PROFIT WORLD TRADING LTD v. HO SO YUNG

HCMP8/2009

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 8 OF 2009

---------------------

------------------------

J U D G M E N T

------------------------

1.  This case concerns a sale and purchase of a property in Sai Kung known as “Town House No. 30 & Car Parking Spaces Nos. 38 and 39, Villa Royale, No. 7 Nam Pin Wai Road, Sai Kung, New Territories” (“the Property”).  The plaintiff was the purchaser and the defendant the vendor of the Property.  In this judgment, I shall refer to them as “PP” and “DV” respectively.

2.  On 10 June 2008, one Mr Hui Pui Cheung (“Hui”), a representative of PP, went with two estate agents to visit the Property.  On that visit, he saw, on the Ground Floor of the Town House, a spacious and nicely decorated sitting room of about 350 sq.ft. in area.  This sitting room included a glass-roofed area of about 100 sq.ft.  A photograph of the sitting room and the glass-roofed area has been produced (at p.C180).

3.  On behalf of PP, Hui paid the initial deposit and executed two Provisional Agreements with DV, one in respect of House No. 30 and Car Park No. 39, and a later one in respect of Car Park No. 38.  Nothing turns on the 2^nd Provisional Agreement for Car Park No. 38.  A further deposit was also paid.  The time of completion was 17 September 2008.  This was later extended to 10 October 2008.  A formal Sale and Purchase Agreement was never executed.  

4.  On 18 August 2008, PP’s solicitors, Messrs Tai, Tang & Chong (“TTC”), asked for certain coloured plans and DV’s solicitors, Messrs K.M. Lai & Li (“KMLL”), by letter dated 19 September 2008, promised to supply them when they received them from the Lands Registry, which they did on 23 September 2008.  Although there was some discussion as to whether or not the request for the coloured plans was a requisition, nothing turns on the request or on the coloured plans that were subsequently supplied.

5.  Earlier, on 8 July 2008, KMLL had sent original title deeds and documents to TTC, including an Assignment with plan showing Town House No. 30 and Car Parking Spaces No. 39 and No. 38.  It is obvious, from looking at this plan and the photos of the sitting room on p.C180, that the glass-roofed area was an encroachment into the common area of the development, and that the sitting room had been enlarged by relocating the front door across Car Park No. 39, thereby converting about a third of the car park into the sitting room area.  The relocated front door of the Town House has been marked in green on Exhibit P1.  As can be seen from the Exhibit, about one third of the car park to the right of the green line on Exhibit P1 was converted into the sitting room area.  The encroachment of the glass-roofed area into the common area of the development is shown in pink on Exhibit P1.

6.  On 8 October 2008, there was a pre-completion inspection and on 9 October 2008, one day before completion, TTC wrote and complained of unauthorised “alterations and additional structures” in the property and enclosed a copy of an inspection report by Hung Man Construction dated 8 October 2008 stating, inter alia, that “the existing sitting room is original for car park purpose only”.  Further requisitions were raised on 10 October 2008, which have fallen away, but it was repeated that “there is an unlawful change of user of the Car Parking Space”.

7.  KMLL replied on 9 October 2008 that the requisitions were time barred and wrote again on 10 October 2008 that “without prejudice to the fact that we have already given good title of the above property and your requisition is raised out of time” they were enclosing an Architect’s Certificate certifying that the alteration works, including “the existing sitting room is original for car park purpose only” were non-structural, not requiring Building Authority approval, and that they could be reinstated at any time.

8.  In another letter on 10 October 2008, KMLL referred to the Architect’s letter and repeated that the alteration works were non-structural and they reserved all their client’s rights.  In yet another letter on 10 October 2008, KMLL reiterated that the requisition was out of time and did not need to be answered, that the alterations could be reinstated, and that completion should take place by 5:00 p.m. on 13 October 2008.

9.  On 11 October 2008, TTC asserted that the DV was in repudiation of contract by failing to answer requisitions in relation to illegal and unauthorised building works and by failing to prove good title, which repudiation PP accepted.

10.  On 13 October 2008, KMLL wrote to TTC enclosing photographs and another Architect’s Certificate dated 13 October 2008 certifying that the property had been reinstated in accordance with original plans and that PP should complete the sale that day.  The top photograph on p.C156 shows that the glass-roofed area remained intact and continued to encroach on the common area, notwithstanding the reinstatement works.  On 20 October 2008, KMLL wrote that PP had repudiated the Provisional Sale and Purchase Agreements, which repudiation DV accepted, that the deposits were forfeited and the Agreements rescinded, and that DV reserved the right to claim damages including deficiency of resale price.

11.  On 2 January 2009, PP commenced these proceedings against DV for various reliefs, including a declaration that the defendant was in repudiatory breach of contract and that the Provisional Agreements for Sale and Purchase dated 14 June 2008 and 16 August 2008 were terminated and brought to an end by the plaintiff’s acceptance of the Defendant’s repudiatory breach, and for repayment of the deposits paid.

12.  However, PP’s complaints, up to 11 October 2008 (when TTC asserted that DV had repudiated the contract) did not include any complaint regarding the encroachment into the common area by the glass-roofed area of the sitting room.  This complaint was first raised in Hui’s Affirmation of 20 May 2009, in which he stated that, on 18 May 2009, he had met with PP’s legal advisors and had been shown a copy of the Assignment plan (this was identical to Exhibit P1 except that it did not contain the green and pink markings).  Hui asserted in this Affirmation that he then realized, for the first time, that the glass-roofed area of the sitting room might be situated outside the boundary of the Town House.

13.  DV has not denied that the glass-roofed area of the sitting room encroached on the common area of the development.

14.  PP alleged that DV was in repudiatory breach of the Provisional Agreement in that DV had failed to give good title to the glass-roofed area, that DV had failed to provide a sitting room which failure constituted a defect in title, that DV had failed to show a good title to the sitting room area, that PP’s requisitions in that regard were raised within a reasonable time or, even if late, that the delay had been waived by DV and, finally, that PP was entitled to rescind the Provisional Agreements by reason of DV’s misrepresentation.  Before I can deal with these discrete issues, I need to determine what was the contractual bargain between the parties.

The contractual bargain

15.  There is no detailed description of the Property in the two Provisional Agreements, and the court must look at the conduct of the parties, prior to the execution of the two Provisional Agreements, to determine the subject matter of the Sale and Purchase Agreement.

16.  Hui, on behalf of PP, inspected the Town House before entering into the Provisional Agreement.  The inspection was carried out to identify the property being sold.  During his inspection, either DV or DV’s representative was at the Town House.  Hui regarded the sitting room as “spacious and nicely decorated sitting room”.  He appreciated the fact that “part of the sitting room was covered by a glass roof, so that people inside could enjoy more natural light”.

17.  In the light of this evidence, I find that the impression conveyed to PP, via Hui, was that the Property included the sitting room and the glass-roofed area, and that the contractual bargain between PP and DV was to sell and to buy the Property, which included the sitting room and the glass-roofed area.

18.  Any reasonable purchaser, on viewing the Town House as Hui did, would regard the glass-roofed area as part of the Property being sold to him, more so than the yard in Green Park Properties Ltd v Dorku Ltd [2000] 4 HKC 538, CA (affirmed by the Court of Final Appeal (2001) 4 HKCFAR 448), in which Le Pichon JA said at 542E-I :

“In the present case, the purchaser was taken to view the property. The purpose was plainly to show the purchaser what was for sale. Portion A had previously been used as a restaurant and was being renovated. Work was being carried out at the time. During the inspection, the parties went into the yard which, though open in the sense of not having a roof, was enclosed by a wall. In order to gain access to the toilets at the rear, one had to go through the swing doors into the yard. The natural boundary of the property was the end wall with the metal doors which separated the property from the lane. Given the physical characteristics and layout of the property, the overall impression conveyed was that the property included the yard…

The judge was justified in concluding that there was a representation by conduct that the yard was part of the property to be sold.”

Failure to give good title to the glass-roofed area

19.  The present case has common features with the case of Cashew Holdings Ltd v Pacific Success Enterprise Ltd [2004] 2 HKC 594, in which a room, on the upper floor of the property in question in that case, which had previously been a store room, had been converted into a larger room with a window.  The extension had been made by dismantling the wall between the storeroom and the adjacent pump room and resulted in an encroachment upon the common area of the building.  Lam J observed in his judgment at p.605G-606E that :

“Even if reinstatement works were carried out…, there is still a title problem. The problem does not stem from the risk of enforcement actions by the Government or the manager of the building. The problem stems from the fact that the vendor simply cannot pass a good title nor give exclusive physical possession to the purchaser regarding the encroached area. …

… Even with the reinstatement, the Defendant was in breach of contract in that it was unable to give a good title nor to deliver vacant possession in respect of the encroached area by the deadline for completion.”

20.  If PP could rely on this ground of complaint, I would readily conclude that DV did not have any title in respect of the glass-roofed area and could not lawfully pass a good title or deliver vacant possession in respect of that area to PP on the scheduled completion date.  Accordingly, DV had committed a repudiatory breach of the contract.

21.  However, Mr K.M. Chong, counsel for DV, submitted that no complaint had been raised in respect of the glass-roofed area until Hui’s Affirmation of 20 May 2009.  The point was taken eight months after the date of completion and taken only after proceedings had commenced in January 2009.  As the point had not been taken by PP before the close of completion, PP could not rely on the point subsequently.

22.  Mr Liu Man Kin, counsel for PP, countered this submission by relying on the classic statement of principle set out in Chitty on Contracts (30^th Edition), Vol. 1, at para.24-014, as follows :

“The general rule is well established that, if a party refuses to perform a contract, giving therefore a wrong or inadequate reason or no reason at all, he may yet justify his refusal if there were at the time facts in existence which would have provided a good reason, even if he did not know of them at the time of his refusal.”

23.  Mr Liu submitted that, as a matter of law, whether the reasons stated in TTC’s letter dated 11 October 2008 were adequate or accurate did not really matter and that what mattered was that there were facts in existence at the time of the rescission, as was indeed the case here, which would have provided a good reason to PP to rescind the contract.  Mr Liu also submitted that DV had ample opportunity to deal with the new point raised in Hui’s affirmation of 20 May 2009, and was in fact given leave to file an affirmation in reply to these matters.

24.  I accept Mr Liu’s submissions and conclude that PP can rely on this new ground of complaint, notwithstanding that it was not raised prior to the date of completion, nor in the letter of 11 October 2008, and that DV was unable to give good title to the glass-roofed area.  However, that is not the end of the matter because Mr Chong raised a further point in this regard, namely, that by not raising a requisition in time, or at all, in respect of the glass-roofed area, PP had accepted the defect in title in the glass-roofed area, which was a patent defect, and which ought to have been discovered with the exercise of due diligence.  As Mr Chong has raised the same point in respect of the alleged failure to give good title to the sitting room area, I shall return to it and deal with it later in my judgment.

Failure to give title to the sitting room area

25.  As stated above, the sitting room area included the glass-roofed area and encroached onto one third of the area occupied by Car Park No. 39.  The Architect’s Certificate dated 13 October 2008 certified that the Car Park No. 39 had been restored to its original size and the encroachment by the enlargement of the sitting room area into the car park space had been removed.  Was the failure to provide a sitting room occupying about one third of the area of Car Park No. 39 and including the glass-roofed area a defect of title?

26.  Without the encroachment into the common area by the glass-roofed extension and without the encroachment into Car Park No. 39, the sitting room viewed by Hui would be reduced to no more than a landing for the staircase and a foyer for the entrance.  The reinstatement of the ground floor area to its original size would result in the loss of the glass-roofed area of about 100 sq.ft., and the loss of another similar or even larger area from the reinstatement of Car Park No. 39.  The reinstatement would turn the sitting room into an entirely different room to that seen by Hui.

27.  I find that the failure to provide the sitting room, with the glass-roofed area and with the extension into the Car Park No 39, constituted a defect in title.  Whilst the reinstatement of that part of the sitting room originally occupied by Car Park No. 39 would have cured the unauthorised use of the premises and removed the risk of enforcement action and the blemish to the title caused by the unauthorised use, it did not cure the failure to provide a sitting room of the dimensions as seen by Hui.  As Madam Yuen J, as she then was, noted in Goldful Way Development Ltd v Wellstable Development Ltd [1998] 4 HKC 679 at p.685F :

“The issue is not whether the vendor has the right to demolish the enclosure. The issue is whether the vendor could still be regarded as performing the agreement if it assigns the property without the enclosure.”

28.  In Cashew Holdings, the converted room, after reinstatement, could no longer be a room with a window.  The room could no longer enjoy the lighting and ventilation provided by that window.  It could no longer be used as a bedroom and could only be used as a storeroom.  Lam J held in that case that the vendor could not tender substantial performance to the purchaser after it had reinstated the converted room.  The reinstatement meant that there would not be any risk of enforcement and the blemish to the title by the unauthorised conversion of the room would have been cured.  However, the physical state of the property had been altered in that case in such a way that the purchaser could complain that he did not get what he bargained for.  Despite the reinstatement works, there was still a title problem.  Likewise, I find in this case that DV could not tender substantial performance to PP by reinstating the sitting room to its original dimensions.  Not only would that result in the loss of the glass-roofed area of about 100 sq.ft., and the loss of another 100 or 150 sq.ft. from the reinstatement of Car Park No. 39, a total loss of 200 or 250 sq.ft. from a total area of 2,020 sq.ft. of the Town House, which was more than minimal, the ground floor area could no longer be used as a sitting room and could only be used as a foyer and a landing.  Whilst the blemish to title and the risk of enforcement action by reason of the conversion of Car Park No. 39 would have been removed, the DV could not cure the defect in title by the reinstatement works.

29.  In this case, DV could never provide title to the glass-roofed area of about 100 sq.ft.  Therefore, I need not decide the question of whether or not DV could tender substantial performance to PP by giving good title to the glass-roofed area and providing a smaller sitting room, without the encroachment into the car park, with a reduced area of about 100 or 150 sq.ft.

30.  Clause 12 of the two Provisional Agreements stated that the premises were sold to the Purchaser on an “as-is” basis.  I do not construe that clause as extending to and covering illegal structures or unlawful alterations.  As Le Pichon JA said in All Ports Holdings Ltd v Grandfix Ltd [2001] 2 HKLRD 630 at 642B-C, clauses such as Clause 12 in this case say no more than that the property was being sold “as-is”.  DV could not rely on Clause 12 to force PP to accept a title with defects by reason of the unauthorised extension of the sitting room and its encroachment into the common area of the development.

31.  However, that is not the end of the matter because DV contended that, by not raising a requisition in time, or at all, PP had accepted the defect in title, in the sitting room and/or glass-roofed area, which it ought to have discovered with the exercise of due diligence.

Failure to show a good title

32.  The only requisition that remains relevant is the complaint on 9 October 2008, one day before completion, in relation to unauthorised alterations and that the existing sitting room “is original for car park purpose only”.  TTC repeated on 10 October 2008 that “there is an unlawful change of user of the car parking space”.

33.  Mr Liu for PP contended that the requisition was within time; alternatively that, even if it was late, DV had waived her right to refuse to answer the late requisition; and, in any event, that even if the requisition was raised out of time and the delay had not been waived, PP was entitled to pursue the matter as it went to the root of the title, relying on the statement of principle enunciated by Le Pichon JA in Lucky Dragon Corp. Ltd v Speedy Vantage Ltd [2009] 5 HKLRD 501 that a purchaser was entitled to raise requisitions out of time, if they went to the root of the title and the defect in the vendor’s title could not have been discovered had the purchaser exercised due diligence.

34.  I find against PP on all three grounds.

35.  It is trite law that, in the absence of an express provision stipulating a time within which to raise requisitions, there is an implied term that requisitions are to be raised within a reasonable time.  It has been a well established practice in Hong Kong that requisitions be raised no later than 14 days before completion so much so that the practice has been replicated in Condition 7(1) in Part A of the Second Schedule to the Conveyancing and Property Ordinance, which provides that any requisition objection in respect of title shall be delivered as soon as practicable after delivery of the title deeds, and, in any event, not later than 14 days prior to the date of completion.  Although this condition has not been expressly incorporated into the two Provisional Agreements in the present case, I do not see any basis for concluding, in the present case, that it was reasonable to extend the time to make requisitions to less than 14 days before the date of completion.  In my judgment, a reasonable time within which to raise requisitions in the present case was no later than 14 days before the date of completion.  In its letter dated 9 October 2008, KMLL stated that the requisition, raised only one day before the completion date, was time-barred.  In its letter dated 10 October 2008, KMLL stated that they were enclosing an Architect’s Certificate from Mr Michael Yuen (“Mr Yuen”) dated 9 October 2008 “without prejudice to the fact that … their requisition is raised out of time and we are not obliged to answer it”.  In another letter dated 10 October 2008, KMLL referred to the Architect’s Certificate of Mr Yuen and asserted that no more documentary evidence had to be provided by DV.  They also expressly reserved all their client’s rights.  In yet another letter dated 10 October 2008, KMLL reiterated that, as PP had raised its requisition out of time, they were not obliged to answer it.  Given the express reservation in the correspondence of the right to contend that the requisition was late and having reviewed the correspondence as a whole, I find that DV had not waived her right to assert that the requisition had been raised late and that she did not have to answer it.

36.  I have already held that the requisition in connection with the unauthorised alteration of the Car Park No. 39 and the extension of the sitting room into the car park went to the root of the title.  However, I find that PP could have discovered the defect in title by the exercise of due diligence.  It was obvious from looking at the assignment plan, which had been sent to TTC on 8 July 2008, that the sitting room had been enlarged by relocating the front door across Car Park No. 39, thereby converting about a third of the car park into the sitting room area.  Mr Liu explained that although Hui, on seeing the assignment plan, would have realized that there had been an alteration of the use of the car park area by the extension of the sitting room into part of Car Park No. 39, the fact remained that he had not seen the assignment plan prior to the date of completion and PP’s solicitors, who had seen the assignment plan, had not visited and viewed the premises, and so were not aware of the alteration of the car park.  Mr Liu explained that in Hong Kong, the purchaser would not usually sit down together with his solicitor to peruse the title deeds and plans.  Accordingly, PP could not be criticized for not having discovered the defect in the sitting room before 8 October 2008, the date when the requisition was raised.  Hui had only been alerted to that problem on that date by Mr George Ho of Hung Man Construction Co. Ltd, when they went to view the Town House together.

37.  Whatever might be the Hong Kong practice, the party seeking to rely on a late requisition going to the root of the title has to establish that the defect in the title could not have been discovered by the exercise of due diligence.  If it was readily discoverable by viewing the assignment plan, as was the case here, (and which was not the case in Lucky Dragon Corp. Ltd v Speedy Vantage Ltd), that party would not be able to establish that the defect could not have been discovered with the exercise of due diligence.  When Hui saw the assignment plan in this case on 18 May 2009, he discovered that the glass-roofed area encroached onto the common area of the development.  He would have discovered the same encroachment, as well as the unauthorised alteration of part of Car Park No. 39, had he seen the assignment plan prior to the date of completion.  In my judgment, the exercise of due diligence requires the purchaser and/or his representative or agent to view the assignment plan prior to the date of completion.  Hui did not do so.  If he had, he would have discovered the title defect.  I am not satisfied that the defect in the title could not have been discovered by the exercise of due diligence.  Accordingly, PP is not entitled to rely on the late requisition even though it went to the root of the title.

38.  I should state, for the sake of completeness, that I accept Mr Liu’s submissions that the motive of the purchaser and the absence of good faith were immaterial, provided, as was the case here, that a substantive requisition was raised, i.e. a requisition that was proper and reasonable.  It might well be that PP in this case was a speculator who was trying to get out of a bad bargain.  However, if the purchaser had a legal right to do so, the court ought not to deny him that right simply because the court suspected, or it was proved, that he was a speculator.  Whatever its motives for doing so, PP had raised a proper and reasonable requisition in respect of unauthorised use of property.  If the defect in the title could not have been discovered by the exercise of due diligence, I would have permitted PP to rely on the late requisition.  As Le Pichon JA said in Strong & Associates Ltd v Flywin Co. Ltd (CACV40/2001) at para.19, it is open to the vendor to incorporate express provisions in the provisional agreement to exclude liability for unauthorised structures and/or unauthorised user of the property.  By incorporating such express provisions, they can prevent speculators from getting out of bad bargains by exercising what would otherwise have been their legal right to complain about unauthorised structures and/or unauthorised user of property.

Did PP waive its right to receive a good title to the sitting room and glass-roofed area?

39.  I now come to the main plank of the defence case, which is that, by not raising requisitions within time in respect of the unauthorised alteration of Car Park No. 39 and the extension of the sitting room into part of that car park space, and by not raising requisitions in connection with the encroachment of the glass-roofed area into the common area of the development, the purchaser must be regarded as having waived (a) its right on insisting that the vendor show a good title before completion and (b) its right on insisting that the vendor give a good title on completion.  I have already found for DV in connection with the first part of that proposition.  Has PP also waived its right to insist on DV giving a good title to the sitting room and the glass-roofed area on completion?

40.  I must say that I found the proposition by Mr Chong, that the defect in title to the sitting room and the glass-roofed area had been waived by PP’s silence, to be startling.  The contractual bargain was that PP agreed to purchase the Town House with the sitting room and the glass-roofed area, and DV agreed to sell the same and to give good title to the Town House, including the sitting room and the glass-roofed area.  Even if PP knew or could, with the exercise of due diligence, have discovered the defect in DV’s title, PP could wait for the date of completion and for DV to give or to make good title to the Town House, including the sitting room and the glass-roofed area, on the date of completion.

41.  However, Mr Chong submitted that defects of title in the sitting room and the glass-roofed area were patent and discoverable with the exercise of due diligence, so that the purchaser must be held to have accepted the vendor’s title, notwithstanding these patent defects, if the purchaser failed to raise a requisition in connection with these defects within a reasonable time.  Additionally, by reason of the fact that the defects in title were patent, the act of PP’s solicitors in sending a draft assignment for the approval of the vendor constituted, as a matter of law, implied acceptance by conduct of DV’s title.  It was therefore not open to the purchaser to raise a requisition on the vendor’s title, not even one which went to the root of the title.

42.  In their letter to KMLL dated 18 August 2008, TTC purported to raise requisitions and sought certain coloured plans from DV.  In that letter, they expressly reserved their right to raise further requisitions.  By letter dated 30 August 2008, TTC sent to KMLL a draft assignment, and they sought specific instructions as to the parties to whom they should pay the balance of the purchase price.  In that letter, TTC specifically stressed that “our sending you of the said draft assignment for your approval shall not in any way prejudice our client’s right for satisfactory replies to the outstanding requisitions, if any”.  Mr Chong submitted, correctly in my judgment, that the reservation of rights in respect of outstanding requisitions, if any, did not include a reservation of right to raise future requisitions.

43.  In my judgment, whether or not the sending of the draft assignment for approval in this case resulted in a waiver of the right to raise requisitions on DV’s title, even one which went to the root of the title, the sending of the draft assignment for approval and the failure to raise a timely requisition did not result in a waiver of DV’s obligation to give or make a good title to the Town House, including the sitting room and the glass-roofed area, at the time of completion.  The vendor’s duty to show a good title is distinct and separate from the vendor’s duty to give or make a good title.  A waiver of the former obligation does not necessarily result in the waiver of the latter obligation.  It is a misapplication of principle to suggest that a purchaser, who has lost the right to raise a late requisition going to the root of title by reason of his failure to exercise due diligence, has thereby also lost the right to complain about the vendor’s inability to give or make a good title.  The loss of the right to demand that the vendor show good title cannot be equated with the loss of a right to demand that the vendor give or make a good title; for the latter to occur, there must be a clear and unequivocal representation that the purchaser accepts the defect in title.  In my judgment, such a clear and unequivocal representation cannot be inferred, even in the case of a patent defect in title observable by the exercise of due diligence, simply from the act of the purchaser’s solicitors sending a draft assignment with plan to the vendor’s solicitors for approval under cover of a letter containing a reservation of right to make requisitions, albeit that it was a limited reservation.  All the more, it cannot be inferred from the purchaser’s failure to raise a timely requisition in relation to the patent defect in title.

44.  In Strong & Associates Ltd v Flywin Co. Ltd (CACV40/2001), affirmed by the Court of Final Appeal (FACV15/2001), a similar submission had been made that the omission by the purchaser in that case to raise a requisition as to unauthorised alterations within a reasonable time amounted to unequivocal conduct from which an inference could be drawn that the purchaser had waived its entitlement to good title.  Le Pichon JA rejected that submission and found that the matters relied upon did not remotely make out a case of waiver.  She also said at para.19 of her judgment that:

“… I do not agree that there was an obligation upon the plaintiff to raise requisitions simply because it was informed by the vendor that some of the alterations might be unauthorised. Insofar as it may be suggested that the purchaser has a positive duty to ascertain whether or not unauthorized structures exist, it is wrong. The legal burden is on the defendant to give a good title. To hold that the purchaser is under such an obligation would effectively reverse the legal burden for giving good title in contracts for the sale and purchase of land.”

45.  These observations apply with equal force to the present case and I reject Mr Chong’s submission that by sending the draft assignment with plan for approval, and/or by failing to raise timely requisitions on the defect in title in the sitting room and the glass-roofed area, PP must be found to have accepted the defect in title in the sitting room and the glass-roofed area.

Misrepresentation

46.  I agree with the submissions of Mr Chong that it was not open to PP to rely on a case of misrepresentation as no claim in misrepresentation and/or for rescission by reason of misrepresentation had been pleaded in the originating summons.  Further, there were no statements in the affidavit evidence filed to the effect that PP was induced to enter into the Provisional Agreements by reason of any misrepresentation made to its representative.  I also accept the submissions of Mr Chong that, had these issues been properly raised, DV would have sought orders to the effect that the proceedings continue as if begun by writ, so that PP’s witnesses could be cross-examined on the issue of inducement by and reliance on the alleged misrepresentations.  DV’s legal representatives had applied before Deputy Judge Louis Chan for leave to cross-examine the deponents of the affidavits filed on behalf of PP but were refused leave to do so.  I have no doubt that the learned Deputy Judge would have granted leave to cross-examine, if PP’s claim in misrepresentation had been raised before him.  I do not agree with the submission of Mr Liu that the claim in para.7 of the prayer for relief in the originating summons for “further and/or other remedies, reliefs, orders, declarations, determinations and/or directions as the Honourable Court may deem fit or appropriate” is sufficient to raise a cause of action based on misrepresentation in these proceedings.

DV’s counterclaim

47.  I give judgment in favour of PP and dismiss DV’s counterclaim.  However, in the event that I may be overturned on appeal, I deal with DV’s counterclaim as follows.

48.  If DV had succeeded in these proceedings, I would have awarded damages to DV in the sum of $2.68 million as damages for PP’s failure to complete the purchase.  This was the real and substantial loss suffered by DV in a falling market.  Although the normal measure of damages in relation to a breach by the purchaser to complete the purchase is the contract price less the market value of the property at the contractual time for completion, the normal measure may be varied to meet the justice of the case.  Where there are dramatic changes in property values, as in this case, the difference between the contract price and the resale price is the more appropriate measure of DV’s loss, particularly as DV was prevented from selling the Property, on account of the registration of the Originating Summons in these proceedings in the Lands Registry against the Property, and could only do so after paying money into court to secure PP’s agreement to vacate the registration.

49.  I would also have awarded damages to DV in the sum of $95,800.00 for commission, and $25,960.00 in respect of legal costs. 

50.  However, whether or not DV’s claim for the costs of reinstatement is made out depends on whether DV or not is absolved from her obligation to reinstate the Property.  If DV had to perform these works in order for her to perform her obligations under the Provisional Agreements, she cannot claims these expenses as expenses incurred to mitigate loss.  However, if she were absolved from the obligation to reinstate the Property, I would have allowed these expenses as expenses incurred to mitigate loss in the sense that they were incurred in the reasonable hope that PP would complete the purchase which, for the purpose of this exercise it is assumed, it, PP wrongly failed to do notwithstanding the reinstatement.

Conclusion

51.  For these reasons, I give judgment to the plaintiff for :

(a)     a Declaration that the defendant was in repudiatory breach of contract and that the Provisional Agreements for Sale and Purchase dated 14 June 2008 & 16 August 2008 were terminated and brought to an end by the plaintiff’s acceptance of the defendant’s repudiatory breach;

(b)     an Order that the defendant do return to the plaintiff the total sums of HK$958,001.00 together with interest from 11 October 2008 to date of judgment at the rate of HSBC prime plus 1%;

(c)      a Declaration that the defendant, and not the plaintiff, is liable to pay and compensate the estate agent for any sum(s) due to the estate agent under the two Provisional Agreements;

(d)     an Order that the defendant do pay the plaintiff damages of HK$33,660.00 (in respect of conveyancing costs) and HK$12,000.00 ( in respect of fee paid to the architect) together with interest from 11 October 2008 to date of judgment at the rate of HSBC prime plus 1%;

(e)      an Order that defendant’s counterclaim be dismissed; and an Order that the defendant’s counterclaim be dismissed; and

(f)      an Order that the costs of the plaintiff’s claim and the costs of the defendant’s counterclaim be paid by the defendant to the plaintiff (including all costs reserved), to be taxed if not agreed.