HO KWOK CHEUNG AND ANOTHER v. CHEN LI JIA

HCMP No. 555 of 1998

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 555 OF 1998

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REASONS FOR DECISION

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1. This is an application for various declarations concerning an agreement by the Plaintiffs to purchase the first floor premises of a property known as 34, Yau Yu Wan Village, Sai Kung.

2. The original grant was dated the 1st December 1987. The Buildings Ordinance (Application to the New Territories) Cap. 121 came into force on the 16th October 1987. Accordingly the property was subject to the provisions of that ordinance.

3. The Plaintiffs signed the Provisional Agreement on the 27th September 1997 and paid an initial deposit of $100,000.00. The formal agreement was signed on the 13th October 1997 and sent with a further deposit of $217,000.00. In conformity with clause 9 of the Provisional Agreement the Plaintiffs paid the Estate Agent $31,750.00 on or about the 18th October 1997. Completion of the sale of the premises was to take place on or before 2nd February 1998.

4. In deducing title the Plaintiffs' Solicitors raised requisitions in their letter of 17th October 1997 the material one being a request to be provided with "the relevant Occupation Permit issued under the Building Ordinance (Cap. 123) or the Certificate of Exemption issued under the Buildings Ordinance (Application to the New Territories) Cap. 121."

5. In answer to this the Defendant's Solicitors stated that "Since the Certificate of Compliance has been issued, no Occupation Permit is necessary."

6. The Plaintiffs' Solicitors pursued the matter. It was apparent that the height of the building breached Special Condition 7(a) of the New Grant. Accordingly an Occupation Permit was necessary to the proof of title. [See Wong On v. Lam Shi Enterprises Ltd. 1995 MP No. 2549 and Lui Kwok Wai & Another v . Chan Yiu Hing & Another 1995 1 HKC p. 197.] It was clear that a Certificate of Exemption could not be issued because the dimensions of the building did not fall within Part 1 of the Schedule to the Buildings Ordinance (Application to the New Territories) Cap. 121. Without the Occupation Permit (or, had it been applicable, the Certificate of Exemption) there remained a real risk of enforcement by the Building Authority.

7. The Certificate of Compliance did not remove the necessity for either the Occupation Permit or Certificate of Exemption.

8. In reply the Defendant's Solicitors advanced their interpretation of the Letter of Toleration to the effect that the excess height would be tolerated and therefore there was no risk of re-entry by the Government. The Certificate of Compliance, taken together with the letter was an "unequivocal and clear representation that the ..... building is exempted from the provisions of Cap. 123." They also contended that the two decisions referred to by the Plaintiffs' Solicitors were not apposite to the circumstances of this case. I have to say that they are quite wrong in that regard.

9. The decision of Mr. Justice Peter Cheung in Lui Kwok Wai held that an Occupation Permit or a Certificate of Exemption was a necessary document to prove title. Where the dimensions fell within Part 1 of the Schedule to Cap. 121, a Certificate of Exemption issued under sections 4 or 5 of the ordinance was evidence that certain sections of the Buildings Ordinance (Cap. 123), especially section 21, would not apply to that building, i.e. no need for an Occupation Permit. In the absence of either document the risk of enforcement was real. It could not be assumed that the District Lands Office had assumed the authority of the Director of Buildings.

10. In that case a letter from the District Lands Office (dated over two years prior to the proposed transaction) stated that no Occupation Permit was necessary for the land, but the Government reserved its rights to take whatever action was necessary in view of the amalgamation of the house lots. It could not be treated as a Certificate of Exemption.

11. Mrs. Justice Le Pichon in Wong On v. Lam Shi Enterprises Ltd. was considering a transaction in respect of a property which exceeded the dimensions set out in the Regulations and therefore required an Occupation Permit. A Letter of Toleration and a Certificate of Compliance were issued. The learned Judge held that the District Lands Officer was acting for the Crown in its capacity as landlord. It did not purport to act for or on behalf of the Building Authority. Neither the letter nor the Certificate contained any representation that the statutory functions of the Building Authority were being assumed or exercised.

12. The Government as Building Authority had no power to waive compliance with the statutory requirements which it was charged with enforcing; this was to be contrasted with waiver, as landlord, of compliance with conditions of grant. With respect I take the same view as the learned Judges in those two cases.

13. In the case before me the District Lands Officer issued a Letter of Toleration on the 16th May 1990; on the 5th June 1990 he issued a Certificate of Compliance. Both letters referred to the building being exempted from the provisions of the Building Ordinance, Cap. 123. In neither letter did the District Lands Officer purport to represent the Building Authority.

14. Surprisingly the Defendant's Solicitors did not communicate with the Building Authority. It was left to the Plaintiffs' Solicitors to do this. By the letter of 20th February 1998 the Buildings Department made its position clear. There was no Occupation Permit; that the building was subject to the provisions of the Buildings Ordinance since it exceeded the permitted size and may be subject to enforcement action. In such circumstances there remained a real risk of enforcement. In my view the Defendant has failed to show good title.

15. On behalf of the Defendant Mr. Hanif Mughal has very properly directed my attention to the relevant considerations. He has not been able to advance a positive case. There is no affidavit or affirmation from or on behalf of the Defendant for whom a third firm of Solicitors now acts. Reliance has had to be placed upon the existing documents and the answers to the requisitions given by the first and second firms who have acted for the Defendant. For the reasons I have indicated, the requisitions raised have not been sufficiently answered.

16. I make the declarations sought in paragraphs 1, 2 and 3 of the Originating Summons. There will be an order under paragraph 4 that the Defendant repay the deposits totalling $317,500.00 with a lien over the property until such payment, with interest and costs; an order under paragraph 5 for payment of the total of $106,250.00; an order under paragraph 7 for interest on the said sums at 13 per cent per annum from the 10th February 1998 to date and thereafter at the judgment rate until payment; and the costs of this action to be taxed if not agreed.