JUMBO GOLD INVESTMENT LTD. v. WARREN YUEN CHEONG LEUNG and Another

1997 M.P. No. 3871

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS

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J U D G M E N T

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1. This is a vendor and purchaser Summons taken out under Section 12 of the Conveyancing and Property Ordinance, Cap. 219 by the plaintiff purchaser for a determination by the Court as to whether the defendant vendors have shown and proved a good title to the property at Flat C6 and car parking space No. C-6 of Block C of the Repulse Bay Mansions at No. 113 Repulse Bay Road, Hong Kong (hereinafter called the said property).

2. By a sale and purchase agreement dated 30th August 1997, the defendants agreed to sell and the plaintiff agreed to purchase the said property for $26.8 million.

3. Block C of the Repulse Bay Mansions is erected on Rural Building Lot No. 168 Section A, subsection 4 which was carved out from Rural Building Lot No. 168 between 1954 and 1957.

4. Rural Building Lot No. 168 (hereinafter called the said Lot) was originally subject to the following covenants under the Government Lease, namely:-

"And except with the consent of the Governor-in-Council, (the lessee) will not erect more than eight houses on the said piece or parcel of ground and will not erect any building on the said piece or parcel of ground other than houses of a European type and the design of the exterior elevations and the disposition thereof shall be subject to the special approval of the said Director (of Public Works) and in no case may the height of any building erected exceed Thirty-Five feet except with the consent of the Governor-in-Council."

5. From 1949 to 1955, the said Lot was carved out into Lot No. 168 S.A. and Lot No. 168 R.P. Lot No. 168 S.A. was further carved out into Lot No. 168 S.A. Subsection 3 and Lot No. 168 S.A.R.P. Three buildings were built on Lot No. 168 S.A. as Blocks A, B and C of the Repulse Bay Mansions.

6. Occupation Permit for Block A described as "one block of European type flats" on Lot No. 168 was issued on 28th May 1950. Occupation Permit for Block B described as "one block of European flats" on Lot No. 168 was issued on 5th September 1951 and Occupation Permit for Block C described as "one apartment block C on Lot No. 168 was issued on 28th June 1955.

7. In 1956 and 1957, Lot No. 168 S.A. Subsection 3 was again carved into Lot No. 168 S.A. Subsection 3 S.A. and Lot No. 168 S.A. Subsection 4. and they were assigned respectively to Yue Hing Land Investment Co. Ltd and Lap Heng Co. Ltd.

8. Block C was erected on Lot No. 168 S.A. Subsection 4 and the said property is one of the units in Block C. In 1973, Lap Heng Co. Ltd. assigned the said property to the defendants' predecessor-in-title.

9. In 1961 and 1964, by deeds of variation, the Government lifted the height restriction of 35 feet in respect of the remaining subsections of Lot No. 168 other than Lot No. 168 S.A Subsection 3 S.A. and Lot No 168 S.A. Subsection 4.

10. It is not disputed that there is no document to show that the height restriction in respect of Lot No. 168 S.A. Subsection 4 had been relaxed.

11. The present building on Lot No. 168 S.A. Subsection 4, namely Block C of the Repulse Bay Mansions is a 6 storeys apartment block. There can be no doubt that its height exceeds 35 feet.

12. Subsequent to the signing of the sale and purchase agreement between the plaintiff and the defendants, solicitors for the plaintiff raised requisitions pertaining to the restrictive covenant on height in question. The suggestion was that Block C of the Repulse Bay Mansions, being a 6 storeys building was in breach of the restrictive covenant permitting only houses of not more than 35 feet in height to be built.

13. The defendants, through their solicitors, took the view that as the Government actively monitored the development of the Blocks A, B and C of the Repulse Bay Mansions and since the completion of Block C, there had been two modifications lifting the height restriction in respect of the other carved out subsections of the said Lot, the Government must be aware of the situation. It was also suggested that in the 1940's and 1950's, modifications of Crown Lease were done by correspondence.

14. The defendants did not have any document to show that the Government consented to a building in excess of 35 feet in height to be built on Subsection 4 of section A of the said Lot.

15. The defendants further suggested that even if Block C was in breach of the height restriction contained in the Government Lease, enforcement action by the Government after a period of over 40 years, is highly remote. The defendant raised the issue of "waiver" by the Government in respect of the breach, if any of the covenant.

16. Section 7(a) of the sale and purchase agreement between the plaintiff and the defendants provides the following:-

"The Vendor shall give and prove good title to the Property at his own expenses shall as proof of his title to the Property, produce the Government Lease relating to the Property sold and other documents in accordance with Section 13 of the Conveyancing and Property Ordinance (Cap. 219)............"

17. Mr. Chong, on behalf of the plaintiff argued that in light of clause 7(a) of the sale and purchase agreement and Section 13 of the Conveyancing and Property Ordinance, the defendants, on the undisputed fact that Block C was in breach of the restrictive covenant, must produce a letter of modification showing that the height restriction had been lifted or evidence from the Lands Department and the Building Authority that no enforcement action will be taken in order to show a good title.

18. With respect, I do not agree with such proposition at all.

19. There can be no dispute that waiver can be a defence to breach of covenant and a waiver may be oral or written or inferred from conduct. (Bremer Handesgesellschaft mbH v. Vanden-Avenne Izegem P.V.B.A. [1978] 2 Lloyd's Rep. 109)

20. It is wrong to insist that the party claiming waiver must produce documents to support the allegation to be able to satisfactory answer the requisition or to prove good title as there may not be any such documents at all.

21. If the defendants were making positive suggestion that the Government Lease had been modified, they should of course produce the letter of modification. On the other hand if the suggestion was that the conditions in the Government Lease had been waived by the Government and there was no document to support such waiver, the defendants needed only to set out the background and circumstances leading to the alleged waiver.

22. When the requisition pertaining to the height restriction was raised by the plaintiff's solicitors, the defendants' solicitors suggested that as the Government had actively monitored the development of Block A, B and C, it was likely that there was in existence a modification. The defendants' solicitors had not positively suggested that the Government Lease had been modified. On the other hand, the circumstances in which the defendants claimed that the height restriction covenant had been waived by the Government were set out.

23. In my view, the defendants had satisfactorily answered the requisition raised by the plaintiff in connection with the covenant on the height restriction.

24. That, of course did not mean that the defendants had shown or proved a good title to the said property. In order to show and prove a good title, the defendants must established beyond a reasonable doubt that there is no risk of the Government taking any enforcement action in respect of the covenant on the height restriction. If the defendant cannot so satisfy the court, the court will not force the title on the plaintiff.

25. There is no dispute that the Occupation Permit in respect of Block C of the Repulse Bay Mansions was issued in June 1955. The Occupation Permit described the building as 'one apartment block' with no indication as to the number of storeys. On the other hand, there is no basis to assert that more storeys were added to the building since 1955, which is most unlikely.

26. In any event, at the latest, the said property has been in existence since 1973 when Lap Heng Co. Ltd. assigned the said property to the defendants' predecessor-in-title.

27. There had never been any indication nor suggestion that the Government would take enforcement action in respect of the covenant on the height restriction.

28. The question of risk of enforcement is a question of fact and degree and of common sense as Godfrey J. put it in Kok Chong Ho Wong Mui v. Double Value Developments Ltd. H.C.M.P 2857 of 1990.

29. I have repeatedly asked myself the question that in the light of the background of the case whether there is any real risk and not fanciful risk of enforcement action being taken against the said property. The answers are invariably negative.

30. On the evidence before me, I am satisfied to the required standard that the defendants have shown and proved a good title to the said property.

31. Having satisfied myself that the defendants have satisfactorily answered the requisition raised by the plaintiff and have shown and proved a good title to the said property, I am obliged to make a declaration to that effect and I do so accordingly.

32. I also make the consequential order that the completion of the sale and purchase agreement in question is to take place not later than one calendar month after the handing down of this judgment and on that matter I grant the parties liberty to apply.

33. I am satisfied that the proper order on costs is that each party is to bear its own costs. The order on costs is an order nisi to be made absolute 14 days after the handing down of this judgment.

(Wally Yeung)

Judge of the High Court