Read the full judgment text of FACV 000018/1999 on BabelCite. This FACV judgment was delivered on 19 July 2000 before Chief Justice Li, Litton PJ, Ching PJ, Bokhary PJ, Mason NPJ.
Property law – sale of land – contract for sale of undivided shares in multi-storey building – whether potential liability of incorporated owners under judgment enforceable against successor unit owners under Building Management Ordinance (Cap 344) s.17(1)(b) constitutes a defect in title or encumbrance – whether vendor's offer of indemnity and clause 26 (no-objection and 'good or defective title' clause) defeat the purchaser's right to rescind – sale by tender of 11.5% share in Sun Hing Building comprising 53 car-parking spaces, commercial units and 24 domestic flats for HK$118 million – judgment of HK$25.7 million plus interest and costs obtained by injured workman against incorporated owners between contract and completion – workman rendered quadriplegic after fall from old bamboo scaffolding – whether 'owner' in s.17(1)(b) means owner at the time liability was incurred or owner for the time being – whether liability that attaches to owner for the time being runs with the property as a latent defect in title when extraordinary in magnitude – whether general words in clause 26 can shift risk of undisclosed, extraordinary encumbrance to purchaser – Construction of s.17(1)(b) Building Management Ordinance: 'owner' means owner for the time being, not only owner at the time the liability was incurred; s.2 definition and statutory scheme (ss.16, 20, 22, 23, 33, 34, 39) treat liability as running with ownership – Defect in title: a liability attaching to the owner for the time being binds successive owners and therefore the property; an extraordinary liability wholly outside the contemplation of a reasonable purchaser is a latent defect in title following Jones v. Barnett, Rignall Developments Ltd v. Halil, and the Hong Kong unauthorised-structure cases (Woomera, Giant River, Kok Chong-ho, Active Keen, Lo Miu Ling) – Offer of indemnity: does not cure the defect because the purchaser would still be exposed to s.17(1)(b) proceedings, contribution disputes with co-owners, and loss of finance and marketability – Clause 26: general words will not protect a vendor against a serious defect of which the purchaser was unaware and which the vendor could easily have discovered, following Becker v. Partridge and the construction favoured by Lord Hoffmann NPJ in Jumbo King Ltd v. Faithful Properties Ltd – Appeal dismissed with costs to the respondent purchaser – vendor's offer of HK$33,025,758 or bank guarantee held insufficient – purchaser's deposit of HK$11.8 million returnable.
Legal issues: Construction of 'owner' in s.17(1)(b) of the Building Management Ordinance · Whether the potential s.17(1)(b) liability constitutes a defect in title or encumbrance · Effect of the offer of indemnity · Effect of clause 26 (no-objection and 'good or defective title' clause)
Outcome: Appeal by the vendors dismissed; Court of Final Appeal unanimously affirmed the Court of Appeal's decision that the purchaser was entitled to rescind the contract.
Cited by 2 cases