Lam Man Fung Mamie v. Active Benefit Ltd.
Read the full judgment text of HCA 11556/1997 on BabelCite. This High Court CFI judgment was delivered on 26 January 2000.
1. A housing project known as "Monterey Villas" ("嘉輝花園") was developed by the Defendant in around 1997 in Peng Chau Island, one of the resort areas in Hong Kong. The Plaintiff and her family saw a newspaper advertisement about it and became interested. On Monday, 19 May, 1997, they went to Peng Chau to have a look.
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HCA011556/1997 HCA 11556/1997 IN THE HIGH COURT OF THE HONG KONG SPECIAL ADMINISTRATIVE REGION COURT OF FIRST INSTANCE ACTION NO 11556 OF 1997 __________
__________ Coram: Hon Chung J in Court Date(s) of Hearing: 1 to 2 June 1999 and 6 to 7 January 2000 Date of Judgment: 26 January 2000 ________________ J U D G M E N T ________________ Introduction 1. A housing project known as "Monterey Villas" ("嘉輝花園") was developed by the Defendant in around 1997 in Peng Chau Island, one of the resort areas in Hong Kong. The Plaintiff and her family saw a newspaper advertisement about it and became interested. On Monday, 19 May, 1997, they went to Peng Chau to have a look. 2. They finally chose a unit known in English as "Monterey Villas, 12 Po Peng Street, Peng Chau, Peng Chau Lot No. 661, Flat A09, 4th Floor and Roof Top" ("the suit property" and the roof top is "the Roof Top"). This English description has been used in the documents executed by the parties before the commencement of these proceedings as well as used by them in documents used in these proceedings. The Chinese description of the suit property is "坪洲寳坪街12號嘉輝花園4樓Ａ09室連天台". The significance of the Chinese description will be discussed under the heading "Other Matters" below. 3. A "Memorandum of Sale" dated 24 May, 1997 was signed by the Plaintiff and the Defendant. Later, a formal Sale and Purchase Agreement dated 28 May, 1997 was also signed by them ("the Agreement"). Since the project was one covered by what is commonly called the "Consent Scheme" of the Law Society of Hong Kong, the terms of this document followed the provisions of the standard sale and purchase agreement of the "Consent Scheme". 4. Completion took place on 1 August, 1997. After possession of the suit property was handed over to the Plaintiff, she found that the Roof Top was unfenced and could not be built upon. She also found a "trap door" blocking the opening leading to the Roof Top. She considered it difficult (or impossible) to open this "trap door", making it difficult to access the Roof Top. 5. The reason why the Roof Top was unfenced or built upon was that Clause (8)(f) of the Special Conditions of the Conditions of Sale of the land on which the suit property is located prohibits any "part of any building or structure erected or to be erected on the lot [from exceeding] 15 meters above the mean site formation level": see, for example, para. 4(a) of the Amended Defence. The building of which the suit property forms part was approved to be, and was in fact, built with the Roof Top at the maximum permitted level: para. 4(c) of the Amended Defence. 6. By reason of the facts above, the Plaintiff took the view that the Defendant breached the terms of the Agreement and commenced this action in October, 1997 asking for damages. On the other hand, the Defendant considered that it had not breached any terms of the Agreement. The Issues 7. The Plaintiff's case is based purely on the allegation that the Defendant has breached either the express terms or the implied terms of the Agreement. Although there was a reference suggesting misrepresentation in the Plaintiff's witness statement, Plaintiff's counsel accepted that no reliance would be placed on such reference. 8. The express terms of the Agreement relied upon by the Plaintiff were:-
9. The implied terms of the Agreement relied upon by the Plaintiff were:-
10. The Defendant denies it breached any of these terms, or indeed any term, of the Agreement. 11. Further, the Defendant contends that the Plaintiff was at liberty to view and inspect the building where the suit property is located, or to raise any reasonable requisitions. By reason of these matters, the Defendant was entitled to rely on the principle of caveat emptor: para. 4(d) of the Amended Defence. 12. The Defendant pleaded that it only priced the Roof Top at HK$50 per square foot and as such its market price was only HK$13,450. Findings of Fact 13. By reason of the nature of the issues, the factual dispute between the parties is narrow in scope. Factual evidence was adduced by the parties in relation to the following issues:-
14. Witnesses who testified during the trial were:-
In addition, the parties called the following expert witnesses:-
The expert evidence will be discussed under the heading "Quantum". Only the credibility and reliability of the factual witnesses will be dealt with under this heading. 15. The parties' witnesses differed as to whether a 3-dimensional model of the whole project (including the building in which the suit property is located) was displayed in a conspicuous place inside the sales office at the site when the Plaintiff went there in May, 1997. The Plaintiff testified that it was not whereas Chan testified to the contrary. I find that both witnesses might have been telling the truth and the model was displayed at the site at that time but the Plaintiff failed to notice it. I also accept the Plaintiff's testimony that she did not notice the state of the roof top of the buildings at "Monterey Villas" when she went there in May, 1997. 16. The weight of the "trap door" originally installed at the entrance to the Roof Top (this was replaced by an electrically operated hatch door in about October, 1997 by the Defendant) was disputed. The Plaintiff claimed that it was so heavy she found it impossible to open it on her own. The defence witness Yu testified he did not find it difficult to do so. Yu said that "trap door" weighed about 10 pounds and this was not challenged by the Plaintiff's evidence. I accept Yu's testimony over this point. I also find that the "trap door" could have been opened by reasonable force, for example, by a male of ordinary built, or by a female with the help of someone. I find that such would not constitute undue hindrance to the Plaintiff's access to the Roof Top. 17. It was undisputed that the "trap door" was unlocked at any time before it was replaced with the electrically operated hatch door in about October, 1997. 18. I find that in its present state, the Roof Top is dangerous for ordinary daily use, for example, going there for relaxation, viewing the surrounding areas or social chats. In addition to not being fenced, there were quite a number of lightwells on the Roof Top (which were in effect also unfenced). The defence witness, Chan, answered in cross-examination that whether the Roof Top was dangerous depended on its use. While this was not an express admission of such danger, it was an evasive answer to the matter put to him by the Plaintiff. I infer from such failure to answer that he also accepted there would be danger if the Roof Top is used for the above said purposes. 19. I consider I can take judicial notice that it is common for the ordinary Hong Kong people to use the roof top for a number of domestic purposes, for example, growing plants, drying clothes, having social chats or barbecue parties. These activities fall within the normal range of "habitation" activities on roof tops of buildings in Hong Kong. 20. I accept the Plaintiff's testimony (in cross-examination) to the effect that she could not inspect the Roof Top when she went to the site in May, 1997 because the building was still under construction then (or at least that was the message she got from the staff at the site). The mere fact an occupation permit was issued on 7 April, 1997 does not necessarily mean that this part of her testimony is untruthful or unreliable. 21. I find that the Plaintiff had not been able to prove that the Defendant had allocated $182,800 of the total price for the suit property to the Roof Top. I accept Chan's testimony (which was supported by the contemporaneous documents) over this point, namely, the Defendant only charged the Plaintiff for the construction costs of the Roof Top. Relevant Surrounding Circumstances 22. No contract is made in a vacuum. Contracts need therefore to be construed in the light of its surrounding circumstances at the time: see, for example, the observations of Lord Hoffmann in I.C.S. v. West Bromwich B.S. [1998] 1 W.L.R. 896, at pp. 912H to 913F. 23. Plaintiff's counsel submitted the relevant surrounding circumstances were:-
I find that only para. (d) and (e) were relevant surrounding circumstances. 24. On the other hand, defence counsel argued it is relevant that a model of the proposed development at "Monterey Villas" was displayed conspicuously at the sales office when the Plaintiff went there. Since I have found as a fact that the Plaintiff did not notice the model, this argument needs not be considered further. In any event, even if the Plaintiff had noticed the model, I do not consider this a relevant factor in construing the meaning of the express or implied terms of the Agreement, just as I do not consider the Defendant's news release or price list to be relevant surrounding circumstances. The Plaintiff's Case Based on Clause 28 25. Clauses 28(1) and 28(2) of the Agreement provided that:-
26. The Plaintiff's case based on Clause 28 of the Agreement (relating to defects of the suit property and remedying them) is set out in para. 9 and 10 of the Plaintiff's closing submissions. In essence, the Plaintiff argues that the lack of fencing of the Roof Top makes it dangerous and this constitutes "defect" within the meaning of Clause 28. 27. I do not agree. I consider that "defect" in Clause 28 is related to defects in workmanship or materials. In other words, the kind of defects similar to the implied term referred to in Chitty on Contracts (1999) 28th Ed., para. 13-015, namely, the construction work will be done in a good and workmanlike manner, and good and proper materials will be supplied. I do not consider Clause 28 to cover the kind of "defect" contended for by the Plaintiff which was related to design rather than workmanship or material. The Plaintiff's Case Based on Clauses 2 and 6 and Schedule 3 28. Clause 2 of the Agreement stated that:-
The suit property has been defined in Clause 1(1)(m) as meaning the property described in Schedule 3 of the Agreement. Schedule 3, Part I of the Agreement reads:-
Schedule 3, Part II of the Agreement described the saleable area of the unit as 33.187 square metres while that of the Roof Top as 27.569 square metres. 29. Clause 6 of the Agreement also provided that the Plaintiff shall upon completion be entitled to the vacant possession of the suit property. 30. The above provisions of the Agreement were categorised by conveyancers as "covenants for title". At common law, they are incorporated in conveyancing documents to indicate that:-
31. It is common in Hong Kong for a piece of land to be developed into multi-storey building(s). When the individual units of the building(s) are sold to individual purchasers, it is common for the developer to divide the holding in the land into nominal parts or shares. An appropriate number of these parts or shares will be allocated to each unit to be sold and these parts or shares will be assigned to the purchaser(s). As against the outside world (and the developer vendor), each purchaser will be a co-owner of that piece land holding a number of equal undivided parts or shares in that land. 32. The relationship among the co-owners themselves is commonly regulated by:-
33. In view of the above matters, I consider that Clauses 2 and 6 and Schedule 3 of the Agreement to be only "covenants for title" when these provisions stated that the Plaintiff has the exclusive right "to hold use occupy and enjoy ALL THOSE A09 on the FOURTH FLOOR and ROOF TOP PORTION A09 ... ". They were only intended to regulate the relationship between the Plaintiff and the other co-owners of the same piece of land. 34. I therefore do not accept the arguments of the Plaintiff's counsel that the Defendant had breached these terms because:-
35. This is because:-
36. Plaintiff's counsel correctly did not raise any point regarding the daily operation of the electrically operated hatch door installed in about October, 1997. The day-to-day operation of this hatch door has nothing to do with the Defendant and no valid complaint could have been made against it. The Plaintiff's Case Based on Implied Term(s) 37. Para. 13-015 (and 37-072) of Chitty stated:-
38. I find that the Agreement was a one where the Defendant "sells a piece of land and covenants to build or complete a [building, or buildings] on it" because it was provided in the Agreement inter alia that:-
39. For the above reasons, I conclude that a term should be implied in the Agreement that the suit property (including the Roof Top) should be reasonably fit for habitation. 40. In my view, the phrase "reasonably fit for habitation" connotes not a type, but a range, of activities. For example, when such a term is implied in relation to a bedroom, the bedroom should be reasonably fit for the range of human habitation activities in connection with a bedroom. The same applies to the respective range of human activities for a kitchen, a balcony or a roof top, although the range of activities for each would be different. 41. In considering this issue, I accept Mr Lam's submission (for the Plaintiff) that it is relevant to take into account that the Roof Top is located on a building which is situated inside a housing development on one of the resort areas in Hong Kong. 42. The Plaintiff testified that she intended to hold barbecue parties on the Roof Top with her acquaintances. I accept this to fall within the range of activities of "habitation" reasonably connected to the Roof Top. I also consider activities like having a cup of tea, having a social chat, enjoying the view nearby and the like on the Roof Top to be activities falling within the same category. As I found earlier, it would be dangerous to have such activities on the Roof Top in its present state. Mr Li for the Defendant in his closing submissions said that the Plaintiff could still, for example, place air-conditioning units or a TV antennae there. Even if Mr Li's argument be correct, the Roof Top is still not reasonably fit for habitation in that it does not allow the Plaintiff to put it to the use referred to above. I therefore find that the Defendant had breached this implied term. 43. The Plaintiff's plea setting out her case based on the implied terms of the Agreement can be found in para. 14 to 16 of the Amended Statement of Claim (quoted in one of the earlier paragraphs under the heading "The Issues"). In essence, the Plaintiff pleaded that the Roof Top was sold "for the use and to the use and could be used occupied and enjoyed exclusively by (or to the exclusive benefit of) the Plaintiff". This phrase closely resembles the phrase "exclusive right and privilege to hold use occupy and enjoy" the suit property used in para. 6, 8 and 13 of the Amended Statement of Claim relating to the alleged breach of express terms of the Agreement. 44. Mr Li objected to the Plaintiff relying on Chitty, para. 13-015 (and 37-072) on the ground that the point was not pleaded in the Amended Statement of Claim. Although there is a close resemblance between these phrases (set out in the earlier paragraph), I consider that the pleader did not intend that the phrase used in para. 14 to 16 of the Amended Statement of Claim (relating to implied terms) to have the same meaning as the similar phrase used in para. 6, 8 and 13 of the Amended Statement of Claim (relating to express terms). Otherwise it would be otiose to plead the implied terms either in addition to or in the alternative to the express terms. I consider that para. 14 to 16 of the Amended Statement of Claim was a plea (although not using the exact words used in Chitty) of an implied term of reasonable fitness for habitation. This conclusion is further confirmed by para. 11 to 13 of the Plaintiff's closing submissions and Mr Lam's oral closing submissions. 45. Even if those paragraphs of the Amended Statement of Claim did not cover the implied term referred to in Chitty, I would have given leave to the Plaintiff to re-amend her Statement of Claim to set out such a plea. This is because:-
Mr Li objected to any leave being given to the Plaintiff because:-
46. By reason of the matters set out above, I do not agree with Mr Li's point (a) above. As regards his point (b), I do not find that the Defendant would suffer irreparable prejudice despite the lateness. As regards his point (c), I do not understand Mr Li to be asking for a short adjournment of, for example, half an hour or so. He was asking for a general adjournment to another date. I do not consider this to be necessary because "habitation" is an ordinary English word which in substance means "living" at that location. I also consider evidence to be unnecessary because the matter could be properly dealt with by counsels' submissions. Other Matters 47. As stated above, apart from the English description of the suit property, there is also a Chinese description. This appears in the "Memorandum of Sale" in the box for "The Premises for Sale and Purchase" (in Chinese "買賣之樓宇"). No reliance has been placed by the Plaintiff on the Chinese description, whether in the pleadings or in the submissions. No arguments have therefore been advanced by the parties regarding this aspect. For the avoidance for doubt, when I considered this action, this aspect has not been taken into account. 48. I shall nevertheless, for completeness' sake, proceed to consider its significance. The Chinese description included a reference to "天台", which has been called "the Roof Top" in these proceedings. The word "台" was defined in The Pinyin Chinese-English Dictionary (商務印書館 "漢英詞典") as a "platform; stage; terrace". The Chinese words "天台" literally mean "sky terrace". The words "天台" are commonly used in Hong Kong to refer to the roof top of a building with fencing surrounding it. Conversely, a roof top without any fencing would in ordinary language (in Chinese) be called a "屋頂" or "樓頂". 49. Further, in the "Memorandum for Sale", there is another box for "Saleable Area" (in Chinese "實用面積"). The respect areas of the "Residential Unit" (or "住宇單位") and "Flat Roof/Roof Top" (or "平台 / 天台") were set out there. 50. It is quite arguable as to whether the Chinese description "天台" (with its commonly adopted meaning in Chinese) and the references in Chinese such as "實用面積" (meaning "Area for Use"), or "平台 / 天台" (meaning "Terrace / Roof Terrace") in the "Memorandum of Sale" are relevant to the construction of the provisions in the Agreement because of the observation of Lord Hoffman in the I.C.S. case. ([1998] 1 W.L.R. 896):-
51. If they are relevant, the reference in English to the "Roof Top" in the contractual documents should (at least arguably) be construed to mean "roof terrace" because the Chinese words "天台", rather than "屋頂" or "樓頂" (both meaning "roof top"), were used. Hence, according to the express terms of the Agreement (Clauses 2 and 6 and Schedule 3), the Defendant was obliged to convey to the Plaintiff the unit at Flat A09 and a roof terrace which was fenced. If the Defendant failed to do so, it would have been in breach of these terms. 52. As stated above, the Defendant argued that by reason of the Plaintiff's failure to inspect the suit property, or to raise any reasonable requisitions, the Defendant is entitled to rely on the doctrine of caveat emptor: para. 4(d) of the Amended Defence. In fact, according to Chitty, para. 13-015 (quoted earlier under the heading "The Plaintiff's Case Based on Implied Term(s)), this doctrine does not depend on whether the Plaintiff could have inspected the suit property or could have raised requisitions. It was not argued that at law the Plaintiff has a duty to inspect the suit property, or that there was an implied term in the Agreement that such a duty exits. Even if this had been raised, I would not have found that such argument would succeed. Waiver was not raised as an issue either. 53. No argument has been advanced regarding whether the Agreement had merged with the assignment of the suit property. I consider counsel was correct not to do so because the merger of a conveyancing agreement with the assignment is only relevant to the implied terms about title to land (see Emmet, para. 8.056). It is irrelevant to the issues in this action because the terms relied upon by the Plaintiff (relating to the construction or completion of the suit property) was not intended to merge with the assignment. Conclusion on Liability 54. For the above reasons (except those set out under "Other Matters" which, as stated earlier, were not taken into account), I find in the Plaintiff's favour on liability. Quantum 55. There is a difference between the opinion of the Plaintiff's valuation expert, Ng, and that of the Defendant's valuation expert, Mak. Ng opined that the difference in value between the suit property with a usable Roof Top and one without is to be measured by using (a) the comparative method and (b) the adjustment method (see p. 9 of Ng's report). 56. In relation to the comparative method, Ng included in his assessment comparables in 2 nearby housing developments, Sea Crest Villa and Tung Wan Villa. In relation to the adjustment method, Ng concluded that, as at 28 May, 1997 (the date of the Agreement):-
Further, the open market value of the suit property without the exclusive use and occupation of the Roof Top as at 30 October, 1998 was $920,000. 57. On the other hand, Mak considered that the units of Sea Crest Villas and Tung Wan Villas could not properly be used as comparables since the 2 developments do not have the facilities (such as a shopping complex) offered by "Monterey Villas". He used the units within the same development as his comparables. However, in assessing the difference in the value of the suit property with and without the exclusive use and occupation of the Roof Top, Mak refrained from assigning an open market value to it. The reason he gave for refraining to do so was that there was a special condition prohibiting the Roof Top from being accessible (and therefore usable or occupiable). 58. I prefer the evidence of Ng to that of Mak. Merely because there was a special condition prohibiting the Roof Top from being accessible should not prevent the valuer from attempting to give an opinion on the value of the property. The approach of Mak renders his opinion over this aspect to be of no assistance to the Court. I also do not agree with his opinion that merely because there was a quality difference between the units of "Monterey Villas" and those of the 2 nearby developments, the latter should be completely ignored. 59. Ng has fairly accepted in his testimony that there was a margin of error in his valuation in the range of 5 to 10%. Taking into account Mak's criticism that the quality of the units of Sea Crest Villas and Tung Wan Villas is inferior to that of those in "Monterey Villas", I consider a 10% reduction should be made to the $200,000 difference in the value of the suit property, as assessed by Ng. The amount awarded is therefore $180,000. Interest on the Judgment sum is at judgment rate from the date of Writ to the date of Judgment. 60. The Defendant submitted that the proper date for assessing the Plaintiff's loss should be the date of breach, that is, 17 July, 1997: para. 9.2 of the Defendant's closing submissions. The Defendant further argued that the Plaintiff had failed to adduce any evidence on this point. While this may be true as a fact, I do not consider much weight should be attached to them. First, the time difference between 28 May, 1997 and 17 July, 1997 was relatively small. Secondly, the reports of both sides' experts have provided information on the market condition around that period. It can be inferred from the information provided that the difference in value (in other words, the amount of loss) remained about the same from about May, 1997 to about July, 1997. Costs Order Nisi 61. The parties agreed that it is appropriate to include a costs order nisi in this Judgment pursuant to R.H.C. Ord. 42 r. 5B(6). I make a costs order nisi that the costs of this action are to be paid by the Defendant to the Plaintiff to be taxed if not agreed.
Representation: Mr O Lam, instructed by Messrs K F Wong & Co., for the Plaintiff Mr C Y Li, instructed by Messrs Stevenson, Wong & Lai, for the Defendant |
Cases cited in this judgment
Further hearings and rulings under HCA 11556/1997