TO KAM KWONG v. TSEUNG YUK CHU

1997, No.MP505

IN THE HIGH COURT OF HONG KONG

COURT OF FIRST INSTANCE

(MISCELLANEOUS PROCEEDINGS)

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J U D G M E N T

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1. This vendor and purchaser summons was taken out by the Purchaser under an Agreement for Sale and Purchase dated 2 January 1997 for, inter alia, declarations that the title of the Defendant to the property contracted to be sold is defective, that the Defendant has failed to prove good title to the property and to satisfactorily answer the requisition(s) raised by the Plaintiff's solicitors on the Defendant's title to the property.

2. By the Agreement, the Vendor, who is the Defendant, contracted to assign to the Plaintiff, the Purchaser, two equal undivided 210^th parts or shares of and in Kowloon Inland Lot No.10319 ("the Lot") and of the erections and buildings thereon known as Yick Man Building, Nos.5-19 Ha Heung Road ("the Building"), together with the sole and exclusive right a^nd privilege to hold, use, occupy and enjoy all that Flat C on the 2nd floor and flat roof of the Building ("the Flat").

3. The Lot which is rectangular in shape is one of a number of lots which have a frontage on Ha Heung Road. At one side of the Lot is a lane leading from Ha Heung Road and running from a south-easterly to a north-westerly direction. All the lots fronting Ha Heung Road including the Lot are set back from Ha Heung Road as is apparent from an inspection of the plan of the Lot based on a survey sheet dated 21 November 1973 signed by the Registrar General, there being a pavement separating these lots from the road itself.

4. The Building was erected in 1976 and consists of 13 storeys. The ground floor consists of shops and the 1^st floor, like the ground floor, is for non-domestic use. As appears from the Occupation Permit dated 24 November 1976, each of the 2^nd to 13^th floors consists of six flats for domestic use.

5. There is a block plan showing the layout of the 2^nd floor. Flat C is on the side and has a frontage over the lane. Flats A and B, on the other hand, have frontages on Ha Heung Road. It is apparent from the block plan that portions of Flats A and B protrude beyond the boundary of the Lot by some 10 feet. It is common ground that the protrusions commence only from the 2^nd floor upwards. They are not in fact balconies but are enclosed and each protrusion forms part of Flat A or B (as the case may be) on the 2nd to 13th floors. Because the Lot is itself set back from Ha Heung Road, the protrusions do not project over the road but the pavement. It is to be noted that the survey plan shows broken dotted lines which appear to represent and are certainly consistent with there being overhanging protrusions. Such overhanging balconies appear to be a common feature along Ha Heung Road, Chi Kiang Street and the vicinity generally. So much is apparent from the survey sheet. But as the survey sheet predates the Building, the protrusions in question do not appear on the plan.

6. The portions of Flats A and B which overhang are said to encroach on land belonging to the Government. But the Agreement does not itself relate to either Flat A or Flat B : rather it relates to Flat C, no part of which can be said to have been erected outside the boundaries of the Lot. At the hearing, counsel for the Purchaser quite properly conceded that the Vendor did have good title to the property and effectively abandoned the allegation that the protrusions over Ha Heung Road constituted a defect in the title of Flat C. It is clear from the judgment of Litton J.A. (as he then was) in Active Keen Industries Limited v. Fok Chi Keong [1994] 1 HKLR 396 at 407 and 410-411 that illegal structures or unauthorised balconies affecting only some of the units in a multi-storeyed building does not affect the title to other units in the building that do not have such illegal structures or unauthorised balconies. He observed (at 411) that :-

"[Kok Chong-ho v. Double Value Development Ltd. [1993] 2 HKLR 423] is authority for the proposition that the presence of illegal structures in another part of the multi-storeyed building in which the flat to be sold is located does not per se render the title of the flat-owner defective."

I would respectfully agree.

7. In Chan Hong Chun v. Mak Kiu MP No.1961 of 1995, it was held that a protruding balcony amounted to a structure erected over public streets, that the erection of such a structure amounted to occupation of the street in question and as no licence, deed or memorandum of appropriation existed to justify this occupation, the vendor had failed to prove her title to the property. But in that case the property which was the subject of the sale did have such a protruding balcony. It is thus distinguishable.

8. In view of the concession, the only issue remaining is whether the requisition raised by the Purchaser had been sufficiently answered. If the Vendor fails to answer requisitions satisfactorily, the Purchaser is entitled to rescind even if the Vendor has a good title to the property. See Active Keen Industries Ltd. v. Fok Chi Keong (supra).

9. The requisition was first raised in a letter from the Plaintiff's solicitors dated 21 January 1997 as follows :

"We notice that portions of Flat A and Flat B of the Building was constructed on or over the Crown Land. Please therefore let us have documentary proof showing that the Crown had duly waived its right on the Crown Land or alternatively the Crown had given consent to the developer so had been done."

Despite the awkward phraseology of the requisition, it is plain that the Plaintiff was thereby seeking documentary proof of waiver or, alternatively, consent by the Government. On 23 January 1997 the Vendor's solicitors responded that :

"The issue of the Letter of Compliance Memorial No.264970 as well as the issue of the Occupation Permit No.K92/76 have the implication to show the consent to build over Crown Land. No further documentary evidence is required to be adduced in this respect for proof of title unless the contrary is shown."

10. The Plaintiff's solicitors disagreed with that view and in their letter of 27 January 1997 insisted on having documentary proof of waiver or consent sought earlier when the requisition was first made. Subsequent correspondence merely reiterated the parties' respective positions regarding the effect of the Occupation Permit and the Certificate of Compliance dated respectively 24 November 1976 and 21 December 1976. As regards the latter, it was expressed to be given :

"Without prejudice to all or any rights of the Crown, whether under the said Conditions or otherwise, in respect of any breach or failure to observe any of the said General and Special Conditions which may exist at the date hereof or which may hereafter occur."

11. On 1 February 1997, the Vendor's solicitors gave 5 days' notice pursuant to Clause 4A of the Agreement to annul the sale unless the objection or requisition should have in the meantime been withdrawn. Clause 4A is a provision which enables the Vendor to annul a sale if the Purchaser insists on any objection or requisition as to title which the Vendor is unable or unwilling to remove or if the title of the Vendor should be defective. This notice was withdrawn two days later, prior to the expiration of the 5-day period. On the same day, the Vendor's solicitors wrote stating that it was their view that the Government must be deemed to have abandoned its rights on the ground that the Building had been existence for over 20 years, the Government had notice of the "built-over" portions of the Building because of the issue of the Certificate of Compliance and yet had taken no enforcement action since 1976. It must therefore be deemed to have acquiesced in the protrusions which are over Government land. In response, the Purchaser's solicitors merely reiterated their earlier view and insisted that the Vendor had failed to prove good title or to answer the requisition sufficiently. Although the original completion date was 31 January 1997, by agreement, that was extended to 10 February 1997.

12. It is clear from the response to the requisition raised by the Plaintiff that other than the Occupation Permit and the Certificate of Compliance, the Vendor had no other relevant document that it could produce. However the requisition was framed on the basis that the Vendor was under a positive obligation to produce either a written waiver or written consent on the part of the Government. That premise is unfounded. If, as the Purchaser now accepts, the protrusions do not affect the Vendor's title, the Vendor was not under any obligation to provide the documentary proof requested. Counsel for the Purchaser submits that it was nevertheless incumbent upon the Vendor to write to the District Lands Office to ascertain the Office's stance as regards the protruding balconies. But how could there be such an obligation where it is conceded that the Vendor's title is not defective? In any event, what would that course have achieved? It is a matter of pure speculation what response would have been received had such a letter been sent. More likely than not, the Land Office would have reserved all its rights and it would not have taken matters any further. The submission has no substance.

13. Whether the Vendor's response was sufficient can be tested in the following way. Assuming that a protruding balcony would have constituted a breach of section 6 of the Government Land Ordinance, Cap.28, what are the consequences of such a breach? Subsection (2) provides :

" (2) If the occupation of unleased land does not cease as required by a notice under subsection (1), any public officer, or other person, acting on the direction of the Authority may, with the assistance of such other public officers or other persons as may be necessary-

(a) remove from the land the persons (if any) thereon; and

(b) take possession of any property or structure on the land."

Prima facie therefore, the Government could remove from the land i.e. the unauthorised structure, the person or persons in possession of or the Government could take possession of it. The "land" in that context can only mean the protrusions extending beyond the boundaries of the Lot. It cannot possibly extend to any part of the Lot itself. Subsection (2A) went on to provide that -

" (2A) Notwithstanding subsection (1), where -

(a) .....

(b) a structure has been erected on unleased land, otherwise than under a licence or a deed or memorandum of appropriation, and the Authority is reasonably satisfied that the structure is not being habitually and bona fide used,

any public officer, or other person, acting on the direction of the Authority may, with the assistance of such other public officers or other persons as may be necessary, and without giving any notice-

(i) remove from the structure any person or property therein;

(ii) demolish the structure; and

(iii) take possession of such property and of any property resulting from the demolition of the structure." (emphasis supplied)

The demolition of the offending structure does not arise because the Government may not proceed to do so unless the property is not habitually occupied. It is evident that assuming that the protrusions constitute unlawful occupation of unleased land within Cap.28, it can have no practical consequences for the owner of Flat C. In these circumstances, there was really little else for the Vendor to say other than that it did not have the documentary proof of consent or waiver sought which is the clear inference to be drawn from a fair reading of the answers given. In my judgment, the requisition raised was sufficiently answered.

14. Counsel for the Plaintiff sought to contend that by withdrawing the notice of annulment, the Vendor rendered it difficult for the Plaintiff's solicitors to properly advise their client. Not only is there no evidence of detriment, it is not a matter that has previously been raised. It is not a matter which now arises and which needs to be addressed.

15. This is a case where there is no substance in the Purchaser's objection. The answer given by the Vendor was sufficient. The originating summons is dismissed with costs.