LUI KWOK WAI AND ANOTHER v. CHAN YIU HING AND ANOTHER

1994, No.MP3246

________________

H E A D N O T E

________________

VENDOR AND PURCHASER SUMMONS. REQUISITION AS TO TITLE. NO OCCUPATION PERMIT OR CERTIFICATE OF EXEMPTION BEING ISSUED IN RESPECT OF A BUILDING IN THE NEW TERRITORIES.

1994, No.MP3246

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

__________________

________________

J U D G M E N T

________________

Background

1. This is a vendor and purchaser summons taken out by the Plaintiff (purchaser) of a property situated at Flat B, 2/F Wing Ning Li House, Lots 227, 228A and 228B, Yuen Long, New Territories ("the Property").

2. The Plaintiff entered into an Agreement for sale and purchase ("the Agreement") on 18th July 1994 for the purchase of the Property. The purchase price of the Property was HK$1,130,000,00. A deposit of HK$113,000 was paid by the Plaintiff. The completion date of the sale was 29th November 1994 but the parties agreed to extend the completion to 15th December 1994 in the light of the application before me.

3. Clause 7 of the Agreement provided that the Defendant (vendor) shall prove good title to the Property extending at least 15 years.

4. Pursuant to the Agreement, the Defendant's solicitors on 26th July 1994, supplied to the Plaintiff's solicitors the title deeds to the Property. By a letter dated 3rd August 1994, the Plaintiff's solicitors raised requisitions as to title. In Item 7 of the letter, the Plaintiff's solicitors requested for a certified copy of the occupation permit of the Property. The response from the Defendant's solicitors dated 6th August 1994 stated that no occupation permit was required in respect of the Property.

5. The Plaintiff's solicitors also made enquiries with the District Lands Office as to whether any occupation permit, certificate of exemption, certificate of no-objection to assign had been issued by the District Lands Office. No response was received from the District Lands Office.

6. On 17th September 1994, the Defendant's former solicitors supplied to the Plaintiff's solicitors a copy of a letter issued by the District Lands Office dated 3rd July 1992. The letter stated that :

" Please be informed that the above properties are old schedule house lots and occupation permit is unnecessary. However, your client has amalgamated the three house lots and erected two houses therein. Thus the government reserves all its rights to take what action deem necessary."

7. In this application, the Plaintiff is seeking, inter alia, a declaration that the Defendants have not satisfactorily answered the requisition of title and a declaration that the title of the Property is defective on the basis that no occupation permit or certificate of exemption and no-objection letter has been found to exist or have been issued by the District Lands Office, Yuen Long relating to the Property.

Requirement of an occupation permit

8. The submission of Miss Cruden, Counsel for the Plaintiff, can be summarised as follows. An occupation permit is a relevant and necessary document to prove the title of the vendor. This document is evidence that the provisions of the Buildings Ordinance have been complied with in respect of the construction of the new building. In respect of a property in the New Territories, a certificate of exemption is a relevant and necessary document to prove the title of the Plaintiff. In the absence of this document, the purchaser of the property will face the risk of the Building Authority taking enforcement actions against the property. The risk is real and not fanciful. She referred to Lo Chun Tak v. Chan Foon Tai [1992] HKDCLR 47 in which His Honour Judge W. Wong held that a certificate of exemption is a necessary document to prove title.

9. The test as to whether good title is shown was set out in the case of M.E.P.C. Ltd. v. Christian-Edwards [1981] AC205 in which Lord Russel of Killowen at p.220 held that-

"If the facts and circumstances of the case are so compelling to the mind of the court that the court concludes beyond reasonable doubt that the purchaser would not be at risk of a successful assertion against him of the incumbrance, the court should declare in favour of a good title shown."

10. In Kan Wing Yau and Another v. Hong Kong Housing Society [1988]2 HKLR 182, Clough J.A. at p.199 held that:

"A good holding title is one like the title now under consideration which presents no probability of an adverse claim being made and can usually be sold and forced on a purchaser under a special condition requiring him to assume certain facts (in the present case the validity of the 1984 Power of Appointment) upon which the title depends."

11. I am satisfied that an occupation permit or a certificate of exemption is a relevant and necessary document to prove title. An occupation permit is evidence that the provisions of the Buildings Ordinance have been fully complied with in the construction of the building. Section 21 of the Buildings Ordinance, (Cap.123) provided that no new building shall be occupied unless the Building Authority, which is defined as the Director of Building, has issued an occupation permit in respect of such a building. The Buildings Ordinance (Application to the New Territories) Ordinance (Cap.121), which came into effect on 16th October 1987 provided under s.3 that, subject to Part III, the Buildings Ordinance shall apply to the New Territories. Under Part III, it was provided in s.4 that the Director of Lands may issue a certificate of exemption in respect of any building works in the New Territories. In s.5, it was provided that the Director of Lands shall issue a certificate of exemption in respect of building works in the New Territories for, inter alia, a building to be built by any person and to be used for non-industrial purposes. Section 7(1) provided that various sections of the Buildings Ordinance including s.21, shall not apply to building works or any building specified in a certificate of exemption. This sub-section is subject to s.7(2) which provided, inter alia, that s.7(1) shall not apply in relation to a certificate of exemption issued under s.4 or s.5 in respect of a building of greater dimensions than a building described in Part I of the Schedule. Part I of the Schedule set out the dimensions of the new building. In other words, if the new building exceeded the dimensions set out in Part I of the Schedule, notwithstanding the certificate of exemption being issued in respect of the building, the provisions of the Buildings Ordinance will still apply. Section 8 provided that a certificate of exemption shall be in writing. Section 11 further provided that the powers of the Director of Lands, other than his powers under s.4, may be exercised on his behalf by any District Lands Officer of a district in the New Territories.

12. In respect of a building in the New Territories whose dimension falls within Part I of the Schedule of the Buildings Ordinance (Application to the New Territories Ordinance), a certificate of exemption is evidence that the specified sections, including s.21, of the Buildings Ordinance, will not apply to that building. In the absence of either of these two documents, the possibility of enforcement actions by the Building Authority in respect of the building is real. The Crown may re-enter and forfeit the Crown lease on the basis that the new building was not constructed in compliance with the terms of the Crown lease. The Crown may order demolition of the building which is not authorised or approved or, alternatively, it may impose a premium for the use of the property.

13. Miss Cruden also argued that if the Crown were to resume the land for public works, the purchaser would not be entitled to any compensation for the unauthorised use of the unit. The Crown may only pay compensation for the bare land value or refuse full compensation pursuant to s.12(b) and (c) of the Crown Lands Resumption Ordinance (Cap. 124). However, as the issue is on the incumbrance and not on the diminution in value of the Property, this point is not of relevance. She also referred to the enforcement powers under the Town Planning Ordinance in respect of unauthorised user. However there is no evidence showing that the land upon which the Property is located falls within the development permission area of the Town Planning Ordinance. Requisitions have not raised by the Plaintiff on the requirements of the Town Planning Ordinance. This is not a point that would assist the Plaintiff.

14. Mr Chung, Counsel for the Plaintiff, argued that there was no risk of enforcement by the relevant authorities because the letter dated 3rd July 1992 clearly stated that an occupation permit was not necessary and, in view of this indication, the Crown could not complain that the requirements of the Buildings Ordinance had not been observed. He further argued that the letter of 3rd July 1992 may be treated as a certificate of exemption. The Crown was fully aware that three house lots had been amalgamated and yet had taken no actions for enforcement since 1992.

15. The letter of 3rd July 1992 was issued by the District Lands Office of Yuen Long. Although it was stated that the occupation permit was unnecessary in respect of the building, it is obvious from the letter that the District Lands Office merely wished to say that as the land was in the New Territories an occupation permit might not be applicable. An occupation permit can only be issued by the Director of Buildings after the relevant inspection of the new building. It is wrong to construe the letter as an indication that the, Crown had waived the requirement of an occupation permit or that the District Lands Office had assumed the statutory authorities of the Director of Buildings and come to a view that an occupation permit was not necessary.

16. For all we know, the building is a three storey building. There is no evidence showing that the building is within the dimensions set out in Part I of the Schedule. As I have indicated that, in respect of buildings that exceed the dimensions set out in Part I of the Schedule, notwithstanding the issuance of a certificate of exemption, the relevant provisions of the Buildings Ordinance will still applied. Furthermore, under s.9 of the Buildings Ordinance (Application to the New Territories Ordinance), the Director of Lands, when issuing the certificate of exemption, may impose conditions relating to safety, health or other reasonable conditions. One just could not treat the letter from the District Lands Office as equivalent to a certificate of exemption.

17. Although the District Lands Office was aware of problems regarding the Property since 1992, and had not taken any enforcement proceedings, one just could not assume that no enforcement proceedings would be taken. The Plaintiff's solicitors had by a letter dated 24th August 1994 asked the District Lands Office whether any certificate of exemption or no objection letters had been issued. No reply had been received from the District Lands Office. The District Lands Office had not shown its willingness not to pursue further on this matter. This is not a case where, for example, there is unauthorised work in one unit of a multi-storey building or where the Buildings Authority had taken no steps for many years after the occurrence of a breach of the Buildings Ordinance. The whole building upon which the Property is situated is affected by the absence of the occupation permit and the certificate of exemption.

18. In the circumstances, I am satisfied that the Defendant has failed to prove a good title to the Property. In the circumstances the Plaintiff is entitled to the reliefs set out in the summons and I shall make an order accordingly together with cost nisi to the Plaintiff.