CHEUNG KAI WEI SANDRA v. FUK KA PAK AND ANOTHER

M.P. No. 2099 of 1989

Headnote

Vendor and Purchaser Summons Proceaure in the High Court

            When the summons is ready for determination the Master should not hear it himself but should adjourn it for hearing by a judge in open court (not in chambers) pursuant to Order 28 rule 9 : (see pp. 8 to 10 and 13).

M.P. No. 2099 of 1989

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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JUDGMENT

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Clough, J.A.:

1. This is an appeal from the order of Master Jerome Chan on a vendor and purchaser summons issued by the purchaser of premises, No. 51 Lychee Road East, Fairview Park, Yuen Long in the New Territories. By the purchaser's originating summons, she sought a declaration that she had effectively rescinded the relevant agreement for sale and purchase of the property and an order for the repayment of the deposit of $104,500 paid by her to the vendors, who were husband and wife and the defendants to the originating summons. The Master dismissed the purchaser's claim with costs, and it is from that order that the purchaser now appeals.

2. When outlining the background facts I will refer to the purchaser's additional evidence which has been adduced with the leave of Sears J. after the notice of appeal had been filed. On the 14th May 1989 the purchaser inspected the premises in the company of an agent, Miss Lau of Po King Property Investment Company, and the defendants. She noticed that the boundary wall separating the premises at No. 51 from the adjoining premises, No. 53, was brick built up to a height of 7 feet. What is described as the "plot fence" in front of the premises, separating them from the road, was about 6 feet high. The centre part of the fence (it looks like a wall in the photographs) contained glass bricks which could not be seen through from the outside. The purchaser said in her evidence, (and I emphasise that although I mention this as a part of the background it is not a matter which has been accepted by the vendors), that she liked the premises because they gave her privacy. She contended that she had sighed the provisional agreement on the same occasion, namely the 14th May, for the purchase of the premises on the basis that she was buying them as they were at the time of inspection.

3. On 30th May 1989 the purchaser and the vendors entered into an agreement for sale and purchase in respect of the premises. The purchase price was $1.045 million. Two deposit payments amounting to a total of $104,500 were paid by the purchaser, leaving a balance of $940,500 to be paid on completion. The completion date was on or before 3 p.m. on the 15th August 1989. Time was made of the essence "in every respect" under clause 5 of the agreement.

4. This appeal is concerned with Clause 14 of the agreement which is in the following terms:

5. Reference has also been made to clauses 15 and 16 of the agreement which are in the following terms:

6. I am given to understand by counsel that Fairview Park is a modern development in the New Territories, with small units. They are not multi-storey blocks. Certainly the relevant premises comprises a residential unit and is not part of a block. However, there is a deed of mutual covenant made on 27th February 1979 by which the vendors and adjoining owners are bound. It is common ground that that is the position. By clause 7 of the deed Fairview Park Property Management Ltd. ("Fairview") was appointed to be the manager of all the relevant units. Under clause 5 and the 2nd schedule the owners were liable to certain restrictions including those imposed by park. 4(b) of the 2nd schedule which provided that the owners were not "to make any alterations or additions to the exterior of any Unit of any building or to any walls and fences without the approval in writing of the Company". Under clause 7 and paragraph 1 of the 3rd schedule schedule Fairview is given various powers, including the following:

7. The next relevant event is that on the 14th June 1989 Fairview's solicitors sent a letter to the vendors complaining of breaches of the deed of mutual covenant and the Estate Rules which Fairview has power to make under the deed. One of the alleged breaches related to the insertion into the block fence in front of the premises of glass blocks which had the effect of preventing passers by from looking into the premises as they walked along the adjoining street or roadway. The notice also complained of the increase in height of the brick fence or wall which was the boundary wall of Nos. 51 and 53. This wall ran from the front to the rear of both of those premises. The notice, I should call it a letter, required the defendants to "cease" these contraventions within 14 days. In default legal proceedings were threatened.

8. At some stage around mid July the vendors complied with Fairview's solicitors' letter by removing the offending structures. This compliance was acknowledged by Fairview itself in a letter to the vendors dated 4th August 1989. Shortly before the 22nd July 1989 the purchaser had been informed of these activities at the premises and on that date she went to inspect them. According to her evidence (again this has not been tested in any way but it must be common ground) she noticed that the wall between No. 51 and No. 53 had been reduced to 3 feet and that passers by could now see the front of the premises through the front wall. Photographs have been produced today to demonstrate this.

9. The purchaser complained that the premises had now lost their former privacy. She took the matter up with her solicitors. The sequel was that on the 11th August the purchaser's solicitors wrote to the vendors' solicitors purporting to rescind the agreement pursuant to clause 14(1). The relevant part of the letter was in the following terms:

The letter concluded with a demand for the return of the deposit of $104,500.

10. The ultimate reaction of the vendors' solicitors was a letter dated the 15th August 1989 to the purchaser's solicitors saying that they did not accept that there was any right to rescind on the part of the purchaser. This letter, being written on the date when completion was due, informed the purchaser that as she had failed to complete in accordance with the Agreement, the deposit of $104,500 was forfeited. This led to the issue on the 16th August 1989 of the vendor and purchaser summons by the purchaser pursuant to section 12 of the Conveyancing and Property Ordinance (Cap. 219) seeking the relief which I had mentioned above.

11. The originating summons was supported by an affidavit filed on 13th September 1989 by Mr. Hui, the purchaser's solicitor in which he exhibited relevant documents and correspondence. His affidavit was subsequently supplemented by a bundle of correspondence which had been inadvertently omitted. The first vendor (the husband) filed an affirmation on 26th October 1989 opposing the claim. It was expressed in forensic terms and basically denied the claim of the plaintiff to rescission under clause 14(1) of the agreement.

12. The summons was heard by Master Jerome Chan on 1st November 1989 and 5th January 1990. It is important that I should mention here that this seems to have been the wrong procedure and raises a matter upon which I think it is necessary to dilate. The relevant rule in the Rules of Supreme Court which deals with the master's jurisdiction and likewise the notes in the White Book are not very helpful on this matter. They do not readily assist the practitioner who is not familiar with vendor and purchaser originating summons procedure as practised in England.

13. Order 32 rule 11(1) indicates that the Registrar and any master have "power to transact all such business and exercise all such authority and jurisdiction as under any Ordinance or by these rules may be transacted and exercised by a judge in chambers except in respect of" certain specified matters. So it follows that if a particular proceeding is not to be entertained by a judge in chambers, but in open court, then the master does not have jurisdiction to deal with it. One of the difficult matters for the practitioner to identify is when a judge sits in chambers in the ordinary way and when he does not. The practice books are not of very great assistance in this respect and in England the practice in the Queen's Bench Division differs from that of the Chancery Division. This adds to the confusion for the Hong Kong practitioner.

14. As far as my own personal experience as a Chancery practitioner is concerned, it was the settled practice and I apprehend it is still the settled practice in the Chancery Division in England for vendor and purchaser summonses to be heard by the judge in the ordinary way in open court and not in chambers, so that the master in England never had and does not have jurisdiction to deal with them. The procedure for vendor and purchaser summonses has been mentioned on a number of occasions by Godfrey J. who is versed in these matters. For the benefit of the profession I think I should remind them of the unreported judgments which he has given on several occasions, emphasising that vendor and purchaser summonses should be adjourned by the master to a judge in open court and not in chambers: see Wong Shui Yun Bernadette v. Lau Wai Pui (1987 M.P. No. 1830) at p.2; 1988 M.P. No. 1996 at p.4; Pak Lan Ching v. Crown Great Company Limited (1988 M.P. NO. 2253) at p.4. In those cases Godfrey J. sets out the English practice which, I apprehend, in Hong Kong this court normally reckons to follow. As far as I am concerned, I fully endorse what he has said about vendor and purchaser summons procedure and I wish to make it clear that this case is not a matter which should have been dealt with by a master below. It should have been adjourned to a judge in open court for hearing after giving the appropriate directions under Order 28 regarding evidence and any other necessary matters.

15. I am anxious not to appear to be censorious of the practitioners concerned with this case or of the learned master who has delivered a very careful reserved judgment, but I am anxious to make this procedure clear. I add that if these originating summonses are heard in open court it has the effect of excluding solicitors as advocates. If for any reason it is considered by the profession that solicitors should be allowed a right of audience in applications of this kind, no doubt this is a matter which can be taken up by the respective professional bodies.

16. On the 1st February 1990 Master Chan delivered a reserved judgment dismissing the purchaser's claim. I now have to deal with the plaintiff's appeal. Mr. K.C. Chan, counsel for the purchaser, has made it clear today that the purchaser's evidence, filed after appeal, which I referred to above, was filed at the instigation of Sears J. when this appeal came before him on an earlier date, and that the purchaser does not wish to extend her claim beyond the question of construction of clause 14(1) of the agreement raised before the Master as the only issue. There is no question of any claim being made based on misrepresentation by silence or defect of quality of the premises contracted to be sold. If any such questions had been raised I would, in the circumstances of this case, have considered it necessary to order that this matter should proceed as if begun by writ with pleadings and evidence viva voce, because factual issues would have arisen which would not have been appropriate for determination by vendor and purchaser summons procedure.

17. I come now to the short issue that arises between the parties on clause 14(1) of the agreement. The argument advanced by Mr. K.C. Chan on behalf of the purchaser is in substance as follows. He submits that the words "competent authority" in clause 14(1) are to be given their ordinary natural meaning. It is common ground between the parties that in the event the demolition or alteration of the premises that has in fact taken place is within the ambit of the expression "demolish or reinstate" in clause 14(1). Tae issue remains between the parties regarding the meaning of "competent authority" and "notice" from any such authority. Mr. K.C. Chan points out that this agreement is a document which emanates from the vendors not the purchaser and in support of his contention for the ordinary natural meaning to be given to "competent authority", he relies on the contra proferentem principle, to the extent that nowadays that principle can be invoked. He withdraws, in my view rightly, a concession to the contrary made by him before the master, and now acknowledges that his argument goes so far as to include the proposition that "competent authority" must include any person or authority who has the contractual right or power to serve a notice requiring demolition or reinstatement. This means, and he acknowledges it very fairly, that in a situation where there are adjoining properties with mutual restrictions regarding development and the like, in the event of breach the owner with the benefit of the covenants who seeks to enforce them would be, for the purposes of clause 14(1), a competent authority.

18. Mr. K.C. Chan further argues that there is no basis for the narrower meaning of these expressions contended for by Mr. Kenneth Chan on behalf of the vendors, and he refers to the dictionary meaning of authority by reference to persons exercising power or command. In my judgment, and this is very much a matter of first impression, this wide construction advanced on behalf of the purchaser cannot be accepted. In this connection I gratefully adopt the approach of Master Chan in his helpful and careful reserved judgment, particularly his observations between pages 6 and 9 where he points out that the expression "competent authority" is not uncommon in legislation, and leads me to conclude that the expression is appropriate as a general comprehensive expression which can be adopted by a draftsman in order to avoid specifying all the authorities that he has in mind who might have statutory power to serve notices requiring demolition or reinstatement of buildings or premises.

19. Used in conjunction with the word "Government", I repeat the expression "Government or other competent authority", it seems to me to be clear that what is intended to be referred to by the expression "other competent authority" - I emphasise the word 'other' - is some other body or person who has some statutory power, not a mere contractual right or power, to serve some form of prescribed notice upon the owner or occupier of infringing premises to ensure the demolition or reinstatement of structures which had been either erected or demolished in breach of some statutory obligation or duty. If it were intended that "competent authority" should include any person or authority who had the contractual right or power to serve any sort of demand, whether it be described as a notice or a letter, then it seems to me it would be quite inappropriate to use the words "competent authority", because the words "any other person" or "any other competent person" would suffice and there would be no need to resort to the expression "authority".

20. In this connection it is quite clear that Fairview's powers derive from a contractual document, from the covenants contained in the deed of mutual covenant, and Fairview is the agent of all the owners in whose interest it would be to take proceedings or serve notices in respect of infringement of the covenants contained in the deed. It seems to me therefore that Fairview is really standing in the shoes of the owners themselves, who have contractual rights, and that Fairview is not within the expression "competent authority".

21. For those reasons I dismiss this appeal (with costs to the vendors). I add that because the matter of the procedure to be adopted in vendor and purchaser summonses is a matter of some importance and because Godfrey J.'s judgments do not seem to have percolated through to all members of the profession concerned, and nor do their implications seem to have percolated through, for understandable reasons, I think it is desirable that when this judgment has been reduced to writing it should be handed down in open court after due notice to the parties' solicitors.