WOO KAI MING v. CHUI WING YUEN

HCMP No. 2380/98

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2380 OF 1998

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J U D G M E N T

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Introduction

1. The Plaintiff was the purchaser of the suit property and the Defendant was the vendor thereof. The Plaintiff raised two requisitions on title and was not satisfied that the Defendant's solicitors had sufficiently answered them. For this reason, the Plaintiff considered good title had not been shown by the Defendant and brought this action seeking declaration orders to this effect and for other consequential relief.

The Requisitions in Issue

2. The two requisitions in issue in this action were set out in the letter dated 7 January 1998 from the Plaintiff's solicitors. They were :-

"1. Assignment Memorial No. 315737

The Plan annexed thereto shows that there were 12 until [units] on the 4th Floor of [sic]. However, the Occupation Permit dated 18th March 1960 revealed that there were only 11 until [units] on the 4th Floor. Therefore, please provide documentary evidence to prove that approval of the Building Authority had been obtained for the sub-division of the until [units] on the 4th Floor and that the said sub-division does not constitute any breach of the Deed of Mutual Covenant Memorial No. 316902 which expressly prohibits the retructural [structural] alteration of the until in [units of] the building.

2. Please let us have the certified copies of the following:-

A. Crown lease;

B. Occupation Permit;

C. Assignment Memorial No. 270761;

D. Order Memorial No. 4391746;

E. Letter of Compliance Memorial No. 5676606;

F. Order Memorial No. 4391747;

G. Letter of Compliance Memorial No. 474823."

3. Completion was scheduled to be on or before 28 March 1998. By that date, the Defendant's solicitors did not answer the said requisitions. The Defendant's original solicitors were replaced by another firm at about the end of March 1998. In a letter dated 30 March 1998 (repeated in the letters dated 8 and 18 April 1998), the new solicitors alleged that the Defendant's title had been accepted by the Plaintiff by :-

(a) not informing them whether the transaction was treated as having been postponed or fallen through; and

(b) continuing to occupy the suit premises up to that date.

4. In a letter dated 24 April 1998, the Defendant's new solicitors repeated the above allegation and enclosed a letter from Messrs Gallant Y.T. Ho & Co. dated 23 April 1998 alleging further that this provided an answer to the first requisition. This latter document relied on the case of Active Keen Industries Ltd. v. Fok Chi Keong [1994] 2 HKC 67 and claimed that there was no risk of enforcement action by the Building Authority against the owners of the units on the same floor as the suit property. These were also denied by the Plaintiff's solicitors. At no time have the Defendant's solicitors dealt with the second requisition.

The First Requisition

5. Clause 9(a) of the Deed of Mutual Covenant dated 23 May 1960 ("the DMC") reads :-

"Each party hereto hereby covenants with the other as follows-

Not to make any structural alteration in his floor block or flat or any alteration of the water gas or steam pipes electric conduits or plumbing nor to cut or injure any of the doors walls or beams thereof.

..... "

6. Clause 12 of the DMC reads :-

"If any of the parties hereto shall fail to fulfil his share of the rebuilding of or repairs or amendments to the said premises if such rebuilding of or repairs or amendments to the said premises should become necessary or shall fail to pay his share .... within two months from the date of any notice from the other or others .... requiring the same to be done or paid then the party serving such notice may at his own absolute discretion proceed to carry out such rebuilding or repairs or amendments and the defaulting party shall on demand repay to the other party or parties his share of the costs and expenses incurred in such rebuilding or repairs or amendments and until such repayment the said costs and expenses .... shall remain unpaid shall be a charge upon the share of the defaulting party of and in the said premises .... if default shall be made in payment of the amount of such share .... the other parties may at any time or times thereafter without any further consent on the part of the defaulting party sell the share and interest of the defaulting party .... "

7. The discrepancy in the number of units in the Occupation Permit and the Plan annexed to the Assignment provided a reasonable basis for the Plaintiff's solicitors to doubt whether the additional unit was an unauthorized structural alteration and if so, which unit on that floor (including the suit property) was the offending one.

8. According to Clauses 9 and 12 of the DMC, the unauthorized unit is liable to be demolished by the other co-owners (or the incorporated owners or manager) of the said building and any costs incurred for doing so may be registered against the offending owner's shares in the building as a charge.

9. There is a real risk that the suit property may in fact be the offending unit. If so, it is liable to be demolished altogether. Further, the owner may be liable to pay the expenses for doing so. If he fails to pay, the demolition work may be undertaken on his behalf and the expenses incurred (if not repaid) may be registered as a charge against the suit property. Reliance on the Active Keen case did not provide a sufficient answer to this requisition as the issues in that case were not relevant to those set out above.

10. At the hearing, Mr Chong for the Plaintiff also relied on the provisions of the Buildings Ordinance, Cap. 123 as posing another potential title problem. This arises from the risk of enforcement action by the Building Authority pursuant to ss.24, 25 and 33 of Cap. 123. However, since this aspect has not been raised in the letter setting out the requisitions, I consider that the Plaintiff is not entitled to raise this now. If the Plaintiff were entitled to do so, I would also have found that this could constitute another title problem.

The Second Requisition

11. Clause 6 of the Sale and Purchase Agreement dated 24 December 1997 between the Plaintiff and the Defendant stated :-

"The Vendor shall give good title to the Property in accordance with Section 13 of the Conveyancing and Property Ordinance Chapter 219 of the Laws of Hong Kong."

Section 13 of Cap. 219 reads :-

"(1) ... a purchaser of land shall be entitled to require from the vendor, as proof of title to that land, only production of the [Government] lease to the land sold and―

(a) proof of title to that land―

(i) .....

(ii) in any other case, extending not less than 15 years before the contract of sale of that land commencing with an assignment, a mortgage by assignment or a legal charge, each dealing with the whole estate and interest in that land;

(b) ....."

12. As stated earlier, no reply was given to the Plaintiff's solicitors regarding this requisition. Under s.13 of Cap. 219, the Plaintiff was clearly entitled to a copy of the Government lease. The Defendant has obviously failed to discharge his duty under Clause 6 of the Agreement and s.13 of Cap. 219 over this matter.

13. Mr Chong for the Plaintiff conceded at the hearing the Plaintiff would not be entitled to the document referred to in para. 2(c) of this requisition.

14. The document referred to in para. 2(d) was stated in the Land Registry records to be "Order No. D60/HK/90C under s.26 of the Buildings Ordinance". It was dated 20 March 1990 and registered in April 1990. Under the said statutory provision, an order registered with the Land Registry for costs of any work carried out by the Building Authority shall be recoverable from any person who, at the time of completion of such work, is the owner of that building. Under s.33(9)(b) of Cap. 123, a certificate may be registered in the Land Registry against the title of any premises or land in respect of costs recoverable under Cap. 123 and this constitutes a charge on the said premises or land.

15. The document referred to in para.2(f) was stated in the Land Registry records to be "Order No. DR28/HK/90C under Section 28(3) of the Buildings Ordinance". It was also dated 20 March 1990 and registered in April 1990. Under that section, an order may be served on the owner asking for remedial works to be carried out if the Building Authority is of the opinion that the drains or sewers of a building are inadequate or in a defective or insanitary condition. Under ss.28(7) and (7)(A), the Building Authority may carry out the work for the owner and register an order for costs incurred therefor. Similarly, s.33 of Cap. 123 applies to such costs.

16. There was thus a good reason for the Plaintiff's solicitors to be concerned with whether or not works had earlier been carried out by the Building Authority in relation to these two documents and whether or not they constitute any charge pursuant to s.33 of Cap. 123. As such, the Plaintiff should be entitled under Clause 6 of the Agreement to ask for copies of these two documents.

17. The document requested in para.2(b) was the Occupation Permit of the building. As stated earlier, this document was dated 18 March 1960. It was therefore more than 15 years prior to the date of the Agreement between the Plaintiff and the Defendant. There was an assignment dated 22 March 1982. It is quite arguable the supply of the assignment document would discharge the Defendant's duty under s.13(1)(a)(ii) of Cap. 219. Further, as stated above, it appears that the two Orders under Cap. 123 had been registered by the Building Authority. Thus, the Building Authority apparently was aware of the existence of this building. The only significance of an Occupation Permit to a conveyancer seems to be to establish that the building was approved by the Building Authority. Applying the reasoning set out in the Active Keen case, any risk of enforcement action by the Building Authority for the erection or occupation of this building looks fanciful. I therefore consider that the Plaintiff may not be entitled to a copy of this document. However, since I will be able to decide this action without reference to this document, what I have set out above should be regarded as obiter dictum only as the matter had not been properly argued for the Defendant.

18. Paragraphs 2(e) and 2(g) ask for copies of two Letters of Compliance. These appear to be related to the two Orders registered by the Building Authority because one letter was dated February 1991 and the other was dated April 1993. However, without perusing the documents, it is unknown whether this is in fact the case, and if so, whether the compliance related to the suit property. For these reasons, I find that the Plaintiff should be entitled to copies of these documents.

Conclusion on Liability

19. In view of the above, I find that the Defendant has failed to discharge his duties under Clause 6 of the Agreement or s.13 of Cap. 219.

20. It was alleged by the Defendant's new solicitors that certain acts of the Plaintiff and his solicitors amounted to an acceptance of the Defendant's title. I have perused the contemporaneous correspondence between the solicitors and found nothing which supports this allegation. The mere fact that the Plaintiff was allowed to and did occupy the suit property at some stage prior to completion is also not indicative of such acceptance. For these reasons, I find that there was no acceptance of the Defendant's title by conduct.

Relief

21. This action was taken out by way of an Originating Summons (which was later amended). Further, the heading of this action refers to "IN THE MATTER OF Section 12 of the Conveyancing and Property Ordinance, Cap. 219 ... ". Section 12 of Cap. 219 reads :-

"Application to court by vendor and purchaser

(1) A vendor .... of land may apply by .... originating summons to the court in respect of any question arising out of or connected with any contract for the sale .... of land ...., and the court may make such order upon the .... originating summons and as to costs as to the court appears just."

The phrase "the court may make such order upon .... the originating summons" has attracted quite some judicial discussions in relation to a similar provision in the U.K.

42 Halsbury's Laws of England 231 states :-

"Consequential relief. The jurisdiction to make such order as appears just enables the judge to give relief which is the ordinary consequence of the decision of the point submitted to him. ... An order for payment of unliquidated damages as compensation for a vendor's delay, or of any sum which entails an inquiry and is not merely a matter for computation or taxation, cannot, however, be made on a vendor and purchaser summons, as such an application cannot be treated as an action for damages."

Further, the author of Nield : The Hong Kong Conveyancing and Property Ordinance (1998) said :-

"... it appears that the courts may be able to order recession of the contract although not the payment of damages ... (Re Higgins and Percival (1881) 59 LT 213, Re Walker and Oakshott's Contract [1901] 2 Ch 383 and Barber v. Wolfe [1945] Ch 187)." (at p. 39)

22. I consider the Plaintiff should be entitled to the declaration orders set out in paras. 1 to 5 of the Amended Originating Summons. I will also make an order in terms of para. 6 thereof but the amount will be $10,310. As regards para. 7 thereof, I find that the Plaintiff should be entitled to a lien only in relation to the deposit of $80,000 paid by the Plaintiff. Although para. 7 originally extended the claim for a lien over other sums, Mr Chong informed me at the hearing that the Plaintiff would be satisfied with a lien over the deposit only.

23. Paragraph 8 of the Amended Originating Summons asks for the reimbursement by the Defendant of the commission paid by the Plaintiff to the estate agent (amounting to $12,000). I also consider the Plaintiff to be entitled to seek such relief in this action.

24. Paragraph 9 of the Amended Originating Summons asks for damages to be assessed. I understood from Mr Chong that this relates to expenses allegedly incurred by the Plaintiff for decorating the suit property when the Plaintiff was allowed to occupy it prior to completion. By reason of the matters set out above, I find that the Plaintiff is not entitled to this relief in this action.

25. There will be interest on the sums awarded above at judgment rate from 26 May 1998 (date of the Originating Summons) to date of judgment and thereafter also at judgment rate until payment.

Costs

26. There will be a costs order nisi pursuant to R.H.C. O. 42, r. 5B(6) that the costs of this action be to the Plaintiff, to be taxed if not agreed, there being no apparent reason why the usual rule that costs should follow the event should not apply. Since the Defendant is acting in person, I should mention that unless an application has been made under that rule to vary the order nisi, it will become absolute within 14 days after this Judgment is pronounced.