YEUNG KAM YAU AND ANOTHER v. LAU LAWERENCE WING CHEE AND ANOTHER

DCMP3206/2001

IN THE DISTRICT COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

MISCELLANEOUS PROCEEDINGS NO. 3206 OF 2001

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JUDGMENT

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1. This is a vendor and purchaser summons in relation to an agreement dated 5th March 2001 made between the Defendants as vendor and the Plaintiffs as purchaser for the sale and purchase of a property situated at 2nd Floor and Roof of Lot No. 698 in DD2 Mui Wo Hong Kong ("the property).

2. This summons is taken out by the purchaser to establish whether or not the vendor has satisfactorily answered requisitions raised by the purchaser and thereby shown good title.

Agreement

3. The Agreement contained the usual provisions that the vendor shall show and give a good title to the property in accordance with S13 of the Conveyancing and Property Ordinance and that time was of the essence of the agreement. Deposits up to 10% of the total purchase price were paid. Completion was scheduled for 10th April 2001.

4. The vendor derived title to the property from a person called Hendrik Eckhard Westerhoek, holder of Kingdom of Netherland passport No. Z00219431 ("Westerhoek") by a deed of assignment dated 3rd September 1997. Westerhoek in turn derived title from a person called Wan Loi Hei, by a deed of assignment dated 23rd October 1991. In this deed of assignment, Westerhoek was described as holder of Hong Kong ID No. XXXXXXX(X).

5. Both the purchaser and vendor agreed to retain Messrs. Anthony Kwan & Co. as solicitor acting for both parties. ("Anthony Kwan") Apparently Anthony Kwan encountered some problems concerning the 1997 assignment. On 19th March 2001, Anthony Kwan wrote to Messrs Yip & Partners ("Yip & Partners"), solicitors acting in the 1997 assignment:

"We shall be grateful if you can let us have your assistance relating to the following matter:-

1. Special Condition (8) of the Agreement and Conditions of Exchange New Grant 7506 stated that the Grantee thereof shall not make or permit to be made any windows or other opening in any building erected on the lot without the prior written consent and approval of the District Lands Office. Please let us have the said consent for our approval; and

2. The signature of Westerhoek in the Assignment Memorial No. 258746 is different from the one in the Assignment Memorial No. 180093. Please clarify.We enclose herewith copy of relevant documents for your easy reference.

Encl.

AK/wk"

6. On 29th March 2001, Yip & Partners replied as follows:

"On perusing your concerns, it involves (1) that the window of the property was erected without any consent. We cannot give you any comments, as we have no record as to the erecting of such window at the time of completion.

As regards the signature ......... Bearing in mind that the signatures ...... both executed by Westerhoek were properly identified respectively.

If you do not share our view, there should be a conflict of interest between your two clients. No doubt, you have in mind of the disciplinary code accordingly."

7. Anthony Kwan did cease to act. On 2nd April 2001, B.C. Chow & Co. Solicitors (B.C. Chow) was retained to act for the purchaser. On 3rd April 2001, Yip & Partners replaced Anthony Kwan to act for the vendor. On the same date B.C. Chow had written to Yip & Partners raising the same two requisitions. Completion date had been advanced to 6th April 2001.

8. On 4th April 2001, Yip & Partners replied:

"(1) The New Grant No. 7560 was issued on the 27-4-1987 when the Letter of Compliance was issued on the 27-7-1990. Simply the Compliance was issued after the New Grant and also stated clearly that "the General & Special Conditions of the New Grant No. 7560 have been complied with to my satisfaction". Accordingly, Special Conditions (8) has already been complied with so your concern ........ will be regarded as superfluous."

9. Also on 4th April 2001, Yip & Partners sent to B.C. Chow title deeds and documents.

10. On 6th April 2001, B.C. Chow pointed out

"In the letter of ..... "All the positive obligations imposed on the Grantee of the above lot under the General and Special Conditions of the New Grant No. 7506 have been complied with to my satisfaction". It is therefore in our view that the said Letter of Compliance does not assist your client. Even if we are wrong in this regard, it is common ground that side window(s) or opening(s) do exist at the property. There is no evidence when the side window(s) or opening(s) were constructed and whether they were constructed before or after the issuance of the said Letter of Compliance.

We consider that only by producing the written consent and approval ........... your client can satisfy the title requisition ......."

11. Yip & Partners on the same date (6th April) replied as follows:

"(a) With regret, we do not share your view.

(b) As regards your question of the side window(s) in existence of the property are new requisitions, which we are not prepared to entertain."

12. Further correspondence between the solicitors ensued. This took the matter no further. On 27th April 2001, on an without prejudice basis, a consent letter dated 30 November 1989 from the District Lands Office Islands was sent by Yip & Partners to B.C. Chow for reconsideration. Unfortunately the transaction did not go through.

13. In support of the present proceedings, the vendor on the last court hearing sought and obtained leave to produce an affirmation from Paul Yip, Partners of Yip & Partners who handled the present transaction. It was stated in the affirmation that:

"5. Concerning the side window requisition, I would like to express my view as follow:

(a) there was no reference or express mention of "side windows" in the two letters; and

(b) it was misleading in the way as the requisition so raised and suggested that no window or other opening whatsoever should be made without the prior written consent of the District Lands Officer.

7. Accordingly, the requisition raised ..... failed to specifically identify the issue concerning the side windows. Without formulating the requisition precisely and identifying clearly the particulars of the windows. It is hardly understood that the requisition was referring to side windows ....."

Requisitions

14. There were two requisitions raised by the vendor solicitor. I shall deal with the two requisitions.

(a) Side Windows Requisition

(i) It was submitted on behalf of the purchaser that since windows were erected on all sides of the property and that Special Condition (8) of the Agreement and Conditions of Exchange of New Grant 7506 required written consent or approval of the District Lands Officer, the vendor's failure to provide such consent or approval entitled the purchaser to rescind the agreement. It was further submitted that in determining whether a sufficiently good title had been shown, the test was whether "the facts and circumstances of a case are so compelling to the mind of the court that the court concludes beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the incumbrance". The 1990 Letter of Compliance only referred to the compliance of positive obligations and that Special Condition (8) was not concerned with any positive obligation. It was thus submitted that there was a real risk that the side windows were constructed without the consent of District Lands Officer, thus a breach of Special Condition (8). It followed that the vendor had failed to show good tile.

(ii) It was submitted on behalf of the vendor that the requisition was not properly raised by failing to identify which windows or openings it referred to. In other words, the requisition was worded ambiguously and vaguely. It was further submitted that the purchaser was not at risk of a successful assertion against him of the incumbrance since the District Lands Office did confirm on 17th April 2001 that written consent had indeed been given.

Ruling

(iii) The letter dated 19th March 2001 from Anthony Kwan to Yip & Partners contained more than the body of the letter. It enclosed extracts of the New Grant and extracts of previous deeds of assignment (see YKY-3 page 1-11). Page 2 to 10 of YKY-3 were copies of enclosure. It was stated on the penultimate paragraph "we enclose herewith copy relevant documents for your easy reference". Anyone who cares to read Special Condition (8) in full as enclosed would immediately notice that consent is only required in erecting windows other than at the front and rear faces. The issue raised on this letter seems to me to be crystal clear. It was not about any window(s) or opening(s). Nor was it window(s) or opening(s) made by the vendor where consent should have been obtained. It was about any window(s) or opening(s) erected on the building other than the front and rear. I find the notion that the requisition raised failed to identify the issue concerning the side windows to be absurd.

(iv) The reply letter from Yip & Partners dated 29th March 2001 stated:

"(1) ..... that the window of the property was erected without any consent. We cannot give any comments, as we have no record as to the erecting of such window at the time of completion (emphasis added)"

Clearly Yip Partners was not talking window generally but rather window without any consent. Accordingly there was no question of the requisition being ambiguous. I find the explanation given by Paul Yip in his affirmation unconvincing.

(v) It is therefore my ruling that requisitions raised in letter by B.C. Chow dated 6th April 2001 were no more than reiterating the previous one and that they were not new requisitions as alleged raised out of time. The vendor had not produced the consent or approval by 6th April 2001.

(vi) It was not in dispute that there was an obligation on the vendor under the agreement to show and make a good title. Further, it was also not disputed by Miss Lan that the presence of side windows without consent would prevent a vendor from giving a good title on completion. It was also not submitted on behalf of the vendor that by not producing the written consent or approval, the purchaser would not be at risk of successful assertion against him of the incumbrance. But rather, it was the submission of Miss Lan that because of the fact that such consent had already been given at the time, and subsequently confirmed by letter from the District Lands Office therefore there was no such risk.

(vii) In the present case, the vendor's failure to answer the requisition satisfactorily was a repudiatory breach of the agreement. The purchaser was entitled to and did accept the breach and terminate the agreement. The fact that the vendor had subsequently provided a certified copy of the written consent did not affect its position that it had failed to answer the requisition satisfactorily. It also did not affect the purchaser's legal position.

(b) Signature Requisition

Since the vendor had not successfully answered the side window requisition thus shown good title, there was no need for me to deal with the signature requisition.

15. For the reasons given above, I am of the view that the vendor was unable at the time of completion to give a good title to the property. The Plaintiffs are entitled to the effect that the agreement was lawfully terminated by the Plaintiffs on the ground that the Defendants failed to show and give a good title. There will also be an order that the Defendants repay the sum of HK$96,000 to the Plaintiffs with interest at 8.72% from the date of the originating summons to the date of judgment and thereafter at judgment rate to final payment. I further make an order nisi that the Defendants pay the costs of the Plaintiffs of this action, to be taxed if not agreed.