Lo Chun Tak v. Chan Foon Tai

DCCJ000245/1991

HEADNOTES

Conveyance - requisition - whether relevant is one of fact, degree and common sense - answers must be satisfactory - requisition as to Certificate of Exemption relevant.

The Plaintiff (intended purchaser) made requisition as to a Certificate of Exemption in the sale of a building in the New Territories. Vendor's solicitors replied saying that the lack of Certificate of Exemption would not affect the title. The Plaintiff refused to complete and asked for the return of the deposit.

IN THE DISTRICT COURT OF HONG KONG

HOLDEN AT TSUEN WAN

CIVIL JURISDICTION

ACTION NO. 245 OF 1991

----------------------------

----------------------------

Coram: H.H. Judge W. Wong in Court

----------------

JUDGMENT

----------------

1. The Plaintiff by a sub-sale and purchase agreement dated 12th October 1990 agreed to purchase from the Defendant the 2nd floor and the roof of the building situated at Hung Tso Tin Lot No. 28 The said agreement provided that the Defendant was required to show a good title to the said premises.

2. The Plaintiff pursuant to the said sub-sale and purchase agreement paid to the Defendant a sum of $34,500.00 as deposit.

3. The Plaintiff on the 30th October 1990 made requisition in respect of a Certificate of Exemption in respect of the said building. On the 31st October 1990 the Defendant through his solicitors replied saying that the Certificate of Exemption would not affect the title to that property. Further on the 3rd November 1990 the Defendant disclosed that there was no Certificate of Exemption.

4. The Plaintiff on the 5th November 1990 demanded the return of the deposit. The Defendant replied saying that the deposit would be forfeited if the deal were not completed by 1:00 p.m. 10th November 1990.

5. The Plaintiff now seeks the return of the deposit.

6. The only issues in this case are whether the Plaintiff was justified in making a requisition in respect of the Certificate of Exemption and whether the answer to the requisition was satisfactory.

7. In the sale of land or landed property the purchaser is entitled to know whether there are incumbrances in the land or property. The vendor's title to land is exclusively within his own knowledge. Hence he is bound to disclose defects, if any, to the intended purchaser. The purchaser can refuse to complete the transaction if there were incumbrances or imperfections in title which he does not agree to accept.

8. If there is any doubt or uncertainty in respect of the title, the purchaser can raise it by means of a requisition. The vendor is bound to answer all relevant and necessary requisition but he has no obligation to answer frivolous and unnecessary requisitions. What requisition is relevant is one of fact and degree and also of common sense. The Court will not force on the purchaser the title which might result in a law suit. This principle is neatly summed up in the judgment of Lindley L J in Re Heaysman's and Tweedy's contract 1893 vol 69 LT 89 at P.91. Per Lindley L.J., "It is a general principle that a purchaser ought not to be forced to accept a doubtful title or to buy a law suit.. In applying that principle, however, we must exercise our common sense and see if the supposed law suit has any basis whatever We must see if there is the slightest reasonable chance of any such law suit being instituted. if we came to the conclusion that the supposed law suit exists only in the imagination of the purchaser, we ought to disregard it, giving him the advantage of every reasonable doubt".

9. In Kok Chong Ho and another v. Double Value Developments Ltd. 1990 MP 2857 (unreported) per Godfrey J. "The real issue ....... as it seems to me whether there is a real rather than fanciful risk of enforcement_. action here ..... The question ...... is one of fact and degree and of common sense. If there is a real risk, then the Court will not force the title upon the purchaser ......" Godfrey J. continued and cited Cattell v. Corrals (1840) 4 Y. and C. Ex. 237 and fry on Specific Performance and said "The sort of doubt upon the title which justifies a Court in refusing to force it upon an unwilling purchaser is (as Baron Alderson put it) a case where there is "a reasonable decent probability of litigation" : see Cattell v. Corrall (1840) 4 Y. & C. Ex.. 237. As Fry points out in his work on Specific Performance (at paragraph 891, P. 419) the Court would not consider a title to be doubtful:

"Where the probability of litigation ensuring against the purchaser in respect of the doubt is not great. In that case, the Court, to use Lord Hardwicke's language in one case 'must govern itself by a moral certainty, for it is impossible in the nature of things that there should be a mathematical certainty of a good title'."

10. At P,9 Godfrey J. continued, "The second point ..... is whether the answer given by the vendor to the purchasers' requisition was satisfactory. It does not matter that the vendors have turned out to be right, if they did not satisfactorily answer the requisition".

11. In the present case the requisition made was in respect of a Certificate of Exemption. Section 5 of the Buildings Ordinance (Application to the New Territories) Cap. 121 provides, "Subject to the provisions of this Ordinance the Director shall issue a Certificate of Exemption in respect of building works in the New Territories -

12. For ordinary buildings the developer will have to submit a building plan to the authorities for approval. When the construction is completed it will be inspected by the Building Authority and an Occupation Permit to occupy the same will be issued if the building had been built according to the approved plan. Invariably the vendor in order to show a good title would furnish the Occupation Permit and the previous assignments to the intended purchaser. However for buildings in the New Territories if Cap. 121 applies then no Occupation Permit will be issued. In its stead a Certificate of Exemption will be issued to show that the building has been approved by the relevant authorities.

13. In my judgment a Certificate of Exemption is necessary to prove title. In the absence of such document the likelihood of having a lawsuit is real and not fanciful because there is every possibility that the building may be deemed an illegal structure and the Crown may re-enter under the Crown Lease.

14. The Defendant on the 31st October 1990 in answering the requisition as to the Certificate of Exemption stated "We are of the opinion that the lack of a Certificate of Exemption shall not affect title to the above property ...... We are unable to entertain your queries". Without any explanation as to why the lack of such document would not affect the title, I find that the answer given by the vendor was not satisfactory.

15. In view of my finding, the Defendant has defaulted in performing his part of the contract, the Plaintiff is therefore entitled to rescind the contract. By reason of the Defendant's breach the Plaintiff is entitled to recover the deposit.

16. For reasons stated above there be judgment for the Plaintiff in the sum of $34,500.00 with interests at 10% per annual date of writ to judgment. Costs to the Plaintiff. Certificate for Counsel.

Representation:

Miss Cruden instructed by Messrs Norman Yung & Co. for Plaintiff.

Mr. C. Y. Li instructed by Messrs Edward Wong & Ng for Defendant.