of any enforcement action by the government, the possibility of re-entry by the government was entirely fanciful and unrealistic. 

29.  However, the defendants seem to have misunderstood the purpose of this requisition for a copy of the permit.  This requisition did not seek to dispute the existence of a permit or suggest that the balcony is trespassing onto government land.  It was raised on the basis that there was a permit by the government for the balcony to overhang government land.  It is thus not necessary to refer to section 13(4) of the said Ordinance.  The plaintiff also has not suggested that the balcony is for any reason liable to be demolished at the instance of the government or that there is any risk posed by the balcony which may result in the government re-entering the balcony and/or the flat. 

30.  In seeking a copy of the permit, the plaintiff merely wanted to know the terms and conditions of the permit which the owner of the balcony would have to comply with.  Counsel for the defendants argued that even if the permit is unavailable and the terms cannot be complied with, the worst that can happen is for the permit to be withdrawn.  Since the balcony has been there for 40 years, there is no real risk that the government may take enforcement action even upon the withdrawal of the permit.  I do not agree with this view.  If the permit should require certain action to be taken by the current owner, the current owner cannot default and then argue against enforcement action by saying that the balcony has been there for 40 years.  Without sight of the permit, I think it is dangerous to embark on a wild guess on what are the terms and conditions and what can happen upon default.  Since the permit was never produced, the defendants have also failed to answer this requisition in a satisfactory manner.

31.  I also want to add that counsel for the defendants has informed me that it was her instruction that the permit might simply be a chop embossed on the approved building plans and not a separate document.  However, that is only her instructions and there is no evidence as to the form and nature of the permit.  I will say no more about it.

The execution of reassignment registered by Memorial UB2582641 and internal alterations.

32.  Requisition No. 2 sought the capacities of the two persons who executed this reassignment on 7 May 1984.  The defendants answered this by referring to section 23A of the Conveyancing and Property Ordinance which provides:

“(1)	A deed purporting to be-
	(a)	executed prior to the commencement* of section 9 of the Law Amendment and Reform (Miscellaneous Provisions) Ordinance 2003 (14 of 2003) by or on behalf of a corporation aggregate; and
	(b)	attested by a signatory or more than one signatory, where the signatory or each of the signatories, if more than one, is a person who could have been authorized under the articles of association or other instruments of the corporation,
	shall, until the contrary is proved, be presumed for the purposes of proof of title to any land to have been duly executed by the purported signatory or signatories, as the case may be, with the authority conferred by the articles of association or other instruments of the corporation, whether or not the source of the authority or the means by which such authority was purportedly conferred is apparent from the deed.”

33.  However, the defendants did not advise the plaintiff the capacities of the signatories and one does not know if this section would be applicable or not.  This answer is thus insufficient.

Internal alterations

34.  Requisition 9 sought evidence to prove that the internal alterations were non-structural and did not contravene clause 8 of the DMC which prohibited structural alteration.  The defendants’ answer was that the plaintiff was fully aware of the existing basis before signing the formal sale and purchase agreement.  There was not even any suggestion that the plaintiff was aware of the legal consequence that may flow from the execution of unauthorized structural alterations (see Large Land Investment Limited v Cheung Siu Kwai Pansy, CACV 145/2002).  This answer is again insufficient.

35.  The answers to these requisitions are obviously inadequate.  Counsel for the defendants thus argued that the plaintiff had only said in their letters that all the answers to the requisitions were not accepted without specifying which answer was accepted and which was not.  In fact, some of the answers were indeed adequate and were not mentioned thereafter.  Counsel thus submitted that the defendants had been lulled into a false sense of security that, apart from the answers to requisitions Nos. 5, 6 and 8, all the other answers had been accepted.  I regret that I cannot accept this view.

36.  The plaintiff’s solicitors had, on 27 April and 28 April, advised the defendants’ solicitors that all the answers were not accepted.  Their position was thus clear.  It would have been better for them to set forth their position on each and every answer, but they only received the answers at about 5.30 pm on 26 April and completion was to take place on 29 April.  I think the plaintiff’s solicitors should be excused in not giving a more detailed answer when they had to work within this tight time-frame as created by the defendants.  I therefore hold that the defendants had not been lulled into a false sense of security and they were aware that their answers to Requisitions 2 and 9 had also been rejected.

37.  I therefore declare that the requisitions and objections numbered 2, 5, 6, 8 and 9 in respect of the title to the flat as contained in the letter of the plaintiff’s solicitors dated 15 April 2005 have not been sufficiently answered by the defendants by the date of completion and good title to the flat has not been shown in accordance with the said agreement for sale and purchase.  I further declare that the plaintiff was entitled to and did determine the said agreement by the letter of 29 April 2005 from the plaintiff’s solicitors to the defendants’ former solicitors.

38.  I therefore order the defendants to pay the plaintiff the sum of $122,800, being the amount of the deposit, together with interest at the judgment rate from 17 May 2005.  I further order the defendants to pay the plaintiff the costs of investigating the title of the flat.  I also make an order nisi that the defendants do pay the plaintiff the costs of these proceedings.