CHEUNG KAI WEI SANDRA v. FUK KA PAK AND SO LAI MING

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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1. This is an application under S.12 of the Conveyancing and Property Ordinance Cap.219 by way of an Originating Summons for the determination of a dispute that arose out of the sale and purchase of a house in Fairview Park registered in the District Office Yuen Long as Sub-section 61 of Section N of Lot No.4665 in D.D. No.104 ("the house"). The matter came before me for hearing on 1st November 1989 and 5th January 1990 when judgment was reserved.

2. The Plaintiff was the vendor of the house under a Sale and Purchase Agreement dated 30th May 1989 ("the Agreement"). She claimed entitlement to a declaration that she had, via her solicitors' letter dated 11th August 1989, lawfully rescinded the Agreement by the exercise of an option contained in Cl.14(1) therein. She also sought consequential orders for refund of the deposit of $104,500.00 with interest and costs of investigation of title and of these proceedings. The facts are not in dispute and are as follows: The parties entered into the Agreement for the sale and purchase of the house on 30th May 1989. Completion was to take place on or before 15th August 1989. By a letter dated 14th June 1989, Fairview Park Property Management Limited, the management company of Fairview Park appointed under a Deed of Mutual Covenant dated 27th February 1979, via their solicitors demanded the Defendants to cease contravention of the provisions of the Deed of Mutual Covenant and the Estate Rules resulting from the erection of a block fence and the heightening of the plot fence with bricks. The Plaintiff came to know of the complaint in late July/early August 1989. Enquiries were made by the Defendants' solicitors by letter dated 3rd August 1989. The Plaintiff's solicitors responded by a letter dated 4th August 1989 enclosing a copy of a letter dated the same date from the said management company stating that a site inspection on 29th July 1989 had revealed that the said breaches had been rectified and that costs of the management company in the sum of $3,065.00 had also been fully settled. By letter dated 9th August 1989, the Defendants sought details of the demolition/alterations to the house carried out subsequent to the Defendants' inspection on 14th May 1989. The Plaintiff's solicitors replied, by letter dated the same date, that the details of works effected were as per the letter dated 4th August 1989 from the said management company. The Plaintiff then sought to exercise her option to rescind under C1.14(1) of the Agreement by the letter dated 11th August 1989. In that letter, the Plaintiff also opined that the demolition of the fence amounted to a breach of the Agreement. The Plaintiff asked for the return of the deposit. By a letter dated 15th August 1989, the Defendants alleged that the Plaintiff had failed to complete the sale and purchase at 2:00 p.m. on that date and gave notice of the forfeiture of the deposit. Though the Agreement provided completion to be before 3:00 p.m. and not 2:00 p.m., no point was taken as to this at the hearing.

3. The Plaintiff relied solely on the option contained in C1.14(1) of the Agreement as ground for her recession of the sale and purchase. Despite the hint in the letter dated 11th August 1989, the Plaintiff did not seek to place any reliance on the actual demolition/alteration of the fence to the house itself as a ground for the recession. Clause 14(1) of the Agreement provides:-

"(1) The Vendor hereby warrants and declares that the Vendor has not received and is not aware of there being any notice from any Government or other competent authority requiring the Vendor to demolish or reinstate any part of the Property. If it should be discovered that such notice existed prior to the date hereof or if any such notice shall be served before the actual date of completion, the costs for such demolition or re-instatement shall be borne by the Vendor and the Purchaser shall have the option to rescind this Agreement whereupon the deposit paid hereunder shall be returned to the Purchaser in full but without any compensation interest or costs and neither party shall have any claim against the other or his solicitors and the parties hereto shall at their own costs enter into and cause to be registered at the District Land Office an Agreement for Cancellation."

"The Property" as defined in Schedule 4 included "the building erected thereon or some part thereof". There is thus no dispute that the fences in question fall within the description of "the property" under the said clause.

4. The Plaintiff submitted that the Fairview Park Property Management Limited comes within the meaning of "or other competent authority" under the said clause. In the premises, it was argued, the letter dated 14th June 1989 demanding a ceasure of the breaches resulting from the erection and heightening of the said fences amounted to a notice "to demolish or reinstate any part of the Property" contemplated by the said clause. This gave rise to a right to exercise the option to rescind. The Defendant sought to oppose the application on four grounds. Firstly, it was submitted that "competent authority" can only mean a quasi-government official body and would not cover a mere management company appointed by contract. Then it was argued that the notice issued by such a body must be a valid notice supported by evidence of actual breach before the clause can be invoked. Thirdly, it was submitted that the remedial works required to be carried out under the said letter were "repairs" and not "demolition" or "reinstatement". And lastly, it was argued that the reference to "cease or cause to be ceased" in the said letter was ambiguous and failed to amount to a sufficient notice.

5. The Agreement is in a standard form widely adopted by the profession. This fact must not be lost sight of in the construction of C1.14(1). I was referred to 2 incidents of the use of the term "competent authority" in Stroud's Judicial Dictionary, 1986 edition, at page 483:-

"(8) 'Competent authority' to decide as to delivering up goods found in possession of a fugitive criminal Art.12, Belgian Extradition Treaty 1872: see Re Borovsky [1902] 2 K.B. 312.

 

(9) 'Competent authority' (Defence (General) Regulations 1939, reg. 51(1)(5)): see Blackpool Corporation v. Locker [1948] 1 K.B. 349."

It is also helpful to note the following definitions of "authority":-

"Those in authority, the body or persons exercising power or command. (Formerly in sing. = Government; a Local Sanitary Authority or similar body is also spoken of as "the authority")"-Oxford's English Dictionary.

"Legal Power; a right to command or to act; the right and power of public officers to require obedience to their orders lawfully issued in the scope of their public duties." - Black's Law Dictionary.

6. There are many incidents when "Authority" is actually used in the name of personsor bodies established or empowered by statues, regulations or by-laws to perform public functions. They are usually made up of public officers. The Insurance Authority under the Insurance Ordinance, Cap.41, the Hong Kong Housing Authority under the Housing Ordinance, Cap.283, the Building Authority under the Building's Ordinance, Cap.123, and the Air Pollution Control Authority under the Air Pollution Control Ordinance Cap.311 are examples of these. But many other public bodies do not have "Authority" as part of their description. In these incidents, often they are not part of the government executive/administrative machinery proper as such. Examples of these are the Town Planning Board under the Town Planning Ordinance, Cap.131, the Land Development Corporation under the Land Development Corporation Ordinance, Cap.15, the Panel of Arbitrators under the Labour Relations Ordinance, Cap.55, and the Urban Council under the Urban Council Ordinance, Cap.101. They also include the numerous advisory committees, the councils for various professions and the appeal tribunals or other boards established under various ordinances. And the list goes on. Sometimes these public bodies also have public officers as members. The common characteristic of both categories of "public bodies" is that they are created and enjoy power conferred by statutes, regulations or by-laws to perform duties or acts that would affect the public or a class of the public.

7. The term "competent authority" in C1.14(1) would obviously cover public bodies within the above meaning. But should it be extended to cover individuals or bodies who do not derive their existence or power from statutory instruments, despite having the right or power to perform acts affecting a sector of the public? I think not. It would not be proper to describe under that term persons or bodies who derive their power or rights from an agreement made by persons against whom such power or rights are to be exercised. The term "competent authority" connotes a body created by a superior power and could be imposed on the subjects against whom the body exercises jurisdiction irrespective of the wishes of such subjects. It cannot be subordinate to the desires or wishes of the persons against whom they exercise jurisdiction. Such a body must be above and free from influence and control of its subjects. To extend the meaning to cover every one who has a legal right or power to give a notice to demolish/reinstate the property, would clearly violate the common meaning of the said words and the spirit of the agreement. For example, the Plaintiff had conceded that a notice served by an adjourning owner complaining of encroach ment and demanding demolition could not fall within the ambit of Clause 14(1).

8. The management company in question was appointed by a Deed of Mutual Covenant to manage the estate. It has very wide powers under the said deed to regulate and supervise the said estate. It is not disputed that it has authority to demand via the said letter the rectification of the said breaches. However, the said management company was not appointed by any corporation formed under S.8 of the Multi-Storey Buildings (Owners Incorporation) Ordinance, Cap.344. No such "Incorporated Owners" was ever formed by the owners of the houses in the estate. Thus, the source of authority of the said management company originated solely from an agreement of the "subjects" of its jurisdiction (which also binds all their successors-in-title). The sole basis of its power is one of contractual. It owed its existence and authority to its principals who are also the same persons against whom it has jurisdiction. The Incorborated Owners enjoy statutory powers and are subject to statutory duties as prescribed by the Ordinance irrespective of the wishes or desires of the owners who formed it. Thus Incorporated Owners take on a more public character than the said management company and may perhaps come within the meaning of "competent authority". The only material distinctions the said management company has with an ordinary commercial agent engaged to run an organisation are that: (i) it has wider powers, (ii) it was appointed by deed, and (iii) it enjoyed security of tenure. Such distinctions in my view are not sufficient to cloak it with such status to raise it to the pedestal of "competent authority".

9. It was argued that since the notice issuing authorities under the Mass Transit Railway (Land Resumption and Related Provisions) Ordinance and the Crown Lands Resumption Ordinance were specifically dealt with in C1.15, the "competent authority" referred to in C1.14(1) must mean something other than such public bodies. But that was overlooking the fact that the authorities under the said Ordinances are the Governor or the Governor in Council. Further, the said 3 Ordinances under C1.15 concerned matters relating to use of land and are within a peculiar class of their own.

10. Argument was also advanced that the "ejusdem generis" rule is inapplicable to restrict the meaning of "competent authority" to government or similar authorities. The Plaintiff quoted a passage from Michael Zander's "The Law-Making Process" at page 83:-

"Ejusdem generis - general words at the end of a list of more particular words take their meaning from the foregoing list."

Whilst I do not necessarily agree with counsel's submission that the existence of merely one single word of "government" instead of a list of words before the term would per se render the rule inapplicable, there is no need to seek assistance from this rule.

11. For the above reasons, I do not accept that "competent authority" under C1.14(1) includes a management company appointed by a Deed of Mutual Covenant as in the present case. It probably include a management company exercising the power as agent of an Incorporated Owners formed under S.8 of the Multi-Storey Buildings (Owners Incorporation) Ordinance. Examples of relevant competent authorities under C1.14(1) would include bodies like the Building Authority and the Director of Fire Services (in respect of fire hazard abatement notice). In the premises, the notice in question is not a notice contemplated by C1.14(1). The said purported exercise of the option under C1.14(1) by the Plaintiff was thus misconceived and invalid. By reason of the above, the Plaintiff's claim must fail. The Plaintiff has not sought to rely on other grounds for rescinding the sale and I need not deal with the effect and consequence that may result from the change of the physical condition of the Building subsequent to the making of the sale and purchase agreement.

12. In view of the conclusion I have come to on the construction of C1.14(1), There is no need for me to deal with the other grounds of defence raised by the Defendant. It suffices for me to make a few observations on them. I am not convinced that a notice under C1.14(1) must be a 'valid' notice supported by evidence of an actual brench before the right to the option can arise. No doubt the notice must be lawful in the sense that the issuing body must have the lawful right to issue such notice. To go further to require the parties to come to a conclusion on the validity of the grounds supporting the notice before deciding on the exercise of the option; would, in my view, be repugnant to the spirit of the agreement. This is a sale of land with time being of the essence. Completion is to take place usually within a relatively short period after execution of the sale and purchase agreement (though in the present case it was to be within 2½  months). In view of the nature of the issuing body, i.e. a "competent authority" as defined above, it is not unreasonable for the parties to accept the issuance as sufficient to give rise to a right to rescind. I do not accept that the works required by the said letter were mere "repairs" and not "demolition" or "reinstatement", nor that there is any ambiguity in the reference to "cease or caused to be ceased" in the said letter.

13. The Plaintiff's claims are dismissed and there will be an order nisi for costs to the Defendant with certificate for counsel.

14. Dated this 1st day of February, 1990.