XCHRX NG LUNG SANG ANITA v. LAM YUK LAN

1997 No. A14345

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

____________

____________

_______________

J U D G M E N T

_______________

Introduction

1. This is an application for summary judgment under Ord. 86. The property to which the application relates is a flat in Mei Foo Sun Chuen. By an agreement dated 29th September 1997, the Plaintiff, Ng Lung Sang Anita ("the purchaser"), agreed to purchase the flat from the Defendant, Lam Yuk Lan ("the vendor"), for the sum of $4,380,000.00. The sale was to be completed by 23rd December 1997. The agreement contained the usual provision requiring the vendor to "give and prove a good title" to the flat at her own expense in accordance with section 13 of the Conveyancing and Property Ordinance (Cap. 219). The purchaser's case is that a requisition which her solicitors raised was not satisfactorily answered, and that the vendor had therefore failed to prove a good title to the flat.

Preliminary points

2. Two preliminary points arise. First, Ord. 86 r. 2(2) provides that a summons under Ord. 86 must set out or have attached to it "minutes of the judgment sought by the plaintiff". In other words, a draft of the order sought must be prepared. The purchaser's solicitors did not do that. The summons simply identified the relief which was sought. However, that relief was drafted with sufficient clarity to enable the vendor and the court to know the terms of the judgment which the purchaser would be asking for. Although, therefore, Ord. 86 r. 2(2) has not been complied with, Ord. 2 r. 1(1) has the effect of preventing the non-compliance nullifying these proceedings.

3. Secondly, the purchaser wishes to rely on an affirmation in reply served on the vendor's solicitors late on 5th January, and filed in court only on 6th January - despite an interlocutory order that the purchaser's affirmation in reply be filed within 14 days of the filing of a further affirmation by the vendor. Since the further affirmation by the vendor was filed on 9th September 1998, the purchaser's affirmation in reply should have been filed by 23rd September 1998. I was reluctant to prevent the purchaser from relying on the 2nd affirmation, and I asked Mr. Alfred Liang for the vendor whether the vendor wished to apply for an adjournment to consider the affirmation and if necessary to reply to it. After taking instructions, Mr. Liang decided not to apply for an adjournment. He expressly accepted that I should proceed on the basis of the evidence as it now is, and that I need not take account of the vendor's inability to reply to it (which could have been met by the adjournment which he did not press for).

The requisition

4. The relevant requisition was raised by the purchaser's solicitors by a letter dated 16th December 1997. The letter referred to a visit which an architect engaged by the purchaser had made to the flat three days earlier on 13th December. It enclosed a copy of a letter from the architect dated 15th December, which read as follows:

"... the following building alteration works have been carried out in the premises previously:-

1. two bedrooms have been repartitioned,

2. the original bathrooms (with bathtub) [have] been shifted and a second bathroom (with shower) has been added,

3. the kitchen door has been changed into glass sliding door and an opening has been formed with fixed glass panel on the wall between the living room and kitchen, and

4. the verandah which faces into [the] light well has been enclosed with [an] aluminium window.

A layout plan and a set of photographs to show the aforesaid alteration are herewith attached.

I am of the opinion that the window of the bathroom which opens into an enclosed verandah contravenes Building Regulation 36 [in] that the aggregate superficial area of glass is less than one-tenth of the floor area and is not opened directly into the open air as required, hence such alteration work would not be regarded as exempted work under Building Ordinance Cap. 123 Section 41(3)."

Having referred to that letter, the purchaser's solicitors' letter went on:

"You can see from [the architect's letter] that there are a number of alteration works within the property. The authorised person [i.e. the architect] is of the opinion that alteration of the bathroom is not regarded as exempted works under Section 41(3) of the Building Ordinance Cap. 123. Hence, a formal application before its alteration and a formal approval after its completion are required. Without them, the bathroom constitutes an illegal structure and hence a defect in title.

We would be grateful if you could let us have the relevant approval from the Building Authority as soon as possible. Unless you can prove the bathroom to be a legal structure, your client will not be able to show a good title to the property."

5. The vendor says that she had never carried out any of the alterations to the flat, though when her solicitors replied to this letter on 17th December, they did not say that. They did not answer the requisition either. Instead, they referred to cl. 5 of the sale and purchase agreement, which provided, inter alia:

"Any requisitions or objections in respect of the title or otherwise arising out of this Agreement shall be delivered in writing to the vendor's solicitors within 7 working days after the receipt of the title deeds by the Purchaser's Solicitors ... otherwise the same shall be considered as waived (in which respect time shall be of the essence of the agreement) and the purchaser shall be deemed to have accepted the vendor's title."

Since the title deeds had been delivered to the purchaser's solicitors on 13th October 1997, the time for the raising of requisitions had expired a long time previously. In any event, it was said to be totally unreasonable for the requisition to have been raised so soon before the date fixed for completion.

6. Two days later on 19th December, the vendor's solicitors again wrote to the purchaser's solicitors. Without prejudice to their contention that that requisition did not have to be answered, they informed the purchaser's solicitors that the vendor

"has obtained an opinion from an authorised person who advised that no unauthorised structure/alteration exists in the bathroom as alleged in your letter dated 16th December 1997 and a written report/certificate is being prepared on the subject matter and would be available very shortly."

No such report or certificate was delivered to the purchaser's solicitors by 23rd December.

The meaning of the requisition

7. A vendor is not required to answer a requisition unless it has been formulated with reasonable precision, avoiding confusion and obscurity: see Chan Chik Sum v. Great Pearl Industries Ltd. [1997] 1 HKC 27. The requisition in the present case is said to be unclear because it did not identify with precision which alterations involving the bathroom rendered the bathroom an illegal structure, unless approval from the Building Authority had been obtained.

8. There are two sets of alterations relating to the bathroom to which the architect's letter referred. First, there was the change in the position of the original bathroom and the addition of a second bathroom. Secondly, there was the construction of the aluminium window which had the effect of enclosing the verandah. The architect's view was that that had a knock-on effect on the bathroom, because the window of the second bathroom which opened onto the verandah no longer opened directly into the open air as required by reg. 36(2)(b) of the Building (Planning) Regulations. By referring to the fact that the alteration work involved in the construction of the aluminium window would not be regarded as exempted work under section 41(3) of the Building Ordinance, the architect was saying that the construction of the aluminium window had required the approval of the Building Authority.

9. I turn to the purchaser's solicitors' letter of 16th December, which actually contained the requisition. The letter shows that the purchaser's solicitors had misunderstood what the architect was saying. They thought that he was saying that it was the alterations to the bathroom for which the approval of the Building Authority had been required, whereas the alteration which the architect was saying had required the approval of the Building Authority was the construction of the aluminium window. The architect had not suggested that the alterations to the bathroom had required the approval of the Building Authority.

10. In these circumstances, it is in my view arguable that the requisition was sufficiently confusing to justify the vendor's solicitors' refusal to answer it. It is true that the requisition plainly asked whether approval had been obtained from the Building Authority for the alterations to the bathroom. But since the requisition could be seen to be based on a false premise - namely that the architect had advised that it was the alterations to the bathroom which required the approval of the Building Authority, when he had advised no such thing - it is arguable that the recipient of such a requisition would have been confused by it. The recipient could have thought that what was being asked was whether approval had been obtained from the Building Authority for the construction of the aluminium window. I appreciate that the vendor's solicitors never said that they were confused by it. Indeed, their letter of 19th December shows that they thought that they understood the requisition. But the fact is that they may well have thought that the requisition related to the construction of the aluminium window, because a surveyor's report which the vendor's solicitors subsequently commissioned dealt at length with whether the construction of the aluminium window had required the approval of the Building Authority.

The need for the requisition

11. A vendor is not required to answer a requisition which is unnecessary, i.e. a requisition which does not relate to any potential defect in the vendor's title. The requisition in the present case is said to have been unnecessary because there was no question of approval from the Building Authority for the alterations to the bathroom being required. Such approval would only have been required if the alterations to the bathroom constituted structural work. The purchaser's architect did not at the time suggest that they did. Since then, the surveyors instructed by the vendor's solicitors have asserted that the alterations to the bathroom did not constitute structural work, and the purchaser's architect (who has prepared a further report for these proceedings) does not disagree with that. Accordingly, the only alteration which the purchaser's architect suggested required approval from the Building Authority related to the construction of the aluminium window, and the requisition did not relate to that. In my view, this argument is at the very least a strongly arguable one.

12. I should add that even if the requisition had related to the construction of the aluminium window, and had sought confirmation that approval for its construction had been obtained from the Building Authority, it is arguable that that requisition would have been unnecessary as well. I say that because it is strongly arguable that the architect's construction of section 41(3) was incorrect. The approval of the Building Authority was only required if the works were of a structural nature. If they were not, the Building Authority's approval was not required. It may be that the construction of the aluminium window amounted to a breach of reg. 36(2)(b), but that meant that the Building Authority could take enforcement action, not because approval for its construction had not been obtained, but because a breach of the Regulations had occurred. In these circumstances, if the requisition had related to the construction of the aluminium window, the requisition should not have sought confirmation that its construction had been approved by the Building Authority. Instead, it should have sought such information as the vendor's solicitors had which related to the risk of enforcement action being taken. On that question, the evidence is such that there is a triable issue as to whether enforcement action was likely to be taken.

The timing of the requisition

13. The timing of the requisition was hotly debated before me. In view of the conclusions I have reached on the meaning of, and the need for, the requisition, it is unnecessary for me to reach any conclusions as to whether the vendor's arguments on the timing of the requisition raised a triable issue. But since I have reached clear conclusions on the arguments, I ought to express my view on them - in case a different view is taken on any appeal about the meaning of, and the need for, the requisition - without in any way tying the hands of the trial judge.

14. A requisition which goes to the root of the vendor's title will not be excluded by a condition limiting the time for raising the requisition. Thus, requisitions which go to the root of the vendor's title may be raised even after the contractual time for doing so has expired: see Giant River Ltd. v. Asia Marketing Ltd. [1990] 1 HKLR 297 at pp.310F-311D. However, that will not apply where the potential defect in the vendor's title could have been discovered with due diligence: see Hillier Development Ltd. v. Tread Eagle Ltd. [1993] 1 HKC 285 at pp.292G-293I.

15. Mr. Liang contended that the potential defect in the vendor's title which the architect's inspection had brought to light could have come to light much earlier if due diligence had been exercised on the part of the purchaser. This argument has two planks to it, and I must deal with each in turn.

(i) The title deeds. Mr. Liang contended that a perusal of the title deeds which were delivered to the purchaser's solicitors on 13th October would have made the purchaser aware of the alterations which had been made to the flat. The document relied on is the assignment plan (p.117 of the court bundle). That plan included a plan of the flat before the alterations. I cannot go along with this argument. The fact that alterations had been made could only have been apparent to the purchaser or her solicitors if they had seen the plan and inspected the flat. Otherwise, they could not have noticed the differences which the plan is said to reveal. Although the purchaser saw the flat on 8th September 1997, it is not suggested that she (as opposed to her solicitors) ever saw the plan. And although her solicitors would have seen the plan, it is not suggested that they ever saw the flat. In any event, the plan is on such a small scale that that part of the plan which related to the flat itself is very small. Unless someone was specifically looking for it, I do not think that anyone familiar with the current layout of the flat would have noticed any difference between it and the plan.

(ii) The architect's visit. Even if the potential defect in the vendor's title was not apparent from the title deeds, the alterations to the flat which gave rise to the concern about the vendor's title were apparent to the architect when he inspected the flat on 13th December. Mr. Liang contended that the architect should have inspected the flat much earlier than he did.

16. But could the architect have inspected the flat before 13th December? The purchaser says that she made a number of requests through the estate agent who had introduced the flat to her for permission to inspect the flat. For her part, the vendor admits that after the purchaser had agreed to buy the flat, the estate agent had asked her on three occasions to let him show the flat to someone. She does not assert that she did not realise that those requests came from the purchaser. I therefore take it that she realised that the requests came from the purchaser. Who else, after all, would the estate agent have been asking for access to the flat for at that stage - bearing in mind that the purchaser had by then agreed to purchase the flat? The vendor also admits that she told the estate agent that she would allow the purchaser entry into the flat on 9th December. She does not assert that she gave permission to the purchaser to come to the flat before then. Accordingly, on the vendor's own case, the earliest that she let the purchaser visit the flat after the sale and purchase agreement had been executed was 9th December. That is consistent with cl. 30 of the agreement (which required the vendor to allow the purchaser to inspect the flat once prior to completion by prior agreement), and cl. 37(1) of the agreement (which required the vendor to allow the purchaser to enter the flat from 9th December for the sole purpose of decorating and renovating the flat).

17. Mr. Liang said that the vendor did not appreciate that the requests for access to the flat were made so as to enable the architect to inspect the flat. He claimed that had the vendor realised that, she would have permitted the architect to have access to the flat because cl. 30 of the agreement required her to allow the intended mortgagee to inspect the flat once prior to completion. However, there is no evidential basis for that claim. First, that is not what the vendor asserted in her evidence. Secondly, it is not suggested that the architect was surveying the flat for the intended mortgagee.

18. I appreciate that it is common ground that the purchaser visited the flat with a friend on 8th September 1997 (and that her inspection of the flat was acknowledged in cl. 15 of the agreement). But the question is when the purchaser first had an opportunity to have the flat inspected by someone capable of determining whether there had been alterations to it. As I have said, that was on 9th December. I appreciate that the vendor may have been within her rights in denying the purchaser access before then, but the fact remains that access was denied until 9th December. In these circumstances, it would not have been possible for the vendor to argue successfully that, provided that the requisition went to the root of the vendor's title, it was not reasonable for the requisition to be raised for the first time on 16th December. The vendor had only herself to blame by standing on her rights and not permitting the purchaser access to the flat before 9th December.

Conclusion

19. However, for the reasons I have given, there are triable issues relating to the meaning of, and the need for, the requisition to justify granting the vendor leave to defend the action. Accordingly, the order which I make on the summons is that the vendor be given unconditional leave to defend the action, and I give the parties liberty to apply for directions for the further conduct of the action. I do not at present think that this is a case to which Ord. 86 r. 6 applies, and the order nisi which I make as to costs is that the costs of and occasioned by the purchaser's summons be in the cause.