KA CHUNG MAN v. LAU YIN LING

1996 M.P. No. 4097

IN THE SUPREME COURT OF HONG KONG

HIGH COURT

MISCELLANEOUS PROCEEDINGS

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IN THE MATTER OF a Formal Agreement for Sale and Purchase dated 6th February 1996 and made between TANG SAU CHUN and SIOE YIN MAN and LAU YIN LING for the sale and purchase of All That one undivided 8th part or share of and in All That piece or parcel of ground registered in the Yuen Long New Territories Registry as Lot No. 1430 in Demarcation District No. 109 and of and in the messuages erection and buildings thereon ("the Building") together with the sole and exclusive right and privilege to hold use occupy and enjoy All That Flat C on the First Floor of the Building ("the Property")

and

IN THE MATTER OF Section 12 of the Conveyancing and Property Ordinance Cap. 219, Laws of Hong Kong.

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J U D G M E N T

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1. The Plaintiffs in both actions were originally purchasers of the respective premises at Flat C on the First Floor and Flat C on the Second Floor of the building erected on Lot No. 1430 in Demarcation District No. 109 and the Defendant was the vendor.

2. Having paid the initial deposits of $30,000.00 and $50,000.00 respectively, the Plaintiffs refused to complete the transaction on the ground that the Defendant had failed to satisfactorily answered the requisitions and had failed to show a good title to the said premises.

3. The Plaintiffs seek to recover the deposits and the Defendant seeks to forfeit the same.

4. As the issues involved in both actions were identical, both Summonses taken out by the Plaintiffs under Section 12 of the Conveyancing and Property Ordinance were dealt with together at the same time.

5. Lot No. 1430 in Demarcation district No. 109 (The said Land) was granted to a Chan Chu by the Crown under a Memorandum of Agreement By the Purchaser dated 31st January 1924 which memorandum of agreement was subsequently registered with the District Land Office as New Grant No. 4033.

6. The said Memorandum of Agreement by the Purchaser stipulated that Chan Chu agreed to become the Lessee under and subject to the General and Special Conditions of Sale. The Memorandum of Agreement itself contained no such General and Special Conditions.

7. Apparently, instead of including the General and Special Conditions in the Crown Lease itself, the General and Special Conditions were actually set out in the Government Notification published in the Government Gazette.

8. Government Notification No. 364 published in the Hong Kong Government Gazette dated April 27, 1909 stipulated as follows:-

"It is hereby notified that the General Conditions of Sale applicable to all sales of Crown Land for building in the New Territories (exclusive of New Kowloon), published in Government Notification No. 57 of the 19th January, 1906, are revoked."

9. Government Notification No. 365 dated the same day also stipulated:-

"It is hereby notified that, until further notice and unless otherwise stated, the following General conditions of Sale will be applicable to all sales of Crown land in the New Territories (exclusive of that portion described as 'Southern District Mainland' in the Order in Council dated the 15th of March, 1906, Government Notification No. 212 of 1906 in the same manner as if the said General Conditions were included in the published Particulars and Conditions of Sale in each case, Special Conditions of Sale will be separately set forth:-

General Conditions of Sale ... ."

10. By Government Notification No. 697 dated October 29, 1909, which refereed to Government Notification No. 365 of 1906, the Special Conditions of Sale of lands in the New Territories were also set out.

11. By G.N. No 570 dated October 10, 1924, G.N. No. 365 of 1906 and 697 of 1909 were revoked and a new sets of General and Special Conditions of Sale were applicable to all Sales of Crown Land in the New Territories. G.N. 470 dated July 17, 1931 made further modification to such General and Special Conditions.

12. The General and Special Conditions as set out in G.N. 570 of 1924 and G.N. 470 of 1931 were also revoked and replaced by those set out in G.N. 364 of 1934.

13. It is therefore clear that the applicable General and Special Conditions on the grant of the said Land were those set out in G.N. 365 of 1906 and G.N. 697 of 1909.

14. In or about January 1992, a new three-storeys building was erected on the said land. It was common ground that in respect of the new building no occupation permit had been granted under section 21 of the Building Ordinance Cap. 123 which application was extended to the New Territories by section 3 of the Buildings Ordinance (application to the New Territories) Ordinance Cap. 121. It was also not in dispute that no formal certificate of exemption had been granted by the Director of Lands under Section 4 Cap. 121.

15. By a letter dated 18th November 1993, from the District Lands Officer, Yuen Long addressed to the Defendant, a modification of the New Grant No. 4033 relating to the said Land was allowed on the payment of a premium of $1.7 million and an administrative fee of $21,000.00. The modification set out in the letter was as follows:-

(1) With effect from the date of this letter :-

(A) General Condition No. 12 of the New Grant shall be deemed to be deleted and the following Condition shall be substituted therefor:-

"12.	(a) No house shall be more than two storeys in height,
	(b) Notwithstanding anything to the contrary herein contained, for the lifetime of the building presently erected on the Lot, no structure or building shall be erected thereon other than a building which shall neither contain more than three storeys nor exceed a height of 7.62 metres, and the maximum roofed-cover area of the Lot shall not exceed 141.07 square metres.
	(c) The building presently erected at the Lot is not exempted from the provisions of the Buildings Ordinance Cap. 123, under the Building Ordinance (application to the New Territories Ordinance Cap. 121). No site formation, building or other plans in respect of the Lot have ever been approved by the Building Authority. Nothing herein contained shall be construed as a representation by the Government that the building presently erected on the Lot or any Works in connection therewith are structurally safe and the Government expressly excluded any liability arising out ?of such construuunt of any development or redevelopment of the Lot, plans shall be submitted to the Building Authority for approval before commencement of any works.
	(d) The Purchaser shall indemnify and keep indemnified the Government its officers and servants from and against all actions, costs, claims, and demands arising directly or indirectly out of or in connection with the building presently erected on the Lot.

(B) ... ."

16. By another letter dated 8th of August 1994 and in an attempt to clarify the position, the District Land Office, Yuen Long stated the following:-

"In accordance with the Modification Letter dated 18.11.1993, the building is tolerated for its lifetime and no Certificate of Exemption will be issued.

Subject to the compliance with the lease conditions under which the above lot is held and the Modification Letter dated 18.11.1993, there is no objection from the Government for the alienation of the Lot."

17. By another letter dated 13th July 1995, the Distinct Land Office, Yuen Long again wrote:-

"further to my letter of 8 August 1994 to you, I would confirm that the redevelopment completed on the subject lot has been accepted by the Government by the modification letter dated 18 November 1993 and hence I have no objection to the premises to be occupied.The issue of the Certificates of Exemption is not necessary as the aforesaid modification isby expressly declared that the location, area and boundary of the captioned lot as claimed by you have not been verified by me and this letter shall not be construed as Government's agreement or acceptance as to such location, area or boundary and no liability whatsoever in this respect shall incurred to Government, its officers or servants.

This letter is given without prejudice to all or any rights of the Government whether under any covenant/conditions governing the lot or otherwise in respect of any breach or failure to observe any of the said Conditions which may exist on the date hereof or which may hereafter occur.

As the building erected on the lot is exempted from the provisions of the Building Ordinance, Cap. 123, no site formation, building or other plans have been approved by the Building Authority in respect of the above lot and the building erected thereon. Accordingly this letter is not to be construed as a representation by Government that the building erected on the above lot or any works in connection therewith are structurally safe and Government expressly excluded any liability arising out of such construction or works."

18. Subsequent to the signing of the Sale and Purchase Agreements between the Plaintiffs and the Defendant, solicitors for the Plaintiffs wrote to the solicitors for the Defendant raising requisitions on the Defendant's title to the said Property. There had been numerous correspondence between the two firms of solicitors.

19. It may not be necessary or desirable to set out the correspondence between the solicitors in details. Suffice to say that the solicitors for the Plaintiffs raised the following requisitions:-

1. A certified copy of the New Grant No. 4033;

2. The discrepancy between the name of the owner of the Land, whether the name should be Chan Chu or Chan Chee;

3. Copies of the General and Special Conditions of the sale of the Land referred to in the Memorandum of Agreement dated 24.1.1924;

4. The discrepancy between the modification letter dated 18.11.93 which stated that no house more than two storeys in height should be built on the Land when the building in question was in fact a three storeys building; and

5. Evidence of the approval by the Building Authority for the redevelopment of the said Land and the occupation permit of the Building.

20. In response to the requisitions raised by the Plaintiffs' solicitors, the Defendant's solicitors adopted the following stance:-

1. The conditions set out in G.N. No. 364 of 1934 were deemed to be incorporated as the conditions of New Grand No. 4033. The suggestion was that it was the usual practice of the District Lands Office in the New Territories to adopt G.N. 364 of 1934 as the Particulars of sale of all such early grant and there was no other conditions available at the material time;

2. The name of the original owner should be Chan Chu and the discrepancy was due to the way in which he signed his name;

3. The letter from the District Land Office, Yuen Long dated 13.7.95 confirmed that

"the terms as modified by the Modification Letter have been complied with and that the building erected on the lot is exempted from the provisions of the Building Ordinance. Therefore no occupation permit was required. It was also suggested that section 12(b) of the General Condition of G.N. No 364 of 1934 permitted the erection of a three storeys building on the said Land.

21. The Plaintiffs' solicitors did not find the requisitions raised by them satisfactorily answered and refused to complete the transactions. The Defendant's solicitors forfeited the deposits and hence the present application before the court.

22. On the issue of the discrepancy in the name of the owner in the Memorandum of Agreement dated 31.1.1924 and the Memorial No. 58778, I do not find it difficult to resolve at all.

23. In the Memorandum of Agreement dated 31.1.1924, Chan Chu was declared to be the successful bidder of the said Land. The signature of Chan Chu as appearing in the Memorandum appeared to be Chan Chee. It was purely the manner in which Chan Chu signed his name. In the Memorial No. 58778, the name of the Vendor was stated to be Chan Chu although in the signature column, his name was typed as Chan Chee.

24. Whether it was the result of the manner in which Chan Chu signed his name is not a matter I need to speculate. But in both documents, the party's name was clearly stated to Chan Chu. I do not consider the discrepancy arising out of his signature was of any relevance at all. In any event, Mr. Lam on behalf of the Plaintiffs conceded that it was not a matter he could rely on any further.

25. In some of the subsequent conveyancing documents relating to the said Land, there was reference to a New Grant No. 4033. However there could be no doubt that the said New Grant No. 4033 in fact dealt with the said Land in question, namely D.D. 109 Lot 1430. The reference to the New Grant No. 4033 would not, in my view affect the title of the said Land at all and it could be ignored for all intent and purposes.

26. Mr. Lam, on behalf of the Plaintiffs raised strong objection to the discrepancy in the Modification letter dated 18th of November 1993 when General Condition 12(a) stated that "No house shall be more than 2 storeys in height". Yet the building on the said Land was a three storey building. It was suggested that General Condition 12(b) merely tolerated the existing 3 storeys building "for the lifetime of the building presently erected on the Lot."

27. Mr. Lam posted the following question : "What happens if the building is destroyed by fire or an Act of God ? Would the legal title/interest of each of the owners of the three floors not be affected ?"

28. With respect, by the Sale and Purchase Agreements in question, the Plaintiffs were acquiring an undivided share of the said Land with the exclusive right to enjoy one of the floors of the existing building. There was no reference to another other building or any future building at all. The present building was clearly tolerated and the fact that it might have contravened the original condition of grant was of no bearing at all as there was no risk of any enforcement action in respect of the undivided share and the exclusive right to enjoy one of the floors of the existing building.

29. It was also suggested that there was no occupation permit and it was not clear if the building in question had been exempted from the provisions of the Building Ordinance under the Buildings Ordinance (application to the New Territories) Ordinance.

30. Mr. Lam seek to rely on the case of Lui Kwok Wai and another v. Chan Yiu Hing and another [1995] 1HKC 197 in which it was held that

"an occupation permit was evidence that the provisions of the Buildings Ordinance had been complied with in the construction of the building. In respect of a building in the New Territories whose dimensions fell within Part 1 of the Schedule to the Buildings Ordinance (Application to the New Territories) Ordinance (Cap. 121), a certificate of exemption issued under ss 4 or 5 of the Buildings Ordinance (Application to the New Territories) Ordinance was evidence that specified sections, including s 21 of the Building Ordinance would not apply to that building. In the absence of either of these two documents, the possibility of enforcement actions by the Building Authority in respect of the building was real."

31. There can be no doubt that the absence of an occupation permit or a certificate of exemption under the Buildings Ordinance would render the vendor's title defective.

32. The question was had there been a certificate of exemption in respect of the building in question.

33. In the letter dated 13th of July 1995 from the District Land Office, Yuen Long, it was stated:-

"the development completed on the subject lot has been accepted by the Government by the modification letter dated 18th November 1993 and hence I have no objection to the premises to be occupied.

The issue of the Certificate of Exemption is not necessary as the aforesaid modification is considered sufficient.

the building erected on the lot is exempted from the provisions of the Buildings Ordinance ... ."

34. Section 5 of the Buildings Ordinance (Application to the New Territories) provides that "the director shall issue a certificate of exemption in respect of building works in the New Territories-

(a) for a building to be built by any person and to be used for non-industrial purposes;

35. It does not specify any particular form for the certificate of exemption. In my view, the letters from the District Office, Yuen Long clearly indicate that the building in question had been exempted from the operation of the Building Ordinance. The District Land Office could not have done it in clearer term.

36. Mr. Lam argued that the District Land Office, Yuen Long could not validly and effectively grant a certificate of exemption. He relied on the decision of Le Pichon J. in Wong On v. Lam Shi Enterprises Ltd,. HCMP No. 2549 of 1995 in which the learned judge made the following observation at P. 6 of her judgment:-

"In the absence of any provision which empowered the DLO to make decisions on behalf of, or to override the Building Authority where the subject matter is the development of small houses in the New Territories or any evidence that this was in fact the practice, there is nothing to warrant the conclusion or inference that the DLO had authority to assume the statutory functions of the Building Authority and make decisions that are solely within the domain of the Building Authority under the relevant statutory provision...............In fact, from the paragraph common to both the Letters of Toleration and Compliance, no representation was being made that 'Government' extended to the Building Authority. It certainly did not purport to assume or exercise any of the statutory functions of the Building Authority. The specific reservation of rights in the Letter of Compliance re-inforces this interpretation. It specifically reserved to the Lessor rights other than those contained in the conditions. There is also the fact that Government has not power, qua Building Authority, to waive compliance with statutory requirements the Building Authority was charged with enforcing, as opposed to waiving compliance with conditions of grant, qua landlord."

37. It is important to bear in mind that in Wong On's case, Le Pichon J. was not applying the Buildings Ordinance (Application to the New Territories) Ordinance of 1987 at all. The relevant Ordinance was the 1961 ordinance and the regulations. At p. 2 of the judgment, this was made clear when the learned judge stated:-

"The parties are agreed that each of the four of the houses require an occupation permit. The requirement arises in this way. Building works for these houses were in the course of being carried out on 16 October 1987 when the Buildings Ordinance (Application to the New Territories) Ordinance 1987 Cap. 121 ("the 1987 Ordinance) came into effect. Under the transitional provisions of s. 13 of the 1987 Ordinance, the Buildings Ordinance (Application to the New Territories) Ordinance, Cap. 322 ("the 1961 Ordinance") and the Buildings Ordinance (Application to the New Territories) Regulations ("the Regulations") continued to apply to any building works to which the 1961 Ordinance and the Regulations applied immediately before their repeal by 1987 Ordinance and which were in the course of being carried out at the commencement of the 1987 Ordinance."

38. Section 11 of the Buildings Ordinance (Application to the New Territories) Ordinance of 1987 of course specifically provides that:-

"The powers of the Director under this Ordinance, other than his powers under section 4, may be exercised on his behalf by any District Lands Officers of a District in the New Territories."

39. The District Land Office of Yuen Long clearly was entitled to grant a certificate of exemption under Section 5 of the Ordinance and to that extent, the decision of Le Pichon J. in Wong On' case was not relevant to the present case at all.

40. On the evidence before this court, there could not be any risk of enforcement action against the building arising out of the lack of occupation permit or certificate of exemption. I am satisfied that the letters from the District Lands Office, Yuen Long in fact constitute a valid certificate of exemption under Section 5 of the Buildings Ordinance (Application to New Territories) Ordinance.

41. The Plaintiffs' complain in respect of the lack of occupation permit or certificate of exemption was also not well-grounded.

42. I shall now deal with the remaining issue pertaining to the General and Special conditions of the Crown Lease. There could be no doubt that the Crown Lease in question was subject to the General and Special Conditions as set out in G.N. No. 365 of 1906 and G.N. No. 697 of 1090. Instead of supplying to the Plaintiffs' solicitors the relevant Government Gazette Notice, the Defendant's solicitors wrongly supplied the G.N. No. 364 of 1934 and claimed that the condition set out therein were the applicable conditions to the Crown Lease in question.

43. Section 13(1)(a) of the Conveyancing and Property Ordinance Cap. 219 provides:-

"Unless the contrary intention is expressed, a purchaser of land shall be entitled to require from the vendor, as proof of title to that land, only production of the Crown lease relating to the land sold and-

(a) proof of title to that land-

(i) where the grant of the Crown lease was less than 15 years before the contract of sale of that land, extending for the period since that grant; or

(ii) in any other case, extending not less than 15 years before the contract of sale of that land commencing with an assignment, a mortgage by assignment or a legal charge, each dealing with the whole estate and interest in the land;"

44. Barnett J. had to deal with a similar issue in Gatewood Ltd. v. Silver Noble Investment Limited [1993] 1 HKLR 248. He decided that a purchaser is entitled to sight of a tangible document and he is entitled to see the existing Crown lease which effectively confers title to the land although by effluxion of time and operation of law superseded by a new Crown lease. He stated at p. 250:-

"It is not in dispute that, unless the parties to sale and purchase agreement have otherwise agreed, the vendor must produce the Crown lease if required by the purchaser and, if he fails to do so, the purchaser may rescind the agreement.."

and at p. 252:-

"I am persuaded, therefore, that Mr. Leong is right when he contends that a purchaser is entitled to see the document which, subject to s. 13, contains complete particulars of the terms upon which he hold the land. That document is the existing Crown lease which effectively confers title to the land although by effluxion of time and operation of law superseded by a new Crown lease."

45. There could be no doubt that the conditions as set out in G.N. No. 365 of 1906 and G.N. 697 of 1909 were part of the Crown lease in question and the Plaintiffs were entitled to be supplied with the same under the sale and purchase agreements in question.

46. Mr. Chan, on behalf of the Defendant argued that the Gazette Notices in question were public notices and the Plaintiffs must be deemed to have notice of the same. He suggested that copies of such notices could be obtained from the Supreme Court library.

47. Such an observation might a slap on the face of those instructing him but the point remained, the Plaintiffs were entitled to require from the Defendant to supply such documents, being part of the Crown lease. The Plaintiff needed not try to obtain them from the library or from any other place. It was also not relevant if parties were deemed to have knowledge of the matters published in the Gazette.

48. Despite repeated requests, the Defendant's solicitors, not only failed to supply the relevant documents, chose to supply a wrong set of conditions and claimed that they were the relevant conditions to the Crown lease in question.

49. I am satisfied that on the facts of the case, the Defendant's solicitors had failed to satisfactorily answered all the requisitions raised by the Plaintiffs' solicitors. I am also satisfied that the Defendant had failed to produce the completed Crown lease which he was obliged to do and the Plaintiffs were entitled to rescind the agreements.

50. Having reached the aforesaid conclusion, I must grant the reliefs preyed for by the Plaintiffs.

51. In respect of both actions, I make an order in terms of prayers No. 1-4 of the summonses dated 22nd of November 1996. I also make an order nisi that the Defendant shall pay the costs of the Plaintiffs to be taxed if not agreed. The order nisi on costs will be made absolute 14 days after the handing down of this judgment.