WORLDFULL INVESTMENTS LIMITED v. YOUNG KING ASIA LIMITED

1996, No.MP1826

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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1. This is a vendor/purchaser summons under which the vendor is seeking a declaration that the requisitions and objections in respect of the title of the property known as the Ground Floor, Nos. 1, 3, 5, 7, and 9 Sai Lau Street and Nos. 202, 204, 206, 208, 210, 212 and 214 Sha Tsui Road, Tsuen Wan, New Territories, Hong Kong ("the property"), the subject matter of an agreement for sale and purchase dated 18 January 1996, made between the plaintiff herein as vendor and the defendant herein as purchaser, spelt out in a letter dated 20 March 1996 from Messrs Siao, Wen & Leung, Solicitors for the defendant to Messrs Ho, Li, Lo, Lam & Yeung, Solicitors for the plaintiff, have been sufficiently answered by the plaintiff, and a declaration that good title to the property has been shown by the plaintiff in accordance with the agreement.

2. It is not disputed that part of the property sought to be sold by the plaintiff to the defendant, that is Shop Number 2 on the Ground Floor of Number 212 Sha Tsui Road, Tsuen Wan, New Territories, being a commercial shop premises, was described by the Occupation Permit number NT103/65, dated 4 October 1965, to be a garage for 10 motor vehicles for non-domestic use. It is, therefore, not in dispute that the user, as described in the agreement for sale and purchase of the property, was not permitted by the Occupation Permit. In the premises, prima facie, there was an unauthorised use of the premises sought to be sold by the plaintiff to the defendant. It is then for the plaintiff to explain and establish why, notwithstanding such a blot on the title, there was a sufficient answer to the objections raised in respect thereof, and a declaration that good title has been shown by the answer given to the defendant. I say there was a blot on the title as shown because the admitted unauthorised user of the premises in question would entitle the government to take enforcement action against the said premises, and it is trite law that such will amount to an encumbrance on the title.

3. The plaintiff firstly argued that the requisition was made out of time; and, therefore, there is no right to make that requisition in the first place. It is not disputed that the requisition was made out of time. Pursuant to clause 11 of the agreement, all requisitions to title would have to be made within seven working days after receipt of all title deeds by the defendant. In this case all title deeds had been delivered by 5 March 1996. In the premises, time for raising requisitions would have expired by 14 March 1996. The requisition in question was only raised by the defendant in a letter dated 20 March 1996, about six days after time had expired for raising requisitions. However, notwithstanding expiration of the time for raising requisitions, the plaintiff saw fit to answer such requisitions by their letter dated 26 March 1996 via their solicitors, Messrs Ho, Li, Lo, Lam & Yeung. The said letter was in the following terms :

" We refer to your letter of 20 March 1996 and the requisition stated therein.

We are of the opinion that the plan annexed assignment Memorial number 80251 was prepared by an authorised architect who, at the material time of preparing the same, should have had full knowledge that such alteration was either an authorised structure or exempted building works.

Without prejudice to the aforesaid, we have written to the Building Authority to confirm our view and shall let you have their reply upon our receipt from them."

4. Subsequent to this letter, the plaintiff's solicitor did write to the Building Authority in a letter dated the same date, 26 March 1996, asking the Building Authority to supply information whether the alteration work, that is turning four shops and ten garages to 11 shops on the ground floor, had been approved by the Building Authority in 1967. Pursuant to this enquiry, they received a reply from a Mr. Robin LEUNG, occupying the office of Building Surveyor/Public Relations for Chief Officer/Management Buildings Department dated 10 April 1996. The letter was in a standard printed form with boxes to be ticked against. The author of this letter ticked against three boxes, effectively giving the following answers :

" Firstly, no application for alteration has been received after the issue of Occupation Permit number NT103/65;

Secondly, that the descriptions indicated on the Occupation Permit are generally based on the latest approved building plans;

Lastly, that 'It is not within my jurisdiction and I am not in a position to comment on the assigned memorial number 80251 under the Buildings Ordinance.'"

5. On the basis of the above evidence it is submitted by the plaintiff that the Building Authority must have either acquiesced or waived the unlawful user; and on that basis they submitted that it would be unlikely for enforcement actions to be taken, therefore rendering the blot on title to be a fanciful one.

6. I am unable to accept such arguments on the available evidence before me. No doubt the letter was addressed to the Building Authority but, apparently, that letter was directed by someone, and it is unknown to me by whom, to the Public Relations Office of the Building Department for handling and for answer. There is no evidence before me to entitle me to draw the inference that the unlawful user of the shop in question had been drawn to the attention of the Buildings Authority as against the Public Relations Department of the Buildings Department.

7. I refuse to draw any inference as invited by the plaintiff in this respect that the Building Authorities had actual or constructive knowledge of the unlawful act. In any event, even if I can draw such an inference, there has not been sufficiently long time lapsed between the acquisition of such knowledge and the time for completion for one to draw the further inference that there had been a waiver on the part of the Buildings Authority as against such unlawful act. Completion date was supposed to be 10 April 1996. The time lapsed between the reply letter from the Public Relations Department of the Buildings Department, i.e. the alleged acquisition of knowledge by the Building Authority, and plaintiff's solicitor's letter dated 26 April would only be a matter of a fortnight or so. There is no further evidence to give rise to any other inference in this case in favour of the plaintiff.

8. It is also submitted by the plaintiff that existence of an enforcement order in 1994 should give rise to an inference that the Building Authority must have inspected the whole building at that time and had prior knowledge of the unlawful user as long ago as 1994. I find it impossible for any reasonable tribunal to draw that inference simply on the land search record of such an enforcement order. There is no detail given in the Land Registration Record as to what sort of enforcement order was made back in 1994 and to which part of the building it related. There is absolutely no evidence before the court for the court to draw any inference that anyone from the Buildings Authority had inspected the relevant part of the building, i.e., the subject matter of the sale and purchase in this case, back in 1994. I refuse to draw any such inference from the available evidence before me. To do so would be a matter of unreasonable speculation. For the reasons given, I refuse to draw any inference that the Building Authority had ever acquired any knowledge of the unlawful user, and therefore no issue of waiver or estoppel against the Building Authority can arise.

9. As far as the issue on the time for raising acquisition is concerned, it is a very straightforward position. In the letter of 26 March 1996, when the plaintiff's solicitor answered the requisition, they have not reserved any position open to them in law at that time. They had not made their answer without prejudice to their right under clause 11 to object to the requisition being raised out of time. It is clear from their unqualified letter dated 26 March 1996, that they have agreed, by conduct, to extend time for raising requisitions. They have answered it in unqualified terms without reservation of any legal right under clause 11. Pursuant to this, the defendant had continued to pursue the sale and purchase of the property, thereby incurring legal costs. It is quite clear that the implied consent by conduct, arising from the letter 26 March 1996 from the plaintiff's solicitor, have been relied upon by the defendant, and acted upon by the defendant, in further pursuance of the sale and purchase agreement, and they have suffered detriment as a result thereof by incurring further legal costs on that basis. There is no question of the plaintiff now coming to court to raise complaint about the requisition being made out of time. It is now too late for them to raise this complaint. It is not permissible for them now to go back on their position that they have clearly indicated on 26 March in receiving and dealing with the requisition as if time had not expired for making such requisition. If the plaintiff's solicitor wished to deal with the requisition on a without prejudice basis and reserving their right to raise a complaint against lateness in making the requisition, they should have said so in their letter of 26 March. The profession is advised to do that in future if that was indeed the intention of the vendor to reserve such rights and to answer requisitions on a wholly without prejudice basis.

10. For reasons given, I am satisfied that there is no merit in the plaintiff's application for the declaration sought. I have come to the view that the requisition was, although not properly made at first, accepted by the plaintiff and dealt with by the plaintiff on the basis that such requisitions could be raised at that time, and in the premises they were properly raised, and that the plaintiff had failed to answer that requisition at all.

11. Their answer was simply an assumption that the plans attached to the assignment must have indicated correctly the lawful position because it was signed by an authorised architect. That was their answer on 26 March. Nevertheless, in the 10 April letter, which they had copied to the defendant's solicitor by their covering letter dated 15 April 1996, it was quite clear that that was not the position. The answer from the Public Relations Office of the Buildings Department clearly contradicted the answer given by the plaintiff's solicitors dated 26 March. It effectively said that the user was unlawful. So the assumption that the architect would only do the lawful thing was totally destroyed by the Buildings Department's letter. There is no further supplement to the answer to the requisition. Therefore, the requisition had not been answered at all by the plaintiff, let alone sufficiently answered.

12. For the reasons given, the originating summons must be dismissed.