XCHRX CHAN CHIK SUM v. GREAT PEARL INDUSTRIES LTD.

1996 MP No. 1040

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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INTRODUCTION

1. The Plaintiff seeks declarations to the effect that when he sold House 61 Golden Bamboo Road East, Fairview Park, Yuen Long, New Territories ("the Property") to the Defendant he "showed" and gave good title. The Plaintiff also seeks orders consequential on such declarations.

2. The Property is a semi-detached house on an estate comprised of many similar houses. The dispute concerns a gate post, iron gates, railings and boundary wall (referred to collectively as "the railings"). It is clear from photographs in evidence that the railings around the property are similar to the gates and railings around other houses on the estate. Drawing plans in the bundle indicate that the estate management envisaged similar gates and railings around the houses.

3. In summary the dispute arises from the Defendant's allegations that the Plaintiff failed to answer queries whether the railings contravened (1) the deed of mutual covenant ("D.M.C.") and/or (2) regulations issued by the District Land Office and the Building Department (referred to collectively as "the Regulations"). In effect the Defendant asserts that the Plaintiff failed to "show" good title.

THE SALE AND PURCHASE AGREEMENT

4. The parties entered a formal sale and purchase agreement in respect of the property on 25th July 1994 ("the Agreement"). The purchase price was HK$3,300,000. The deposit was HK$230,000 payable in two tranches. The deposit was duly paid. The date for completion was 30th December 1995 [see Clause 4(a)]. The Defendant was granted a licence to occupy the property from 15th July to 29th December 1995 [Clause 5].

5. Clause 19 of the Agreement states :

"Any requisition or objection in respect of the title shall be delivered in writing to the Vendor's solicitors as soon as practical after delivery of the title deeds and in any event not later than 7 working days after delivery of the title deeds otherwise the same shall be considered waived and time shall be of the essence hereof."

6. The Plaintiff delivered the title deeds of the property to the Defendant on 6th August 1994.

CHRONOLOGY

7. The following sequence is apparent from the documents.

1994

1995

1996

THE ISSUES

8. The issues to be determined are :

(1) were the Defendant's queries ("the requisitions") properly raised;

(2) if the answer to (1) is yes, was the Plaintiff's response sufficient.

9. The Law governing these issues is set out in Active Keen Industries Limited v. Fok Chin Keong [1994] 1 HKLR 396.

(1) Were the requisition properly raised

10. In addition to having good title to property a vendor must "show" good title (i.e. demonstrate good title to the purchaser). It is rare that a vendor who has good title fails to show it.

11. It has never been suggested that the Plaintiff did not, in fact, have good title. I find that the Plaintiff did have good title.

12. The obligation on a vendor is to answer the purchaser's requisitions only if properly raised. The judgments in Active Keen Industries clearly discourage the practice, current among purchasers, of raising non-existent difficulties.

13. The obligation on a vendor to answer a purchaser's requisitions within a reasonable time is, in my view, the reverse side of a like obligation on the purchaser to raise any requisitions a reasonable time before the date for Completion.

14. I find that the Defendant did not raise the requisitions a reasonable time before the date for completion. I also find that the Defendant was breach of Clause 19 of the Agreement by failing to raise the requisitions within 7 days of receipt of the title deeds : the title deeds were received on 6th August 1994; the requisitions were first raised 16 months later on the day before the date for completion (i.e. 29th December 1995).

15. I consider that the nature of the requisitions falls on the borderline of "non-existent difficulties". From the time the Defendant occupied the premises in July 1995 the Defendant was clearly in position to realise that the railings (as the photographs show) are similar to the gates and railings in front of other houses on the estate. Also I consider it likely that the Defendant would have appreciated that in Hong Kong houses on such estates generally have similar gates and railings. I therefore find it hard to accept that the Defendant was genuinely concerned that the railings might be in breach of the D.M.C. or in breach of the Regulations.

16. The reason I consider the issue to be borderline is because the Defendant received a letter from a Chartered Building surveyor (dated 28th December 1995) recommending that the vendor should clarify the "approval status" of the railings from the estate management and/or under the Regulations. This letter also advised confirmation that the railings were structurally sound and stable. It is relevant to note that this letter does not state that the D.M.C. and the Regulations had been broken or that the railings are unsafe. It simply advises the Defendant to obtain clarification.

17. The Plaintiff's evidence shows that the D.M.C. was not breached and that the railings were structurally sound and safe.

18. Recently the Defendant obtained an architect's opinion to the effect that the railings are "structural elements" under the Regulations that, as such, they require approval from the Building Authority failing which they are liable to demolition (see the letter dated 5th July 1996). This opinion is in conflict with that of the Plaintiff's architect [see the affirmation of Erik Lee Siu Man] who stated that the railings are "non-structural works" for which no approval was required. As a matter of evidence I prefer the opinion of the Plaintiff's architect. He described his inspection of the railings and he gave reasons for his opinion. The Defendant's architect does not state the work he has done nor indeed does he state whether he visited the railings. I find that the railings are "non-structural" and so required no prior approval under the regulations.

19. As I have indicated the requisitions are on the borderline of "non-existent difficulties". After considering all factors I have decided that the requisitions were not properly raised. The main reasons for my decision are : (1) the requisitions were raised unreasonably late. In addition they were raised in breach of Clause 19 of the Agreement; (2) when analysed the requisitions do not constitute a sufficient difficulty because neither the D.M.C. nor the Regulations were, in fact, broken.

20. In case my finding that the requisitions were not properly raised be challenged I propose to consider the second issue.

(2) Was the Plaintiff's response to the requisitions sufficient

21. I find that the chronology shows that the Plaintiff did all he could to respond promptly. Twice he extended the date for completion. I find that the Plaintiff's responses were candid : he told the Defendant all he knew.

22. The Plaintiff gave a sufficient response to whether the railings contravened the D.M.C. He sent the Defendant a copy of the estate management office's letter making it clear that there was no breach.

23. With regard to the Regulations I find that there was no real risk of enforcement action by the Building Authority. Part V of the Building Ordinance exempts works which do not involve the structure of the building. I have already found that the railings were "non-structural works" for which no approval was required. Evenso the regulations would apply if the railings were unsafe. After considering the evidence I find that the railings were safe.

24. The Plaintiff did not give a specific answer about the effect of the Regulations. Nevertheless I am satisfied that in all the above circumstances the Plaintiff's response was justified.

25. My finding under issue (1) makes it unnecessary to consider issue (2). However, for completeness, I have considered it. I find that in all the circumstances the Plaintiff's response to the requisitions was reasonable and sufficient.

CONCLUSION

26. I am satisfied that the Plaintiff "showed" good title to the property. I find for the Plaintiff and grant the following relief claimed in the Originating Summons :

27. I make Declarations in favour of the Plaintiff in terms of numbered paragraphs 1, 2, 3, 4 and 5 of the Originating Summons;

28. I make Orders in favour of the Plaintiff in terms of numbered paragraphs 6 and 7 of the Originating Summons;

29. I make an order nisi of costs of and incidental to the Originating Summons to be to the Plaintiff with liberty to both parties to apply.

(Nigel Aiken, Q.C.)

Deputy Judge of the High Court