To Yung Sing Herman v. Szeto Chak Mei and Others

HCMP 2741/2016

[2018] HKCFI [1506]

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO. 2741 OF 2016

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J U D G M E N T

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Overview

1.Before the court is a vendor and purchaser summons arising from an agreement dated 9 March 2016 (“Agreement”), under which the defendants as vendors (“Vendors”) agreed to sell and the plaintiff as purchaser (“Purchaser”) agreed to buy the property (“Property”) known as Kwai Chung Town Lot No 248 (“Lot”) together with the building erected thereon known as 402-406 Castle Peak Road and 20 Shek Man Path, Kwai Chung, New Territories (“Building”) at HK$50,000,001, of which HK$5,000,000 (“Deposit”) had been paid as deposit by the Purchaser upon the signing of the Agreement to the Vendors’ solicitors as stakeholders to be released to the Vendors on completion.

2.The Vendors and the Purchaser were respectively represented in the transaction by Christine M Koo & Ip (“CMKI”) and Michael Cheuk, Wong & Kee (“MCWK”).

3.Completion, agreed to be by way of solicitors’ undertakings, was originally scheduled to take place between 9 am and 5 pm on 8 April 2016.  In consequence of the Vendors’ failure to provide the Purchaser with the title deeds and documents of the Property until just over a week before 8 April 2016, the date of completion was subsequently extended by agreement to 31 May 2016 (“Completion Date”).[1]

4.As it turned out, completion did not take place on 31 May 2016, with both parties claiming to be entitled to rescind the Agreement due to the other’s default.  More particularly, by MCWK’s fifth letter dated 31 May 2016, the Purchaser demanded for the return of the Deposit and reserved his right to claim against the Vendors for damages for his loss and damage caused by the Vendors’ failure to complete.  On the other hand, by CMKI’s letter dated 3 June 2016, the Vendors also rescinded the Agreement and forfeited the Deposit.

5.The contentions that prevented completion relate to:

(1)  the state of Office B on the 2^nd floor and Units C and D on the 5^th floor of the Building (“Office 2B”, “Unit 5C” and “Unit 5D” respectively) at the time appointed for completion;

(2)  the Purchaser’s requisition as to the interest, if any, of one Ying Fung Distillery Limited (“Ying Fung”) in the Property (“Requisition 2”); and

(3)  the Purchaser’s requisition regarding 2 notices dated 15 March 2013 (“MBIS Notice” and “MWIS Notice” respectively and “Notices” collectively) addressed by the Building Authority (“BA”) to the “owner” (“業主”) of the Property pursuant to ss 30B(3) and 30C(3)/(4) [2] of the Buildings Ordinance (Cap 123) (“BO”) in relation to the common parts and the windows of the Building (“Requisition 6”).

6.The issues of liability raised for determination by the originating summons issued herein on 13 October 2016 by the Purchaser (“OS”) are:

(1)  whether the Vendors had failed to give vacant possession of Office 2B, Unit 5C and Unit 5D;

(2)  whether Requisition 2 had been satisfactorily answered; and

(3)  whether Requisition 6 had been satisfactorily answered.

7.By the order made by consent by Deputy High Court Judge Lee on 15 February 2016, quantum (if arising) is to be tried separately.

Material terms of the Agreement

8.Before I discuss each of the issues of liability, to put them in context, the Agreement contained, inter alia, the following express terms:

(1)  The Vendors would on completion execute a proper assignment of the Property to the Purchaser free from all encumbrances save as otherwise provided (clause 3(ii)).

(2)  The Vendors should show/prove and give a good title to the Property respectively in accordance with ss 13 and 13A of the Conveyancing and Property Ordinance (Cap 219) (clause 8).

(3)  The Vendors or any of their agents had not received and were not aware of there being any notice or order from the Government or any other competent authority requiring the Vendors to demolish repair or reinstate any part of the Property or as one of the co-owners of the Building to effect repairs or renovation to any common part or common facilities of the Property.  If it should be discovered that any such notice or order existed or was issued prior to the date of the Agreement, the costs for such repair etc should be borne by the Vendors (clause 15(i)).

(4)  No third party (whether related or otherwise) has any right or interest whatsoever, whether legal or equitable, in the Property and the Vendors have absolute right and interest in the Property (clause 25).

(5)  Vacant possession of the ground floor, 402 Castle Peak Road; Offices A and B on the 2^nd floor; and Units B, C and D on the 5^th floor of the Building (“Vacant Units”) should be delivered to the Purchaser on completion (clause 33(i) and fifth schedule).

(6)  The Vendors should allow the Purchaser to inspect the Vacant Units once before completion for the purpose of verifying delivery of vacant possession (clause 36).

(7)  Time should in every respect be of the essence of the Agreement (clause 12).

(8)  If the Purchaser should fail (other than due to the default of the Vendors) to complete the purchase of the Property in accordance with the terms of the Agreement, the Deposit should be absolutely forfeited to the Vendor (clause 10).

(9)  In the event of the Vendors failing (other than due to the default of the Purchaser) to complete the sale of the Property, the Deposit should forthwith be returned in full to the Purchaser who should also be entitled to recover from the Vendors damages over and above the Deposit as the Purchaser may sustain by reason of such failure on the part of the Vendors (clause 11).

Unless otherwise stated, references in this judgment to numbered clauses and schedules are to the clauses and schedules of the Agreement.

Vacant possession

Facts revealed by Purchaser’s inspection

9.Pursuant to clause 36, on 31 May 2016, at about 4 pm, the Purchaser, accompanied by a representative of MCWK, by prior appointment made earlier that afternoon, attended the Property to inspect the Vacant Units.

10.According to paragraph 16 of his first affirmation filed on 13 October 2016, the Purchaser found chattels and debris inside the living room, bedroom and kitchen of Unit 5C and the living room, bedroom, kitchen and toilet of Unit 5D, including “a wooden door frame, wooden boards, a metal gate, a number of buckets, cartons, plastic containers, plastic bags, paper bags, rolls of water pipes, sticks, brooms, window frames, ladders, some furniture such as shelves and chairs, electrical appliances such as TV, broken pieces of cement, etc.”  The Purchaser’s description of Unit 5C and Unit 5D at the time of his inspection on 31 May 2016 appears to me to be borne out by the first 6 photographs produced by him as exhibit “TYSH-10”.

11.The Purchaser was initially denied access to Office 2B and could only look through the narrow gap between the doors, from where he saw an “astonishing amount of debris and chattels left” inside the unit, including “a number of buckets, containers and sticks, and a tremendous amount of what appeared to be rice wine barrels which are rather large in size”.  He eventually gained entry at 4:46 pm (i.e. just 14 minutes before completion) only to find that unit was “filled with chattels, so much so that the floor could not accommodate more chattels without blocking the already very narrow passages”.  See paragraphs 17 and 19 of the Purchaser’s said first affirmation, as illustrated by the 13 photographs of Office 2B in exhibits “TYSH-10” and “TYSH-12” taken (1) from outside the entrance of the unit and the exterior of the Building before the Purchaser was allowed to enter the unit; and (2) from inside the premises after the Purchaser gained entry.  I have reviewed these photographs.  The unit depicted therein was very cluttered, so much so that one may reasonably question whether the unit had been vacated at all.

12.The Purchaser’s evidence of the state of Office 2B, Unit 5C and Unit 5D shortly before completion, backed up by contemporaneous photographs, is not disputed by the Vendors.  The only answer attempted by the Vendors through paragraph 17 of the 1^st defendant’s affirmation filed on 28 December 2016 and by their counsel Mr Jeffrey Li through submissions is that the chattels left at the 3 units were easily removable; that some of them were industrial waste left over from the reinstatement of the premises; and that it is impractical to expect that absolutely nothing would be left behind when what was being sold and purchased was an entire old building; and that the Building was apparently acquired by the Purchaser for redevelopment.

13.The Purchaser’s demand for clearance of Office 2B, Unit 5C and Unit 5D before completion was not met.

14.It is the Purchaser’s case that the said presence of chattels and debris in Office 2B, Unit 5C and Unit 5D constituted a failure to give vacant possession of those units by the Vendors.

Relevant legal principles

15.The leading authority on a vendor’s contractual duty to give vacant possession is Cumberland Consolidated Holdings Limited v Ireland [1946] 1 KB 264 (CA).  In that case, a disused warehouse with cellars extending under the whole warehouse was sold with vacant possession.  On completion, two-thirds of the height of the cellars was filled with rubbish consisting mainly of sacks of cement that had hardened and some 200 empty drums.  The presence of such rubbish prevented the use of the cellars for any purpose.  The purchasers, after removing the rubbish after completion, claimed damages against the vendor for breach of the condition for delivery of vacant possession. 

16.In upholding the finding below that the vendor had failed to give vacant possession, Lord Greene MR said at 270:

“Subject to the rule de minimisa vendor who leaves property of his own on the premises on completion cannot, in our opinion, be said to give vacant possession, since by doing so he is claiming a right to use the premises for his own purposes, namely, as a place of deposit for his own goods inconsistent with the right which the purchaser has on completion to undisturbed enjoyment.” (emphasis added)

17.And at 271:

“… the right of actual unimpeded physical enjoyment is comprised in the right to vacant possession. … When we speak of a physical impediment we do not mean that any physical impediment will do. It must be an impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property.”

18.Lord Greene MR’s said observation in Cumberland Consolidated Holdings Limited v Ireland was adopted by the Hong Kong Court of Appeal in Grandwide Limited v Bonaventure Textiles Limited, CACV 27/1990, unreported (17 July 1990), which concerned the sale and purchase of the lower 6 floors, together with 10 carparking spaces on the ground floor, of an industrial building.  However, I do not propose to go into Grandwide Limited as the matter therein was an appeal from summary judgment so that the issue was simply as to the existence or otherwise of an issue to be tried regarding whether the obstruction of 5 of the 10 carparking spaces by the vendor’s goods including 2 motor vehicles did constitute a substantial impediment to the purchaser’s right of possession of the upper floors because their presence had prevented the purchaser from parking its own vehicles in these spaces to unload its own goods and to gain proper access with its goods to the upper floors.

19.Cumberland Consolidated Holdings Limited v Ireland was applied by Recorder Ambrose Ho SC inStrong Beauty Ltd v Gain Legend Industries Ltd[2008] 1 HKLRD 570, in which the property sold and purchased was a 5-storey building. The top floor comprised the 5^th floor and the roof.  The sale and purchase was subject to existing tenancies save and except the ground floor and cockloft of which vacant possession would be delivered.  Had the transaction been completed on the original completion date of 31 August 2006, the 5^th floor and the roof would be sold subject to tenancy.  However, due to the extension of the completion date to 31 October 2006, the tenancy of the 5^th floor had expired shortly before completion on 6 October 2006.  On completion, although the tenant of the 5^th floor had moved out, he left plenty of objects and furniture inside the 5^th floor premises and on the roof. 

20.After concluding that the vendor was on a true construction of the sale and purchase agreement obliged to deliver vacant possession of the 5^th floor and the roof, Recorder Ho SC found that the vendor had failed in such duty in respect of the 5^th floor and the roof having regard to the presence of the said objects and furniture.[3] He said at [24]:

“I have borne in mind the observation of Lord Greene MR in Cumberland Consolidated Holdings Ltd v Ireland (at p.271) that the right to vacant possession was denied only when the impediment in question was substantial. But having regard to the presence of the objects and furniture (described as plenty on the fifth floor, as well as the situation seen in the photographs of the roof), I do not think it can be said that the plaintiff had delivered vacant possession of those parts of the Property. The presence of those items clearly interfered, in a substantial manner, with the defendant’s physical enjoyment of its right to the use and occupation of those parts. It is irrelevant whether the objects belonged to the plaintiff or someone else. Nor is it an answer to say that the defendant could easily have them removed. In my view, it is wrong to cast upon a purchaser who is entitled to vacant possession the burden of deciding how to deal with the chattels left on the premises and incurring the expenses of their disposal, unless, of course, it can truly and properly be described as de minimis (which is not the present case).” (emphasis added)

21.In Lee Zoë v Hui Pak Fong, HCMP 157/2009, unreported (19 February 2010), in the context of a sale and purchase of a 1,100 square foot 3-bedroom residential flat, Fok J (as the Permanent Judge then was) found the presence of the following items at the time appointed for completion: beds in each of the 3 bedrooms and a stool in one of the bedrooms; a television set and framed picture on the wall of the living room; a wine fridge, cabinet, kettle and houseplant in the living room; and various toiletries and towels in the bathroom (see [37]). 

22.It was common ground between the parties, following Cumberland Consolidated Holdings Limited v Ireland, that the relevant test is whether or not what has been left behind by the vendor in the premises amounts to a physical impediment which substantially prevents or interferes with the enjoyment of the right of possession of a substantial part of the property (see [47]). 

23.Fok J put the question before him as follows at [48]:

“I have made my findings as to the state of the Property as at 5 p.m. on 16 January 2009 under issue (1) above. The question therefore arises as to whether those items left behind in the Property constituted a physical impediment which substantially prevented or interfered with the plaintiff’s enjoyment of the right of possession of a substantial part of the Property or whether those items should be disregarded as being de minimis.” (emphasis added)

24.On the basis of his said finding as to what was left at the property and applying the test of substantial prevention of or interference with the enjoyment of the right to possession of a substantial part of the property, his Lordship held at [54] that the defendant vendor did not give vacant possession of the property at the time fixed for completion.  He concluded that the items of furniture left behind in the property were not to be disregarded as de minimis but did not think that it was fruitful to try to frame any quantitative definition of what amount of furniture exceeded the de minimis threshold.

25.While on the law, Miss Alison Choy, counsel for the Purchaser, has also drawn my attention to Templeman J’s explanation of a vendor’s duty to give vacant possession in Topfell Ltd v Galley Properties Ltd [1979] 1 WLR 446 at 449G-H as being the obligation to hand over the property “in a condition which would allow the [purchaser] to occupy it”.  However, this statement should be read in context.  In Topfell, the subject property was a 2-storey house. The first floor was sold subject to tenancy while vacant possession of the ground floor would be given on completion.  However, the local authority had in the year before served on the vendors a statutory notice which directed that the house should be occupied by only one household.  The purchaser claimed specific performance with an abatement of price due to the fact that the vendors were unable to give vacant possession of the ground floor notwithstanding that it was indeed handed over to the purchaser in a vacant state.  It can be seen that what negated vacant possession in Topfell was not a physical impediment but a legal one.  Templeman J’s said statement at 449G-H should be taken in this light.

26.The test that I am going to apply is that of substantial prevention of or interference with the enjoyment of the right to possession of a substantial part of the property.

Findings

27.Having regard to the Purchaser’s undisputed evidence of, and the contemporaneous 19 photographs showing, the state in which the Purchaser found Office 2B, Unit 5C and Unit 5D at his inspection within the hour before the time fixed for completion and applying the test of substantial prevention of or interference with the enjoyment of the right to possession of a substantial part of the property, I find the Vendors to have failed to deliver vacant possession of these 3 units. 

28.Of the 3 units, the situation of Office 2B was the worst.  It appears from the relevant photographs that all parts of the premises were just stacked full of objects of all sorts.  That it was so could be seen even from the street level through the windows of the premises.  As said earlier, one might reasonably think that the unit was still being used and occupied.

29.As for Units 5C and 5D, although they were nowhere near as cluttered as Office 2B, the areas that were littered with objects and debris (i.e. living room, bedroom, kitchen and toilets) were in my view still substantial. Those areas could not be enjoyed at all with the presence of such objects and debris. And it is no answer to say that they could be easily removed, as the Vendors suggest: see Strong Beauty Ltd v Gain Legend Industries Ltd, supra, at [24].  In any event, that would not be true insofar as Office 2B is concerned. 

30.And the age of the Building and the purpose to which the Purchaser allegedly intended to put the same (such as redevelopment) are irrelevant.  The parties agreed on delivery of vacant possession of certain parts of the Building, without qualifying what they meant by “vacant possession”.  I am not aware of a different test for vacant possession for premises that are aged or to be demolished and rebuilt.  In any event, given that most of the units in the Building were still tenanted, there is no reason to assume that the Purchaser would necessarily not enjoy his right to possession of the Vacant Units in the meantime, even if he were to redevelop the Lot.

31.Mr Li places emphasis on the requirement that the extent of the premises the enjoyment of which is prevented or interfered with by the physical impediment has to be “substantial”.  He criticises Recorder Ambrose Ho SC for wrongly applying the test in Cumberland Consolidated Holdings Limited v Ireland in Strong Beauty Ltd v Gain Legend Industries Ltd by focusing on the extent to which enjoyment of the 5^th floor (together with the roof), as opposed to the entire 5-storey building being sold and purchased, would be prevented or interfered with.  He highlights that, in the instant case, what was being sold and purchased under the Agreement was an entire building consisting of 20 units so that the 3 units affected could not be said to be substantial. 

32.I understand Mr Li to be saying that, in a transaction involving multiple units, whether there is a substantial prevention of or interference with the enjoyment of the right to possession of a substantial part of the property should be measured with reference to the whole subject-matter of the sale and purchase, and not just the units where the physical impediment is present. 

33.It is unnecessary for me to decide the validity of this broad proposition generally on the facts of this case.  And I do not propose to do so save to say that where vacant possession is required of only some of the units, I am unable to discern any or any logical reason why the court should, in deciding whether the vendor has or has not given vacant possession of such units, take into account the premises sold and purchased subject to tenancy.

34.On this note, first, the Vendors’ obligation to deliver vacant possession extended to just 6 units, and not all 20 units, of the Building.  See clause 33(i) and the fifth schedule.  The prevention of, or interference with, the right to possession of half of the premises sold with vacant possession cannot, on any view, be said to be not substantial.

35.Second, it appears to me that Mr Li has misunderstood the meaning of “substantial” in this context.  It is clear from Cumberland Consolidated Holdings Limited v Ireland, Strong Beauty Ltd v Gain Legend Industries Ltd and Lee Zoë v Hui Pak Fong, as analysed above, that “substantial” is to be contrasted with “de minimus”.  In other words, there is no prevention of or interference with the enjoyment of the right to possession of a substantial part of the property only if the extent of the property affected can be disregarded as de minimis.  On any view, 3 units, whether out of 6 units or 20 units, should not be ignored as de minimus.

36.The Vendors also seek to blame the Purchaser for their failure to clear Office 2B, Unit 5C and Unit 5D in time for inspection by the Purchaser.

(1)  First, they complain that the Purchaser had not given sufficient notice for his inspection to enable the Vendors to remove the impediments before completion.

(2)  Second, they claim to have been led by the Purchaser into believing that completion would not take place at 5 pm on 31 May 2016 because:

(a)  The Vendors had invited the Purchaser to consider proposals that would prevent the Completion Date from being affected by the existence of the Notices.  And Purchaser had responded by just repeating that he was not bound to take the Property with the Notices undischarged.

(b)  MCWK had not sent to CMKI a draft of the undertakings by which completion was to be effected even on the Completion Date.

37.The first objection can be disposed of right away.  It was the Vendors’ contractual obligation under clause 33(i) to give vacant possession of 6 units of the Building including Office 2B, Unit 5C and Unit 5D on completion of the Agreement, regardless of whether the Purchaser chose to exercise his right of inspection under clause 36 or not.

38.As for the second-objection, it will be seen below that I am of the view that the Notices would potentially cause a blot on the title of the Property; that the Purchaser was entitled to have the same removed or otherwise satisfactorily dealt with by the Vendors on or before completion; and that the Vendors had not done so. 

39.I do not see how the Vendors could reasonably form the belief that completion would not take place as agreed and would be further extended simply because they were not in a position to clear, but the Purchaser had stated that he would insist on the clearance of, all outstanding requisitions on title, particularly Requisition 6, before completion.  To infer such a belief would be to give a licence to the Vendors to take advantage of their own failure to show and prove a good title in a timely manner. 

40.In any event, the correspondence plainly shows the contrary.  In particular:

(1)  The penultimate paragraph of MCWK’s letter dated 27 May 2016 to CMKI concluded with this statement: “Our client is always willing, able and ready to complete the purchase of the Property provided that your clients can prove good title to the Property to our client’s satisfaction, time being of the essence in every respect of the sale and purchase.” (emphasis added)

(2)  By their second letter dated 27 May 2016, MCWK sent to CMKI a draft of the assignment for their approval. 

(3)  By one of their letters dated 31 May 2016, MCWK confirmed that they had been put in funds of HK$45,000,001 by the Purchaser for the purpose of completing the purchase of the Property.

41.MCWK’s said second letter of 27 May 2016 also provides the answer to the Vendors’ reliance on the fact that MCWK had not sent to CMKI a draft of the undertakings by which completion was to be effected.  In the paragraph numbered (iii), MCWK repeated the demand for replies to the outstanding requisitions, particularly Requisition 6, “in order for us to prepare the draft undertaking letter”.  In other words, MCWK could not finalise drafting of the undertaking letter because they were still waiting to hear from CMKI as to what the Vendors intended to do to resolve Requisition 6.

42.To conclude, I find that the Vendors had failed to deliver vacant possession in breach of clause 33(i), which entitled the Purchaser to rescind the Agreement.

43.This finding alone should dispose of liability.  Nevertheless, in case this matter should go further, I shall also deal with Requisitions 2 and 6. 

A vendor’s obligation to prove good title

44.Before I discuss the issues of liability raised by these requisitions on title, it is helpful to recap that:

(1)  The obligation on the vendor to prove good title means that the title proved must be one which can at all times, and in all circumstances, be forced upon an unwilling purchaser in an action for specific performance. 

(2)  The court will not force a doubtful title on a purchaser. 

(3)  A doubtful title includes a title on which the court entertains a favourable opinion but may yet be reasonably and fairly questioned by other competent persons.

(4)  A purchaser will not therefore be forced to take a title which will expose him to risk or hazard.

(5)  A purchaser is entitled to be satisfied beyond doubt that his vendor is seised of the estate which he is purporting to sell and that he is in a position, without the possibility of dispute or litigation, to pass that estate to the purchaser.

(6)  Where the “incumbrance” in issue is an assertion of an adverse claim to the property by a third party, the purchaser (and the court) must be satisfied beyond reasonable doubt that the purchaser will not be at a real risk of a successful assertion against him of the incumbrance.

(7)  A blot on title can only be ignored if it is purely theoretical and not practical.

See In re Stirrup’s Contract[1961] 1 WLR 449, per Wilberforce J at 454, MEPC Ltd v Christian-Edwards [1981] AC 205, HL, per Lord Russell at 220C-D; Kan Wing-yau v Hong Kong Housing Society [1988] 2 HKLR 187 (CA); Jumbo Gold Investment Ltd v Yuen Cheong Leung (2000) 3 HKCFAR 52, per Bokhary PJ at 60J-61B; and De Monsa Investments Limited v Whole Win Management Fund Ltd (2013) 16 HKCFAR 419, per Litton NPJ at 109.

45.Further, the vendor’s duty to show a good title includes the obligation to answer requisitions satisfactorily, failing which the vendor would not have discharged his obligation to show good title and it did not matter if he did in fact have good title.  See e.g. Lo Shea Chung v Lo Hung Biu[1997] 2 HKC 723, per Cheung J (as he then was) at 734B and Xu Xiaoqi v Tsui Yuet Lai Teresa, HCA 1352/2011, unreported (30 April 2013), per Anthony Chan J at [15].

46.On these notes, I turn first to Requisition 2.

Requisition 2

Evolution of and correspondence on Requisition 2

47.The Purchaser first raised requisitions on title by MCWK’s letter dated 30 March 2016 based on the copy title deeds and documents obtained by MCWK from the Land Registry, as MCWK had by then still not received any such documents from CMKI notwithstanding that completion was just over a week away. 

48.Under the requisition numbered 2, the Purchaser asked the Vendors to produce a certificate of compliance to show that the positive obligations under New Grant No 4957 for the Lot (“Grant”) have been complied with.

49.On 10 May 2016, MCWK received from CMKI a certified copy of the relevant Certificate of Compliance dated 18 December 1974 issued by the Secretary for the New Territories (“Certificate”).

50.The Certificate was addressed to “Ying Fung Distillery Ltd., No.26-38, Ta Chuen Ping St., Kwai Chung, N.T.”

51.Leaving aside the argument as to whether the Vendors were obliged to produce the original of the Certificate which is not an issue in these proceedings, as Ying Fung has never been a registered owner of the Property, on 12 May 2016, MCWK sought clarification from CMKI, still under the requisition numbered 2, as follows:

“2. Compliance with the New Grant

We note that the addressee of the [Certificate] was [“Ying Fung”]. However, the registered owner at the date of [the Certificate] (18^th December 1974) should be Szeto Chiu and Szeto Chout. Please clarify with the Lands Department why the [Certificate] was issued to [Ying Fung], but not the then registered owner. Please also confirm what was the capacity of [Ying Fung] and whether [Ying Fung] had or has any interest in the Property.”

52.CMKI replied on 19 May 2016 as follows:

“2. With due respect, the addressee of a Certificate of Compliance could not have any impact on the effectiveness or legality of the Certificate. It is not a contract in which the identity of the parties must be clearly stated and as long as the land forming the subject matter of the Certificate is correctly and accurately stated, it is a valid Certificate of Compliance per se and we would not clarify as to the addressee’s name, suffice to say that [Ying Fung] is a company once controlled by late Szeto Chiu, deceased. A copy of the relevant company search record is enclosed for your kind reference.” (emphasis added)

53.The company search record provided by CMKI has been exhibited as “TYSH-19” to the Purchaser’s said first affirmation.  It is Ying Fung’s annual return made up to 31 December 1973, showing that the shares in Ying Fung were held inter alia as to 50% by Szeto Chout and 25% by Szeto Chiu, who were also the only 2 directors of the company, in the year before the date of the Certificate.  Szeto Chout and Szeto Chiu were at all material times registered as the owners of Property as tenants-in-common in equal shares until Szeto Chiu and Szeto Chout passed away on 17 April 1998 and 24 November 1998 respectively.

54.It is appropriate to mention here that the Purchaser was to subsequently find out from his said inspection of Office 2B on 31 May 2016 that Ying Fung happened to be the occupier of Office 2B as its name in both English and Chinese (盈豐米蒸酒房有限公司 / 盈豐米蒸酒房) was displayed on signages affixed on the wall next to the entrance to the premises and on the external walls of the Building underneath the unit.  Furthermore, Office 2B was still packed full of chattels, including those for wine making and storage, like it was still being used and occupied at about a quarter of an hour before completion.

55.In the meantime, on 27 May 2016, MCWK wrote back to make clear that the Purchaser was not challenging the validity of the Certificate.  Rather, he was put in inquiry as to why the Certificate was addressed to an entity other than the registered owners.  The Purchaser repeated his request for confirmation of Ying Fung’s capacity and whether Ying Fung had any interest in the Property.  Reference was specifically made to clause 25.

56.The Vendors’ final response on this issue was contained in CMKI’s letter dated 30 May 2016 as follows:

“2. We maintain our position that we have satisfactorily answered your requisition in this respect. We further follow no logic that a recipient named in a correspondence issued by the Government would have any indication or implication in the discrepancy in ownership of a property.”

57.MCWK persisted and, by paragraph 2 of their third letter dated 31 May 2016 to CMKI, repeated the requisition relating to Ying Fung:

“Our requisition is whether [Ying Fung] had or has any interest in the Property, which [the Vendors], who purport to be the beneficial owners of the Property, should confirm.”

58.By their fourth letter dated 31 May 2016 to MCWK, CMKI stated that it had no further comment on all requisitions except Requisition 6 and asserted that all requisitions had been satisfactorily answered and dealt with.

Vendors’ preliminary objection

59.With regard to Requisitions 2 and 6, Mr Li takes a point based on the wording of paragraph 2 of the OS which prays for: “A declaration that the requisitions numbered 2 and 6 raised in the letter dated 30^th March 2016 from [MCWK] to [CMKI] in respect of the title of the [Property] have not been satisfactorily answered by the [Vendors]” (emphasis added).

60.Insofar as Requisition 2 is concerned, Mr Li argues that the requisition numbered 2 raised in MCWK’s letter of 30 March 2016 to CMKI was for the production of the Certificate, which had been satisfactorily answered by the supply of a certified copy of the Certificate by CMKI on 10 May 2016.  The case now run by the Purchaser is not the requisition numbered 2 raised in MCWK’s letter of 30 March 2016 and therefore outside the ambit of the OS.

61.I find Mr Li’s reading of paragraph 2 of the OS unduly literal and restrictive. 

(1)  First, it can be seen from the correspondence summarised in paragraphs 47 to 58 above that the requisition numbered 2 raised in MCWK’s letter of 30 March 2016 had evolved in correspondence upon the Vendors’ production of the Certificate to a concern about Ying Fung’s interest (if any) in the Property.  

(2)  Second, paragraph 2 of the OS should not be read in isolation.  The OS was served together with the Purchaser’s said first affirmation.  It is clear from such evidence that the Purchaser uses the expression “the requisition numbered 2 raised in MCWK’s letter dated 30^th March 2016 to CMKI” to identify his concern with Ying Fung’s interest (if any) in the Property.  And I so understand paragraph 2 of the OS.

Findings

62.The grantees of the Lot under the Grant were the said two gentlemen surnamed Szeto.  They were the persons to whom a document in the nature of the Certificate (confirming the grantees’ compliance with all the general and special conditions governing the Lot) should have been issued.  Of course, these gentlemen could have been represented by an agent in their dealings with the relevant government department concerning the Lot.  However, it is not apparent from the Certificate that this was the case as the Certificate was simply addressed to Ying Fung without qualification as to the capacity in which it was issued with the Certificate. 

63.In such circumstances, in the absence of an explanation, the solicitor acting for a purchaser cannot be faulted for questioning why Ying Fung was involved in the matter of obtaining the Certificate.  He would be particularly mindful of the risk that Ying Fung might somehow be interested in the Property.

64.I do not regard such risk fanciful or theoretical as it was, with the benefit of the Purchaser’s inspection of Office 2B on the Completion Date, reinforced by the state of Office 2B witnessed by the Purchaser.  Office 2B was supposed to be untenanted.  It was not sold with tenancy.  Vacant possession was to be delivered on completion.  Yet, at less than a quarter of an hour before the time fixed for completion, the name plates of Ying Fung (which happened to be the entity to which the Certificate was addressed for reasons denied to the Purchaser) were displayed outside Office 2B and on the external wall of the Building near the unit, indicating that it had been the occupier of Office 2B.  The inside of the premises was filled with various chattels, like it was still being used and occupied.  Some of the chattels were obviously related to the wine production business of Ying Fung.

65.A purchaser is entitled, as an aspect of being shown and proved a good title, to be satisfied beyond reasonable doubt that there is no real risk of a successful assertion against him of an adverse claim to the property by a third party.  In this case, the Vendors had, by clause 25, warranted that no third party (whether related or otherwise) had any legal or equitable right or interest whatsoever in the Property.

66.The question of Ying Fung’s interest (if any) raised under Requisition 2 therefore goes to the Vendors’ title to the Property.

67.CMKI’s focus on the validity of the Certificate completely missed the point.  The Purchaser, expressly, did not question the validity of the Certificate because it was issued to someone other than the registered owners.  He was simply asking why the Certificate was so issued.

68.Save that Ying Fung was a company then controlled by one of the grantees of Lot, the Vendors had in effect refused to answer this requisition.  With respect, it is neither here nor there that the registered owners of the Property, between themselves, held 75% of the shares in Ying Fung or were the directors of such company.  Such fact, without more, does not rule out Ying Fung’s interest (if any) in the Property.

69.I find that the Purchaser was entitled to raise Requisition 2 and that the Vendors had failed to satisfactorily answered the same.

Requisition 6

The correspondence on Requisition 6

70.By MCWK’s said letter dated 30 March 2016, under the paragraph numbered 6, the Purchaser raised:

“6. Mandatory Building and Window Inspection

According to the Letter from the [BA] Memorial No. TW118784, the [Building] was completed in or before 1974 which is more than 30 years ago.  Please confirm whether [the Vendors have] received statutory notices under the [MWIS] and the [MBIS]. Please also produce documentary evidence to show that the statutory requirements to carry out inspections and the prescribed repair, if any, have been complied with.”

71.CMKI confirmed on 21April 2017 that the Vendors had received the Notices which required the owner of the Property to appoint a registered inspector (“RI”) / qualified person (“QP”) to carry out the prescribed inspections of the common parts / windows of the Building within 3 months from the date of the Notices (i.e. 15 March 2013); to complete the prescribed inspections within 6 months / 5 months respectively; and if the repairs prescribed under s 30B(8) / s 30C(6) were required, to complete such repairs within 12 months / 6 months respectively.

72.In addition, CMKI also enclosed:

(1)  a fee proposal dated 19 April 2016 for the total amount of HK$70,000 by Savills Project Consultancy Limited (“Savills”) to the Vendors for providing various services for compliance with the Notices but which notably did not include the carrying out of repair works if required; and

(2)  a quotation dated 19 April 2016 by one Shing Chi Interior Decoration Engineering Co (“Shing Chi”) to the Vendors for HK$44,600 for materials supplied and work done.  Shing Chi was apparently the contractor intended to undertake the repair works required.

73.By letter dated 29 April 2016, MCWK asked CMKI to clarify:

“6. Mandatory Building and Window Inspection

(a) Please confirm whether the [Notices] … have been complied with. If so, please produce documentary evidence of such compliance for our perusal. Please also advise, in particular:-

(i) Whether [the Vendors] have appointed any [RI] / [QP] to carry out the inspection;

(ii) Whether the [RI] / [QP] have completed the inspection and prescribed any repair;

(iii) Whether the prescribed repair, if any, has been completed; and

(iv) Whether [the Vendors] have taken any other action in response to the [Notices].”

74.On 3 May 2016, CMKI replied, inter alia:

(1)  that the Vendors had appointed Savills as the RI / QP;

(2)  that the inspection had been completed (and reference was made to certain reports said to have been sent to MCWK under its letter of 21 April 2016); and

(3)  that the prescribed repairs had not been completed.

The Vendors also invited the Purchaser to consider accepting the Vendors’ payment to the Purchaser of the total fees charged by Savills and the nominated contractor for the repair works (presumably Shing Chi) as full settlement and discharge of the Vendors’ liability under the Notices and under clause 15(i).  This proposal was said to have been made first in a telephone conversation between the solicitors on 21 April 2016.

75.By MCWK’s letter dated 12 May 2016 to CMKI, the Purchaser put on the record that:

(1)  Savills was an interested party in the sale and purchase in that they had been acting as the Vendors’ sale agent (thereby calling into question Savills’ impartiality).  Anyway, CMKI were asked to provide MCWK with copies of the documents by which Savills was appointed.

(2)  CMKI had not sent MCWK any report under their letter of 19 April 2016.  MCWK asked for a copy of the report and for confirmation that the inspection as reported had in fact been done according to Savills’ said fee proposal.

(3)  The Vendors’ obligation under clause 15(i) was not discharged by the mere disclosure of the Notices, but by the actual discharge of the Notices before completion.

76.Notwithstanding MCWK’s said requests, CMKI did not provide Savills’ appointment document or report to MCWK.  CMKI’s response by letter dated 19 May 2016 was as follows:

“It is [the Vendors’] position that they will bear all obligations and expenses rising from the [Notices] and for such reason they have invited [the Purchaser] to consider the acceptance of a sum to be paid for discharge of the [Notices]. In the alternative, [the Vendors] are willing to have a sum to be agreed stakeheld upon completion for the discharge of the said obligations. We are in the course of obtaining quotations from DTZ and CBRE as to their professional services for compliance of the [Notices] and will let you know the outcome soon.”

77.DTZ (i.e. DTZ Cushman & Wakefield) produced a proposal for the prescribed inspections (“DTZ Proposal”) under an email dated 25 May 2016.[4]

78.By their said letter dated 27 May 2016, MCWK stated the Purchaser’s position that he was not bound to take the Property with the Notices undischarged despite the Vendors’ agreement to bear all obligations and expenses arising therefrom or to accept any sum for the discharge of the Notices, even more so if there were no full details on the extent of the obligation and a reliable estimate of the amount of time and expenses involved.

79.MCWK then indicated the Purchaser’s willingness to consider any offer by the Vendors, accompanied by the details necessary for the Purchaser to assess the reasonableness of the offer.  And a mere quotation for the prescribed inspections would not suffice since the Notices also required repairs (if prescribed).  Further, the inspections under the DTZ Proposal appeared to fall short of the requirements of the Notices:

(1)  A visual inspection, as proposed by DTZ, may not comply with the Code of Practice for MBIS and MWIS 2012 under which other forms of testing may be required depending on the situation.

(2)  The scope of work should not be limited to “accessible common areas”, as proposed by DTZ.

(3)  DTZ proceeded on an incorrect definition of “common parts”, including only “the exterior of the building, the roof and the plant rooms etc”.  As there is no instrument registered at the Land Registry which specifies or designates any parts of the Building for the exclusive use, occupation or enjoyment of an owner, the whole of the Building[5] would have to be inspected.

(4)  All windows of the Building, and not just “windows at the common areas” as suggested by DTZ, should be inspected under the MWIS Notice.

(5)  The inspection and verification of repairs under the MWIS Notice should be carried out by a QP, not an RI as proposed by DTZ.

80.MCWK urged CMKI to work with DTZ (to whom MCWK had also directly written on the same date) and made clear that the Purchaser would agree to the Vendors’ engagement of DTZ only if DTZ was engaged in a proper manner, to the extent that the obligations under the Notices would be fully discharged in a timely manner to the satisfaction of the Purchaser and that the responsibility for payment should rest solely with the Vendors.  On the question of timing, MCWK indicated that DTZ’s proposed date of 13 June 2016 for submission of a draft report was not satisfactory to the Purchaser.

81.This provoked the following rather convoluted response from CMKI on 30 May 2016:

“We are instructed that the appointment of DTZ instead of Savills was one as recommended by [the Purchaser] and solely for the sake of facilitating the achievement of the without prejudice proposal made by [the Vendors] under which [the Purchaser] may complete the purchase of the Property despite the [Notices], and with which a sum of money will be stakeheld or deducted for meeting the sum, subject to the final agreement of the parties herein. Save that we are instructed that Savills has not submitted to the Buildings Department the papers for the purpose of fulfilling the [Notices], we have no further comment on the appointment of Savills, which is a matter between [the Vendors] and the said firm.

[The Vendors’] stance is that, in the context of proving title to [the Purchaser] in relation to the [Notices], our duty is to show you that all such notices have been discharged/complied with upon completion but everything prior to and regarding compliance of the [Notices] will be a matter to be resolved between the Building Department and the RI (and the AP if needed) in their exercises of professional duty. However, as completion is imminent and as a matter of courtesy and implementation of the aforesaid without prejudice proposal, we invite [the Purchaser’s] participation into the matter as this will become a post-completion matter if [the Purchaser] did accept the said proposal, notwithstanding [the Vendors] will all along maintain that their duty is only to strictly comply and satisfy with the [Notices] and the inspection and works prescribed by and fallen within the scope of the [Notices] but not otherwise and will pay for the costs, expenses and disbursements to see such compliance and satisfaction done.

In this connection, we believe DTZ will respond to your requisitions exercising their professional duty towards the compliance of the [Notices].  In the meantime, we invite [the Purchaser] to accept the said without prejudice proposal at the soonest.”

82.By their third letter dated 31 May 2016 to CMKI, MCWK pointed out:

“We reiterate, and you have in fact admitted that, [the Vendors’] duty is to show us that the [Notices] will be discharged and complied with upon completion. [The Vendors] have so far failed to do so. We repeat our requisition in this regard.

All negotiations regarding a lump sum to be set aside for compliance with the [Notices] after completion are on entirely without prejudice basis. In the absence of information showing the extent of repairs expected to be carried out, the time needed and the estimated cost of doing so, [the Purchaser] is not in a position to assess the reasonableness of [the Vendors’] offer of a lump sum set out in your without prejudice letter today. [The Vendors’] said offer is therefore not accepted. Please furnish the aforesaid information for [the Purchaser’s] consideration.”[6]

83.In response, by their fourth letter on 31 May 2016, CMKI said:

“In specific reply to [Requisition 6], it is [the Vendors’] position and contention that, even though it is a fact that the [Notices] have not been complied with or discharged, [the Purchaser] is not in a position to refuse to complete the purchase of the [Property] if the proper and satisfactory sum could be stakekheld for security of the fees and disbursements for such compliance or discharge as this is a matter of conveyance. In any event, [the Vendors’] without prejudice proposal to you is for such purpose and [the Purchaser’s] risk or liability, if any, resulting in the payment of the said items would be fully covered and protected thereagainst.”

This concluded the correspondence on Requisition 6.

Vendors’ preliminary objection

84.I refer to paragraph 59 above.  Insofar as Requisition 6 is concerned, Mr Li argues that the requisition numbered 6 raised in MCWK’s letter of 30 March 2016 to CMKI was for confirmation as to the existence of government notices under the Schemes and for evidence of their compliance, if any.  Such requisition had been answered by the disclosure of the Notices and the provision of Savills and Shing Chi’s respective quotations for the prescribed inspections and repair works on 21 April 2016 and by the confirmation by CMKI’s letter dated 3 May 2016 that the inspections, but not the repair works, had been completed.  The case now run by the Purchaser is not the requisition numbered 6 raised in MCWK’s letter of 30 March 2016 and therefore outside the ambit of the OS.

85.Again, I am not impressed by such submission.  As in the case of Requisition 2, first, Requisition 6 had clearly evolved in the correspondence detailed in paragraphs 70 to 83 above to become a concern for compliance, or effectively ensuring compliance, by the Vendors with the Notices at or before completion.  Second, it would have been plain to the Vendors from reading the Purchaser’s said first affirmation, served together with the OS, that the Purchaser uses the expression “the requisition numbered 6 raised in MCWK’s letter dated 30^th March 2016 to CMKI” to identify such concern.

Whether the Notices constituted an encumbrance on title

86.There is no direct authority in respect of notices issued under s 30B or s 30C of the BO.

87.However, I find the cases on notices issued under other provisions of the BO, notably ss 24 and 26, instructive. 

88.With regard to s 24, broadly:

(1)  Under s 24(1), the BA may order the demolition of any building works carried out in contravention of any of the provisions of the BO or such alteration as may be necessary to cause the building works to comply with the provisions of the BO, or otherwise to put an end to the contravention thereof.

(2)  Under s 24(2)(a), an order made under s 24(1) should be served on the owner of the unauthorised building works.

(3)  If the order is not complied with, the BA may demolish or alter or cause to be demolished or altered the offending building works under s 24(3), in which case the costs of the works carried out by the BA may be recovered under s 24(4) from the persons upon whom the order had been served.

(4)  To facilitate recovery, the BA may under s 33(1) and (3) certify the costs (and surcharge if imposed) and the names of the persons liable therefor and, where there are more than one person liable, apportion the costs among them and serve a copy of the certificate upon each person affected by it.

(5)  Further, at any time prior to the full recovery of the costs and surcharge and interest thereon, the BA may under s 33(9) register a memorial of the certificate against the title of any premises in respect of which the costs certified arose.  Upon registration, the costs etc shall constitute a first charge on the premises, which gives the BA the same powers and remedies in respect thereof as if it were a mortgagee under a mortgage by deed in common form having power of sale and lease and of appointing a receiver.  See sub-s (9)(b).

89.Litton JA (as he then was) held in Active Keen Industries Ltd v Fok Chi Keong [1994] 1 HKLR 396 at 409(38)-(41) that an order served on all owners with regard to unauthorised building works in common ownership under s 24(2) of the BO could bring in its train the consequence that, eventually, the apportioned cost of removal incurred by the BA is charged against the title of the individual owners under s 33(9), which would then become an encumbrance.

90.Litton JA’s said observation in Active Keen Industries Ltd v Fok Chi Keong in relation to an order made under s 24 of the BO was held by the Court of Appeal in All Ports Holdings Ltd v Grandfix Ltd [2001] 2 HKLRD 630, per Le Pichon JA at [14] to be equally applicable, by reason of the application and operation of s 33(9), to an order made under s 26 in respect of a building that has been rendered or is liable to become dangerous so that a subsisting s 26 order created a potential blot on title.

91.The reasoning in Active Keen and All Ports, based on the application and operation of s 33(9), was followed by Deputy High Court Judge B Chu (as she then was) at [24] in More Alliance Limited v Shing Samuel, HCMP 1980/2012, unreported (29 April 2013), a case concerned with an order issued by the BA under s 24(1) requiring the removal of a structure on and over the flat roof adjacent to the property sold and purchased.

92.Section 33 materially provides as follows:

“Recovery of costs and surcharge by Building Authority

(1) In any case where under this Ordinance the [BA] is authorized to recover the cost of any inspection, investigation or works carried out by him or caused to be carried out by him or to recover the costs of services provided by him or caused to be provided by him or to recover the cost of any abortive visit made by him, the [BA] may impose a surcharge of not exceeding 20% on the cost due and may certify under his hand the cost and surcharge due and names of the persons liable therefor, and may by such certificate apportion such cost and surcharge among such persons.

...

(9) At any time before such costs or surcharge and any interest accrued thereon has been wholly recovered, a memorial of the certificate referred to in subsection (1) may be registered in the Land Registry against the title of any premises or land in respect of which such cost or surcharge arose, and upon such registration the cost or surcharge and any interest accrued or thereafter accruing shall—

(a) be recoverable by action in Court in accordance with the provisions of this section from any person who from such Land Registry register then or thereafter appears to be the owner of such premises or land:

Provided that—

(i) the amount recovered by virtue of this subsection shall not exceed the value of that person’s interest in the premises or land charged; and

(ii) where the amount so recovered is equal to the value of the premises or land the charge created under paragraph (b) shall become void; and

(b) constitute a first charge on the said premises or land which shall give the [BA] the same powers and remedies in respect thereof as if he were a mortgagee under a mortgage by deed in common form having power of sale and lease and of appointing a receiver:

Provided that the charge shall be void and no liability shall accrue under this subsection against a bona fide purchaser or mortgagee of the premises or land for valuable consideration who, subsequent to the completion of the works specified in the certificate and before the registration of the memorial thereof, has acquired and registered an interest in the premises or land to be charged.

…” (emphasis added)

93.The provisions under s 33 apply to any case under the BO where the BA is authorised to recover the costs of, inter alia, any inspection, investigation or works carried out or caused to be carried out by the BA.

94.In this regard, s 30B(10) and (11) allows the BA to carry out or cause to be carried out any inspection and/or repair works directed under a notice served under inter alia s 30B(3) if the notice is not complied with and to recover the costs of doing so as a debt due to the Government.  Likewise, s 30C(8) and (9) gives the BA the same authorisation in respect of a notice issued under s 30C(3) or (4).

95.Hence, s 33(9) should equally apply where the BA carries out or causes to be carried out any inspection and/or repair works directed under a notice served under s 30B or s 30C.

96.By parity of reasoning, the analysis based on the potential registration of a memorial of a certificate of the costs, surcharge and interest arising from works done by the BA under s 33(9), upon which the cases concerning orders issued under s 24 or s 26 of the BO were decided, should apply so that a subsisting s 30B(3) or s 30C(3) and (4) notice creates a potential blot on title.

97.Mr Li seeks to distinguish the precedents concerning orders issued under s 24 and s 26 with reference to the fact that the orders issued by the BA therein had all been registered by the BA against the premises affected under ss 24(2C) or 26(2A). 

98.However, the BA has the same power of registration under ss 30B(9) and 30C(7).  Where a notice has not been registered with the Land Registry, the BA’s costs of inspection and repair works is recoverable from the person on whom the notice is served: ss 30B(11)(a) and 30C(9)(a).  Where a notice has been registered, such costs is recoverable from the person who is the owner of the relevant part as at the dates of the completion of the inspection and repair works: ss 30B(11)(b) and 30C(9)(b).

99.With respect, this is not a material distinction.  Registration of a notice under ss 30B(11)(b) or 30C(9)(b) at the Land Registry gives rise to a personal claim by the BA for receovery of the costs incurred by it against the person who has become the owner of the relevant parts by the time the BA completes the inspection and repair works. 

100.What Mr Li has overlooked is s 33(9)(b), under which the BA may attach its costs to the premises in respect of which such costs arose by registration of a memorial of a certificate of the costs. Prior registration of the notice under ss 30B(11)(b) or 30C(9)(b) is not required to invoke s 33.

101.Further, upon registration under s 33(9), the BA’s costs or surcharge and interest thereon would become recoverable from who appears from the Land Registry register to be the owner of the premises then and thereafter.  See s 33(9)(a).

102.The case of E-Global Limited v Trenda Limited, HCA 1887/2011, unreported (31 January 2013), relied upon by Mr Li, is irrelevant.  In that case, the court was concerned with certain directions issued by the Fire Services Department under the Fire Safety (Commercial Premises) Ordinance (Cap 502) (“FS(CP)O”) against the incorporated owners of the building of which the unit sold and purchased formed part.  The directions, requiring a significant number of alterations to be done, had yet to be complied with. Deputy High Corut Judge Burrell held that the fire service directions did not constitute a blot on the title, noting at [12] that the FS(CP)O (unlike the BO) contains no provision for registration of such directions against the property affected and distinguishing All Ports, supra, on such ground at [26]. 

103.More pertinently, I note that the FS(CP)O does not provide for any mechanism for the Fire Services Department to carry out the works mandated in a fire safety direction and to recover the costs of doing so by means which includes the creation of a charge against the premises involved by registration of a memorial of a certificate of such costs.

104.For these reasons, I find the undischarged Notices to be a potential blot on the title of the Property which, if not satisfactorily dealt with by the Vendors, would entitle the Purchaser to rescind the Agreement.

105.I disagree with Mr Li on his submission, based on the words “the cost for such repair etc. shall be borne by the Vendor” in clause 15(i), that the only consequence of the existence of the Notices is that the Vendors should bear the costs of the inspections and repair works necessitated under thereunder.  The Vendors assumed the obligations to show/prove and give a good title to the Property under clause 8, failing which the Purchaser could not be compelled to complete.

Whether Requisition 6 had been satisfactorily answered

106.It was thus incumbent upon the Vendors to demonstrate either that the Notices had been dealt with to the satisfaction of the BA or that the costs of the prescribed inspections and repair works under the Notices had been adequately provided for, such that no encumbrance under s 33(9) could ever arise: All Ports, supra, per Le Pichon JA at [21].

107.The Vendors had done neither.

108.In particular, with regard to the latter option, the mere offer to pay falls short of what is required.  The Purchaser is entitled to be assured of adequate provision by the Vendors for the costs of the prescribed inspections and repair works necessary for the eventual discharge of the Notices. 

109.However, as at the Completion Date:

(1)  The prescribed inspections under the Notices by DTZ (or other RI / QP) were yet to be carried out.  Indeed, the scope of the inspections required to comply with the Notices was still being debated. 

(2)  Without the inspections, it was not known whether any, and  if so what, repair works would be required to satisfy the Notices.  Needless to say, the costs to be incurred for the discharge of the Notices could not be ascertained.

110.The Vendors try to pass the blame to the Purchaser for (1) not accepting Savill and Shing Chi as the RI / QP and contractor or their said quotations for the inspections and repair works; and (2) questioning (a) Savills’ neutrality thereby causing the switch from Savills to DTZ; and (b) the adequacy of the DTZ Proposal.

111.It does not lie in the Vendors’ mouth to so blame the Purchaser.

112.First, it appears from the correspondence before me that the Vendors did not even attempt to defend Savills.  They just went along with the Purchaser by approaching DTZ.  Despite the claim that Savills had completed and reported on the prescribed inspections under the Notices and the Purchaser’s demand, the Vendors had never provided the Purchaser with Savills’ inspection report, without which the Purchaser would not be able to be satisfied whether the alleged inspections by Savills would fulfil the requirements of the Notices or whether a sum equivalent to the total fees quoted by Savills and Shing Chi would be sufficient to secure the eventual discharge of the Notices.  

113.Second, the DTZ Proposal is not before the court.  However, even without sight of such document, the objections raised by the Purchaser in respect of the DTZ Proposal (see paragraph 79 above) appear to me to be well grounded.  I certainly do not see any evidence of refute by either DTZ or CMKI. 

114.To conclude, Requisition 6 had been not satisfactorily answered.

Dispostions

115.In the premises, I declare:

(1)  that the Vendors had failed to deliver vacant possession of Office 2B, Unit 5C and Unit 5D;

(2)  that Requisitions 2 and 6 had not been satisfactorily answered by the Vendors;

(3)  that the Vendors had failed to show a good title to the Property; and

(4)  that the Purchaser was entitled to accept the Vendors’ repudiation of the Agreement thereby terminating the same.

116.I also make an order nisi that the Vendors should pay the Purchaser’s costs of these proceedings up to date, to be taxed if not agreed on a party and party basis.

Miss Alison Choy, instructed by KWC & Associates for the plaintiff

Mr Jeffrey Li, instructed by Christine M Koo & Ip LLP for the defendants