GOLD GLORY INTERNETIONAL (HK) LTD v. K.W. WONG INVESTMENT COMPANY LTD

HCMP 1618/2012

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO 1618 OF 2012

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J U D G M E N T

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1. This is a vendor and purchaser’s summons taken out by the plaintiff (as purchaser) against the defendant (as vendor) for a declaration that the defendant has failed to answer satisfactorily and sufficiently the requisitions and objections raised by the plaintiff’s solicitors, that the defendant has failed to show or prove a good title to the property in question and that the defendant has wrongfully repudiated the Sale and Purchase Agreement dated 27 March 2012 which repudiation has been accepted by the plaintiff. The plaintiff also claims for return of the deposits paid and other related reliefs.

2. The requisitions in issue are requisitions 2, 3, 5 and 6.

Introduction and Background

3. By a Provisional Agreement dated 13 March 2012, the defendant agreed to sell and the plaintiff agreed to purchase the entire building standing on the Remaining Portion of Inland Lot No. 5463 known as No. 47 Sharp Street East (“the Property”) at the price of HK$135,000,000.00. An initial deposit of $6,750,000.00 was paid by the plaintiff upon the signing of the Provisional Agreement.

4. The parties entered into a formal Agreement for Sale and Purchase on 27 March 2012 (“the Agreement”) with completion to be carried out on or before 5.00 p.m. on 28 June 2012. A further sum of $6,750,000 was paid by the plaintiff as further deposit upon the signing of the Formal Agreement.

5. Messrs. Lo Wong & Tsui (“LWT”) acted for the plaintiff and Messrs. Foo and Li (“FL”) acted for the defendant.

6. On 2^nd April 2012 the title deeds and documents in respect of the Property were sent by FL to LWT.

7. Requisitions (and objections) were first raised by LWT by letter on 10 April 2012. Thereafter numerous letters were exchanged between LWT and FL relating to the requisitions and objections.

8. The dispute between the parties raised by such requisitions and objections could not be resolved between them by the time of completion and completion of the sale and purchase did not take place. This resulted in each party blaming the other for the failure to complete. The defendant forfeited the deposits. The plaintiff on the other hand accused the defendant of repudiation of the Agreement which repudiation the plaintiff accepted.

9. The Originating Summon was taken out by the plaintiff on 2^nd August 2012.

10. The four outstanding requisitions, the subject matter of dispute between the parties in this application, are as follows:

(a)  Requisition 2 concerns breach of user as stipulated in the Occupation Permit;

(b)  Requisition 3 concerns title in relation to the balconies of the Property which protrude onto Sharp Street East, being unleased Government land;

(c)  Requisition 5 concerns LWT’s request for the production of the originals of Form CR109 in respect of the 2^nd, 3^rd, 4^th and 5^th floors of the Property and the request for rectification by the defendant of a mistake concerning the term of the tenancy in CR109 in respect of the 2^nd floor of the Property;

(d)  Requisition 6 concerns LWT’s request for production of an Assignment registered in the Land Registry by Memorial No. UB383356 (“the Assignment”) which relates exclusively to the Property.

The issue and dispute in respect of each requisition

11. I shall deal with the dispute between the parties in respect of each requisition in turn.

Requisition 2

12. The Property is a 6-storey building (“the Building”).

13. The Occupation Permit relating to the Property expressly provides that apart from the Ground floor which can be used as shops for non-domestic purposes, the 1^st to 5^th floors are for domestic use only.

14. Under the relevant tenancy agreement dated 27 March 2010, the 1^st floor has been let from 27 March 2010 to 15 April 2012 expressly for business purpose. Moreover, the tenancy agreement prohibits the 1^st floor from being used for domestic purpose at all.

15. The plaintiff’s case was that there had been a clear breach of the permitted user of the Occupation Permit in so far as the 1^st floor is concerned.

16. The plaintiff also complained that notwithstanding the expiry of the tenancy in relation to the 1^st floor, the defendant had allowed the tenant thereof to stay on the said premises up to and after the time for the scheduled completion on 28 June 2012.

17. To the extent that the defendant sought to rely on clause 16 of the Agreement, the plaintiff submitted that clause 16 could not assist the defendant since clause 16 related to unauthorized building works and not unauthorized change of user.

18. On the other hand, it was contended by the defendant that as early as when the Provisional Agreement was entered into, the plaintiff had been provided with a copy of the tenancy in relation to the 1^st floor, therefore knew not only the user of the 1^st floor by the tenant but also that the tenancy would expire on 15^th April 2012.

19. Moreover, the defendant submitted that the combined effect of clause 13.1 (d) and (i) of the Formal Agreement was such that upon the termination of any of the tenancy in the Property, the defendant was obliged to act as directed by the plaintiff and the tenancy of the 1^st floor thereof could not be renewed without first obtaining the consent of the plaintiff.

20. It was also contended by the defendant that this requisition was first raised by the plaintiff after the tenancy of the 1^st floor had expired on 15 April 2012. Moreover, when the defendant sought the instructions of the plaintiff as to whether there should be any renewal of same, the plaintiff failed to respond.

21. It was therefore submitted by the defendant that the plaintiff had full knowledge and complete control over the tenancy of the 1^st floor and had been given the election by the defendant as to what it wanted to be done with the 1^st floor tenancy, whether to renew the same of otherwise. The failure of the plaintiff to respond to the instructions sought by the defendant prevented the defendant from purging the breach of user before completion.

22. Accordingly, the defendant submitted that this requisition was not raised bona fide and in any event the defendant had sufficiently answered same.

Requisition 3

23. The Approved Building Plan dated 10 January 1961 relating to the Building showed that the Building should contain a balcony on each floor from the first floor to the fifth floor and that these 5 balconies were built over Government land on Sharp Street East.

24. Photographs produced by the plaintiff of the Building showed that there were in fact no balconies due to the fact that all the balconies have been completely enclosed so as to become the integral parts of the flats to which they belonged and all that can be seen from the front section of the Building are only continuous exterior wall with windows as opposed to balconies.

25. This requisition therefore concerned such enclosed front portions of the Property from the first floor to the fifth floor (originally meant to be balconies) which protruded into and encroached upon the air space over Sharp Street East, being unleased Government land (“the Encroaching Portions”). It was not disputed that such parts do encroach and protrude upon the air space over Sharp Street East.

26. In purported answer to Requisition 3, the defendant had produced a certified copy of a Balconies Undertaking dated 18 October 1941 (“the Undertaking”) which was issued in accordance with Schedule E of the then Buildings Ordinance by the Governor on 18 October 1941 with regard to and granting permission for balconies to be erected on or over unleased Crown land adjoining and fronting Sharp Street East on Inland Lot No. 5463.

27. The plaintiff therefore takes two points in so far as Requisition 3 goes. Firstly, the plaintiff submitted that even if the Undertaking was applicable to the construction of the Building, it was no more than a permission to erect the balconies over unleased Government land but gave no title over such unleased Government land. The effect of clause 1.1 of the Agreement is such that the defendant agreed to sell a legal estate and to deduce title in accordance with clause 7 of the Agreement and section 13 of the Conveyancing and Property Ordinance Cap 219. Accordingly, the defendant has failed to produce a Government lease covering the Encroaching Portions in accordance with the Agreement. Nor can the defendant be in a position to convey a legal estate of the Property including the Encroaching Portions to the plaintiff. In the premises, the defendant simply has no title to the Encroaching Portions which protrudes over unleased Government land.

28. The second point taken by the plaintiff is that clauses 1, 2 and 7 of the Undertaking made provisions for the owners not to deviate from the plans and drawings deposited with the Building Authorities, to keep the balconies in good order, not to use any portions of the balconies for the display of advertisements and to comply with all regulations in force relating to the verandahs and balconies.

29. The defendant was therefore in breach of the above clauses of the Undertaking in that the balconies have been enclosed and turned into a continuous exterior wall, also the photographs show the Encroaching Portions to have been used for display of advertisements. In view of such breaches, the Undertaking is liable to be revoked by the Government, and thus being potentially defeasible, cannot be forced upon the plaintiff. Moreover, the Undertaking relied upon by the plaintiff cannot provide an answer to Requisition 3.

30. The plaintiff therefore says that Requisition 3 has not been sufficiently or satisfactorily answered and the defendant has failed to show a good title to the Property.

31. On the other hand, it was contended by the defendant that in so far as the question of title goes, the subject matter of the sale and purchase under the Agreement was Lot 5463 RP, and included no part of the ‘unleased Government land’ over which the Encroaching Portion protruded.

32. It was also submitted by the defendant that as the Undertaking which related to Lot 5463 was registered with the Land Office as an instrument affecting land, the terms of the Undertaking made it unambiguously clear that permission was given by the Government allowing for the Encroaching Portion to be erected into the air space over Sharp Street East.

33. Lot 5463 was later divided into Lot 5463RP and Lot 5463A and Lot 5463A was surrendered back to the Government in 1962.

34. It was therefore submitted by the defendant that since the defendant having supplied the Undertaking which itself is evidence of the licence having been granted by the Government for the erection of the Encroaching Portion over Sharp Street East, there was no unlawful encroachment over unleased Government land and Requisiton 3 would have been satisfactorily answered.

35. It was also submitted that the Encroaching Portion projecting out over unleased Government land and which formed part and parcel of the building erected on Lot 5463RP was and still is owned by the defendant thus there can be no risk of Government enforcing its rights against the owner of the building or the premises due to such encroachment by reason of the Undertaking.

36. There can therefore be no question as to title in respect of the Encroaching Portion.

37. In so far as the plaintiff’s complain regarding the breaches of the Undertaking by the complete enclosure of all the balconies from the first to the fifth floors, the defendant relied on clause 16 of the Agreement to say that the plaintiff is precluded from raising any requisition “in respect of any unauthorized structure additions alterations or illegal structures”. Reliance was also placed on clause 26 of the Agreement.

38. The defendant further relied on the fact that given the existence of the balconies since 1962, when the Building was erected, there could be no risk of enforcement action being taken.

39. The defendant took issue factually with the plaintiff’s contention as to what is contained in the approved design building plan. It was the defendant’s case that factually such plan denoted that there would be walls on both sides of the balconies. Therefore it was wrong for the plaintiff to allege that the balconies were wrongfully enclosed by “concrete walls”.

40. The defendant also did not accept that the front portion of the balconies (glass panels) constituted ‘unauthorized building works’ within the meaning of the Buildings Ordinance. In this respect, the defendant made the point that in two Building Orders issued by the Building Authority to purge unauthorized building works on the top and front portion of the balconies of the 4^th and 5^th floors, no issue has been raised on the glass panels by the Building Authority.

Requisition 5

41. The Property was sold with the benefit of the existing tenancies and the plaintiff requested the defendant to produce the originals of Form CR109 in respect of the 2^nd, 3^rd 4^th and 5^th floors of the Property as well as for rectification by the defendant of a mistake concerning the term of the tenancy in the CR109 relating to the 2^nd floor.

42. The basis of the plaintiff’s request was that without the originals of the Form CR109 duly endorsed, the plaintiff would not be entitled to maintain an action for the recovery of rent under section 119L (2) of the Landlord and Tenant (Consolidation) Ordinance Cap 7.

43. It was only at about 11:04 am on the day set for completion under the Agreement (ie 28 June 2012) that LWT received a letter from FL and enclosing the originals of the Forms CR109 for the 2^nd, 3^rd and 4^th floors, at the same time indicating that as the tenant had already moved out of the 2^nd floor, vacant possession of the 2^nd floor would be delivered.

44. The plaintiff complained that the production of these originals was so late that the defendant ought to have given the plaintiff sufficient time to consider. Instead, the defendant purported to rescind the Agreement at 5:30 pm the same day.

45. The plaintiff therefore says that the defendant had failed to properly and sufficiently answer Requisition 5.

46. On the other hand, it was contended by the defendant that the Forms CR109 are not title documents and therefore not required to be supplied under section 13 and section 1A of the Conveyancing and Property Ordinance to prove title. 

47. The defendant further contended that since copies of the Forms CR109 for the 2^nd to the 4^th floors had been supplied by the defendant the plaintiff can have no complaint for the original of those forms to be provided or produced after completion since the endorsement by the Commissioner for Rating and Valuation on the tenancy can be seen from the copies provided and it is that endorsement which is the statutory requirement for the recovery of rent.

48. It was also contended by the defendant that the clerical error in the Form CR 109 in respect of the 2^nd floor, being the wrong description of the date of commencement and expiry of the term, such clerical error would not render the endorsement invalid. Moreover, since the tenant had already moved out of the 2^nd floor by the time completion took place, there was no necessity to rectify that Form CR 109 since no question of recovery of rent would arise the tenant having left.

49. As for the Form CR109 relating to the 5^th floor, the defendant submitted that the plaintiff had been given the original of the tenancy agreement in relation to the 5^th floor and that the endorsement required under section 119L of the Landlord and Tenant Ordinance could be made “at any time” under sub-section (1A) thereof upon payment of a fee to enable the plaintiff to maintain an action to recover rent.

Requisition 6

50. This concerns LWY’s request for the production of an assignment registered in the Land Registry by Memorial No. UB383356 (“the Assignment”) which relates exclusively to the Property.

51. The defendant contended that the Assignment was a pre-root document.

52. In response to that contention by the defendant, the plaintiff sought to rely upon the judgment of Tang V.P. (as he then was) in the Court of Appeal in De Monsa Investment Ltd. v Whole Win Management Fund Ltd. [2011] 4 HKLRD 478 to the effect that the vendor was obliged to produce original title deeds and documents beyond the intermediate which relate exclusively ot the property sold which should be in his possession or power. It should also be pointed out that at the hearing, plaintiff’s leading counsel had informed this court that the Court of Appeal’s decision in the case of De Monsa Investment Ltd. v Whole Win Management Fund Ltd. was under appeal to the Court of Final Appeal the hearing of which was set for 3^rd June 2013, ie one day before this hearing in our present case. However, the judgment by the Court of Final Appeal may only be given after this hearing before this court.

53. It was therefore contended by the plaintiff that notwithstanding sections 13 and 13A of the Conveyancing and Property Ordinance, the defendant was obliged under the Agreement to produce the Assignment so as to dispel any risk of equitable mortgage by way of deposit of title deeds. By failing to do so or otherwise proving their loss or destruction, the defendant has failed to sufficiently and satisfactorily answer Requisition 6.

54. The defendant on the other hand contended that the Assignment was created on 22 October 1962 and thus falls outside the statutory period of 15 years. By virtue of sections 13 and 13A of the Conveyancing and Property Ordinance the defendant submitted that there was no obligation to deliver the Assignment whether original or copy.

55. However, on 18 June 2012, FL, on a wholly without prejudice basis, expressly stated by letter that its client has possession of the Assignment and agreed to provide the Assignment to the plaintiff  after completion.

56. Notwithstanding that, the plaintiff’s case remained that the defendant has failed satisfactorily or sufficiently to answer Requisition 6.

DECISION

Requisition 2

57. There is no dispute that there was a breach of the permitted user of the Occupation Permit in that the tenancy of the 1^st floor was for business purpose only and in fact prohibited use for domestic purpose.

58. However, that tenancy of the 1^st floor expired on 15 April 2012.

59. A copy of that tenancy in relation to the 1^st floor having been provided to the plaintiff by the defendant when the Provisional Agreement was entered into, the plaintiff would have been made aware of the above matters including the fact that the tenancy of the 1^st floor would expire on 15 April 2012.

60. Requisition 2 was first raised by the plaintiff on 17 May 2012, which was after the expiry of the 1^st floor tenancy. That requisition merely asked for documentary proof as to change of user having been approved by the Buildings Department.

61. On 31 May 2012, FL responded by letter to the effect that that the Property was sold on an ‘as is’ basis without warranty of user and that the defendant having inspected the Property would have known that the 1^st floor was let out for business purpose but still agreed to purchase the Property subject to the existing tenancies. Therefore it was not necessary for the defendant to comply with the request by the plaintiff.

62. LWT, by its letter dated 6 June 2012 further complained that as the 1^st floor was still used by the tenant for business purposes, that is a breach of the Occupation Permit as to permitted user which brings about a real likelihood of enforcement actions and proceedings by the Buildings Department and the Fire Services Department which could affect title.

63. By letter on 26 June 2012, FL responded as follows:

“…In any event, the Tenancy Agreement dated 27 March 2010 (“the Tenancy Agreement”) has expired so with such commercial use. We have fully informed you of the expiration of the said Tenancy Agreement and seek your client’s instructions as to whether your client would like to renew the tenancy or requiring the sitting tenant to move out of the 1^st Floor, in respect of which up to the time of writing this letter we have not received a reply from you.”

64. Completion was set for 28 June 2012 and up to the time for completion, there was no further reply from the plaintiff in respect of Requisition 2.

65. Clause 13.1(d) and clause 13.1(i) of the Agreement provides:

“(d) If a tenancy subject to which the said premises is sold terminated for any reason, the Vendor shall inform the Purchaser and, on being indemnified by the Purchaser against all consequential loss, expenditure or liability, shall act as the Purchaser directs.”

….

“(i) After this Agreement being duly signed by the Vendor and the Purchaser, the Vendor shall seek the consent of the Purchaser on the new rent of any unit(s) on Ground Floor to 5^th Floor should there be any new lease(s).”

66. Based on the above, I am satisfied that upon the expiry of the tenancy relating to the 1^st floor, the defendant has informed of the plaintiff or LWT, the solicitors for the plaintiff, that that tenancy has expired and sought their instructions as to whether that tenancy should be renewed or whether the tenant should vacate the 1^st floor premises, a matter which had been provided for and agreed between the parties as contained in clause 13.1(d) and clause 13.1(i) of the Agreement.

67. In that sense, the plaintiff had complete say as to what was to be done with the tenancy of the 1^st floor upon its expiry. If the plaintiff thought it risky to be in further breach of the Occupation Permit as to its permitted user, the plaintiff could have given instructions not to renew the tenancy of the 1^st floor premises and the defendant would have been obliged under the Agreement to act as directed by the plaintiff even though completion had not taken place.

68. However, due to the failure of the plaintiff to give any directions as to what should be done with the tenancy of the 1^st floor upon its expiry, the plaintiff cannot now be heard to complain of the continued breach of the permitted user under the Occupation Permit during the time the tenant held over after expiry of the tenancy.

69. For the above reasons, I am satisfied that the defendant had sufficiently answered Requisition 2 raised by the plaintiff despite the fact that there was an actual breach of the permitted user allowed under the Occupation Permit.

Requisition 3

70. Concerning Requisition 3, there are two matters that need to be decided. The first is whether title has been shown by the defendant by reason of the Enchroaching Portion over unleased Government land. Secondly, whether there has been any breaches of the Undertaking by the defendant and the effect of such breaches in respect of title.

71. In so far as the first matter is concerned, the plaintiff relies on the judgment of Keith J in the case of Chan Hong Chung and anr v Mak Kiu HCMP 1961 of 1995 (unreported). That case was also a vendor and purchaser summons and concerned the sale of a flat on the 9^th floor of a building in Tai Kok Tsui situated on the corner of Poplar Street and Ki Lung Street. When the documents were examined, the purchaser’s solicitors noted that there were six flats on the 9^th floor of the building and a balcony of some 8 feet had been erected outside each of those six flats but had not been provided for in the Crown leases. The balconies protruded into the air space over Poplar Street and Ki Lung Street. The vendor’s flat overlooked Poplar Street and it was the air space over Poplar Street into which the balcony outside the vendor’s flat protruded.

72. Since the vendor undertook to give a good title to the flat under the agreement, requisition was raised in respect of such protrusion over Poplar Street. Not being satisfied with the answer given by the vendor’s solicitor, this vendor and purchaser summons was taken out by the purchaser for, inter alia, a declaration that the vendor had not shown a good title to the flat.

73. The judge accepted the submission that section 4 of the Crown Land Ordinance Cap 28 (as it was then called) provides that unleased land may not be occupied except under a licence or a deed or memorandum of appropriation; and that the definition of the word “occupy” in section 2 of that Ordinance includes “erect or maintain a structure on or over …land.” The definition of the word “structure” in section 2 includes “any…thing erected on or over land.”

74. The judge, in rejecting the one argument put forward by the vendor that since the legal estate which the vendor was selling was the equal undivided shares in the building, it did not relate to any particular part of the building and did not prevent a good title to that share being passed, found that what was being sold was the flat and that it was irrelevant that the agreement did not identify which part of the building the equal undivided share related to.

75. On the assumption that Poplar Street was unleased land, the judge came to the conclusion that the vendor had not proved she had a good title to the flat adding at the end of his judgment that it was on this narrow point on title to which there was no answer that he decided the case.

76. The case of Chan Hong Chung is clearly distinguishable from our present case on facts in that in our present case there is the Undertaking and nothing even remotely similar exist in the case of Chan Hong Chung.

77. The effect of the Undertaking in our case was that permission was given by the Government for the balconies in the building to protrude over Sharp Street East when the building was constructed.

78. It would be quite anomalous and illogical to say that while the vendor was allowed to build the building with the balconies protruding  over Sharp Street East, they did not have title to give when it came to selling off the building (or for that matter any part thereof) because of the protrusion over Sharp Street East.

79. Put another way, the case of Chan Hong Chung would most certainly not have been decided the way it was had there existed in that case a document similar in effect to the Undertaking in our present case.

80. Bearing in mind also that what was being sold in our present case was Lot 5463 RP with the building thereon, I am of the view that title has been adequately shown by the defendant notwithstanding the Encroaching Portion which protruded into the air space over Sharp Street East but which was permitted to do so by the Undertaking.

81. I turn now to deal with the second point raised in this Requisition 3, whether there was any breaches of the Undertaking and its effect on title.

82. The Undertaking contains the following provisions relied on by the plaintiff:

“THAT THE OWNER would :-

1. During the construction of the said Balconies in no way deviate from the plans and drawings thereof supplied signed by their architects and deposited in the office of the Building Authority.

2. Always keep the said Balconies in good order and repair and colourwashed painted and cleansed and would keep clean the foot-path underneath the same whenever required by the Building Authority to do so and would not use or permit to be used any portion of the structure for the display of advertisements other than or names of the occupiers together with such appropriate business descriptions as were necessary for the purpose of identification.

…

7. Always comply with all Regulations from time to time in force relating to Verandahs and Balconies.”

83. It is the plaintiff’s contention that the defendant was in breach of clause 1 above, having enclosed all the balconies from the first to the fifth floor of the Building. In this respect, the plaintiff points to the continuous side wall of the balconies from the 1^st to 5^th floor of the Building and say that the side wall is a deviation from the approved Building Plans. Secondly, the plaintiff also points to the enclosing glass panels or windows which have completely enclosed what should have been balconies and say that this is a breach of the Undertaking which allows for balconies to be erected.

84. The plaintiff further says that the defendant is also in breach of clause 2 above, having displayed advertisements (other than names of the occupiers) on the side wall of the enclosed balconies as was shown in the photographs exhibited.

85. The defendant on the other hand seeks to rely on clause 16 of the Agreement which provides as follows:

“16.1 The said premises is sold to the Purchaser on an “as is” basis, the Purchaser has inspected the said premises and hereby acknowledges and accepts the existing condition of the said premises. The Vendor makes no warranty as to whether or not the said premises contained any unauthorized structures additions or alterations or any illegal structures. No requisition or objection whatsoever shall be raised in respect of any unauthorized structure additions  alterations or illegal structures and the Purchaser shall not be entitled to withhold or delay the purchase of the said premises on the ground that there is any such unauthorized structures alterations or illegal structures in or affecting the said premises.”

86. Clause 26 of the Agreement has also to be looked at when considering clause 16 thereof. Somewhat strangely, although the Agreement was in English, clause 26 of it was in Chinese. The parties had, probably through oversight, failed to provide any translation to the court in respect of clause 26 (whether agreed or certified). A certified translation was therefore obtained by the court from the official court translator. An opportunity was given to the parties to comment on the certified translation in respect of clause 26 but both parties indicated they had no comments thereon.

87. The certified translation of clause 26 of the Agreement states as follows:

“26. Additional terms re the repair order

26.1 The purchaser and vendor declare that they are both aware of the following repair order (hereinafter referred to as “the repair order”) issued by the Buildings Department in respect of the property or the building where the property is situated. Both parties hereby agree to complete the transaction notwithstanding the repair order and deal with the repair order in the manner mentioned below:

(Memorial) Number of the repair order registered with the Land Registry:

08092600340214

08092600340236

26.2  The purchaser agrees to pay all the fees arising from the performance of the repair order in respect of the property whereas the vendor shall not be in any way liable for the repair order. The purchaser shall not raise any requisition in respect of the repair order and/or hence refuse to complete the transaction.”

88. The two “repair orders” referred to in clause 26 of the Agreement and registered with the Land Registry under memorial numbers 08092600340214 and 08092600340236, were exhibited in this application. They were in effect two Notices by the Building Authority under section 24C(1) of the Buildings Ordinance Cap 123 notifying that building works described therein has been erected or carried out in contravention of the Buildings Ordinance. Both Notices were dated 29 April 2008.

89. The contravening building works were described in the two Notices as being “one structure on and over the balcony at the front of” the 4^th and of the 5^th floor respectively.

90. Given what has been agreed by the parties and as contained in clause 26 of the Agreement in relation to these two Notices by the Building Authority, there can be no complaint by the plaintiff in relation to the contravening building works covered by these two Notices.

91. As for the plaintiff’s complaint as to the enclosing of the balconies of the 1^st to the 5^th floors by the glass panels and the brick walls on the side as well as the advertisement all of which amount to a breach of the terms of the Undertaking, I accept the submission put forward by counsel for the defendant that firstly, from the approved plans, it is not at all certain that walls on the side of the balconies is a deviation from the approved plans.

92. Secondly, even if that is a breach of the approved plans, it would be covered by Clause 16 which expressly provides that no warranty is given by the defendant as to the premises containing any “unauthorized structures, additions or alterations or any illegal structures”. The parties have also agreed that no requisition or objection is to be raised thereto and the plaintiff is not entitled to withhold or delay the purchase on such grounds.

93. Clause 16 would also avail the defendant not only where the side walls are concerned, but also the plaintiff’s complaint as to the glass panel or windows which enclose all the balconies.

94. In their answer to this requisition raised by LWT, FL has properly raised clause 16 as being the answer to this requisition. I am of the view that in so far as clause 16 is relied on by the plaintiff, it has sufficiently answered the plaintiff’s queries as to the enclosure of the balconies, both as to the side walls as well as the glass panels or windows.

95. As for the plaintiff’s submission made in relation to advertisement on the outside wall of the balconies, it should first of all be noted that in the requisitions contained in the correspondence between LWT and FL, the only matter raised concerning advertisement was in relation to an advertisement structure used by the hotel next to the Property which was erected and affixed to the front part of the Property. This was raised in LWT’s letter dated 10^th April 2012, and required the structure to be removed before completion. In FL’s letter dated 31^st May 2012, it was stated that the advertisement structure complained of will be removed by the hotel within 10 days time. By letter dated 18^th June 2012, FL further stated that they are given to understand that the structure has already been removed. That the structure had been removed was confirmed by LWT’s letter dated 26^th June 2012.

96. The point as to the advertisement on the outside wall of the Building being a breach of clause 2 of the Undertaking was a point raised by counsel at the hearing. It was never raised as a requisition nor was it even made mention of in the two affirmations of Chan Chung Mo made on behalf of the plaintiff.

97. Not having been raised part of the requisition, but being only a point taken by counsel at the hearing, I do not know how it can now assist the plaintiff.

98. Even if it was a breach of the Undertaking, it would appear that the Building Authority has taken the view that it was not a sufficiently serious breach to warrant enforcement action since no action has been taken by the Building Authority apart from the two Notices referred to in clause 26 of the Agreement.

99. In the circumstances, given that the building in question was developed in 1962, the chance or risk of enforcement in relation to the advertisement complaints by the plaintiff is so minimal that there cannot be a real risk of same.

100. I do not find that the plaintiff has made out a case as to Requisition 3.

Requisition 5

101. There is no dispute that the building was sold with existing tenancies.

102. There is also no dispute that copies of the CR109 had been supplied by the defendant to the plaintiff prior to completion in respect of the 2^nd 3^rd and 4^th floors.

103. The plaintiff’s complaint is the failure of the defendant to accede to its request to supply the originals of the CR109 before completion.

104. The purpose for which the CR109 was required was said to be so that the plaintiff could maintain an action for rent when and if that should arise.

105. The plaintiff’s entitlement to rent in respect of the existing tenancies only arise from the time of completion when the plaintiff becomes the new landlord in respect of the existing tenancies in the building.

106. Therefore it must follow that there can be no necessity for the originals of the CR109 to be given prior to completion since these documents are not title documents and therefore not required to prove title.

107. It was sufficient that the plaintiff had been furnished with copies of the CR109 prior to completion so that the plaintiff would know that the original are in the possession of the defendant. Moreover, the plaintiff would be in a position to know from the copies of the tenancies that the endorsements by the Commissioner for Rating and Valuation were on the copies of the tenancies which is the statutory requirement before an action for rent could be maintained.

108. As for the clerical mistake appearing on the CR109 relating to the 2^nd floor, that was clearly a clerical mistake as to the term of the tenancy thereto which can be seen to be such when it is looked at side by side with the tenancy, the tenancy being the primary document to show the actual term of the tenancy itself.

109. Once it is accepted as being a clear clerical error, I accept the contention by the defendant that such an error is not of such significance as to require rectification of the CR109.

110. I am unable to visualize a court rejecting a claim for rent only by reason of such a clerical error appearing on the CR109.

111. In any event the tenant having moved out of the 2^nd floor, it would be a completely futile exercise to require rectification of the CR109.

112. As for the failure to produce the CR109 in respect of the 5^th floor, it would appear that a fair inference which can be drawn from such failure to produce the CR109 (or even a copy of it) for the 5^th floor, coupled with the submission of the defendant (that the CR109 could be obtained “at any time”), that the defendant did not have the CR109 in respect of the 5^th floor.

113. Section 119L (1A) provides as follows:

“The notice mentioned in subsection (1) may be lodged-

without charge, within 1 month after the event notified; or

upon payment to the Commissioner of such fee as may be determined by the Financial Secretary by notice published in Gazette, at any time.”

114. The CR109 is not a document of title and is not a document which is needed whether to prove or to give title. It is a document needed by statute only to maintain an action for recovery of rent from a tenant under a written tenancy.

115. Its absence therefore does not affect the plaintiff’s title or potential title.

116. However, it does affect the plaintiff qua landlord in respect of the existing tenancy of the 5^th floor.  But even so it is not fatal as the plaintiff, when it becomes the landlord, can still apply for it by paying the prescribed fee. In that event, the plaintiff’s remedy against the defendant would be to claim for the prescribed fee which, if the defendant had provided the CR109, the plaintiff would not have had to incur.

117. For the above reasons, I am satisfied that there is nothing outstanding in respect of Requisition 5 which the defendant has failed to answer satisfactorily which goes to the question of title.

Requisition 6

118. The Assignment which is registered in the Land Office by Memorial No. UB383356, the original of which is sought by the plaintiff in this requisition, was created on 22 October 1962 and was an assignment by which one Mak Fook Hing as vendor, assigned his interest in the said premises to one Thie Long, as purchaser. This was one of the chains of transfers of interest in land since the date of the Crown grant of 8 February 1958.

119. There can be no dispute that this document falls outside the statutory period of 15 years under sections 13 and 13A of the Conveyancing and Property Ordinance.

120. The plaintiff relies on the judgement of the Court of Appeal in the case of De Monsa Investments Limited v Whole Win Management Fund Ltd. in which the Court of Appeal held that notwithstanding section 13 of the Conveyancing and Property Ordinance, a vendor is required to supply all the original title deeds which relate exclusively to the property sold which should be in his possession or power even if the document extends beyond the intermediate root. Otherwise, the vendor must provide clear and cogent proof of the contents of the missing document, its due execution and the fact of its loss or destruction.

121. The case of De Monsa went on appeal to the Court of Final Appeal. That appeal was heard by the CFA on 3 and 7 June 2013 with a written judgment coming out on 26 July 2013. At the hearing of this application that judgment of the CFA had not been delivered yet.

122. The Court of Final Appeal overturned the above point of law as enunciated by the Court of Appeal.

123. In his judgment, Mr. Justice Chan PJ (as he then was) had this to say (at para.20):

“I would add that in view of what is required to be shown and proved under s.13(1) [of the CPO] the absence of pre root title documents will now seldom, if ever, have any impact on the title to be acquired by a purchaser.”

and went on to say also (at para 21):

“The effect of s.13A is to restrict the title documents to be handed over by the vendor to the purchaser on completion to those which the vendor is required to produce for showing and proving title under s.13(1)(a) and (c).”

124. In his judgment in the same case, Mr. Justice Litton NPJ said that the Court of Appeal thought that there was a real risk of the purchaser’s title being blemished by a prior encumbrance created by deposit of title deed. But what the Court of Appeal appears to have overlooked was that such a situation could not have arisen in Hong Kong since once the assignment to the purchaser is registered the purchaser take priority over an unregistered charge. (para 112 of the judgment refers)

125. Ultimately, the risk of a lender emerging from the dark with an original title deed in his hands and registering a memorandum of deposit ahead of the purchaser is one of degree and that degree of risk, whether it can be regarded as “fanciful” depends on the circumstances. (para 117 of the judgment refers)

126. Coming back to our present case, it is not contended here, similarly as to the facts and circumstances in the De Monsa case that there is any realistic possibility that the absence of the originals of the Assignment registered as UB383356 in the Land Registry has any impact on the title to be acquired by the plaintiff.

127. In the circumstances, this point must, following the judgment of the CFA in the De Monsa case, be decided in favour of the defendant.

128. Accordingly, I find that Requisition 6 has been satisfactorily answered by the defendant.

CONCLUSION

129. For the reasons given above, the claim by the plaintiff in its Originating Summons herein is dismissed in its entirety.

COST

130. There will be a cost order nisi that the plaintiff pays to the defendant all its costs arising from defending the plaintiff’s Originating Summons including the cost of the hearing with certificate for two counsel to be taxed if not agreed.