Woomera Company Limited and Another v. Provident Centtre Development Limited

CACV000130/1984

Vendor and purchaser - conveyancing - sale of newly built flats - vendor's obligation as to title - whether payments made by purchaser formed part of "the deposit".

Where the Crown lease under which land was held contained a covenant that the lessee "will not erect ... any building other than a building which shall ... in all respects comply with the Building Ordinance and regulations made thereunder..." (and included a proviso for re-entry for breach of covenant) a lessee who had agreed to sell a number of flats in a new building on the land had made out a good title by providing the purchasers, before the completion date, with attested copies of the Crown lease and of the occupation permit for the building (the latter being prima facie evidence that the covenant had been observed) and with statements that certain modifications of the regulations had been made by the Building Authority. In the circumstances disclosed there was no risk of the Crown re-entering for such trivial breaches of the Building Ordinance and regulations as were established by the purchasers at trial.

Decision of High Court affirmed.

Upon the true construction of the agreements for sale and purchase, all the sums paid by the purchasers before the agreements were terminated formed part of "the deposit" and could not be recovered by them.

Cross-appeal allowed.

BETWEEN

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Coram: Silke, Fuad and Kempster, JJ.A.

Dates of Hearing: 16, 17,18, 19, 22, 23 and 24 April 1985

Date of Judgment: 13 May 1985

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JUDGMENT

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Fuad, J.A. :

1. This is an appeal from a decision of Liu, J. given on the 24th June 1984 whereby he found in favour of the vendors, and against the purchasers, in a dispute concerning the sale and purchase of a number of newly-built flats. There is a cross-appeal by the vendors against orders made in favour of the purchasers in relation to the re-payment of certain sums of money they had paid under the relevant agreements.

2. The parties are Woomera Company Ltd. and Eskensen Investment Ltd. (the Plaintiffs who now appeal, and whom I will call for convenience "Woomera", "Eskensen" or "the Purchasers") and the Defendant/Respondent, Provident Centre Development Limited ("Provident" or "the Vendors").

3. Provident are property developers. On the 19th February 1981, they were granted a Crown lease of certain land at North Point for 75 years reckoned from the 5th September 1921, with a right of renewal for a further term of 75 years. There is nothing remarkable about this Crown lease, and it is only necessary to note (i) that it contained a covenant that Provident "will not erect or permit or suffer to be erected on the said piece or parcel of ground any building other than a building or buildings which shall subject to terms and covenants herein contained in all respects comply with the Buildings Ordinance any regulations made thereunder and any amending legislation" and (ii) it included the usual proviso for re-entry "for breach or non-performance of any of the covenants and conditions herein contained."

4. Provident decided to construct 17 blocks of residential flats on the land they had leased. On the 7th March 1981 Eskensen entered into agreements with Provident to buy all the flats in Block 4 (100 in number). Woomera entered into similar agreements in respect of all the 100 flats in Block 3 on the 17th March. All the 200 agreements are in identical terms.

5. Early in October 1980 the Purchasers had each paid $6,649,500 "booking deposits" being 5% of the total purchase price for the respective 100 flats and, on the signing of the agreements on different days in March 1981, they each paid "further deposits" of the same sums as required by letters from the Vendors' agents dated the 6th October 1980.

6. The agreements recited that Provident intended to erect and complete the flats by the 30th June 1983. Inter alia, the Vendors undertook to "comply with the requirements of the Building Authority and of any other relevant government authority relating to the building" (Clause 3(i)(a)). It was agreed that the building would be "deemed to be completed on the date on which the Authorized Person shall apply to the Building Authority for the Occupation Permit" (Clause 3(iv)) and that "the purchase shall be completed.....within fourteen days of the Purchaser being notified in writing that the Occupation Permit ..... has been issued and that the Vendor is in a position validly to assign the said premises to the Purchaser" (Clause 4). Clause 2 provided that "the purchase price shall be the sum set out in the Second Schedule hereto which shall be paid by the Purchaser to the Vendor's solicitors as stakeholders in the manner set out in the said Second Schedule." The Purchasers were required by that Schedule to pay a further 10% of the purchase price by 10 equal instalments from and after the 1st May 1981. The balance was to be due on completion. In due course the Purchasers paid $1,329,900 in respect of each of their respective 100 flats. Whether this further 10% is properly to be regarded as being part of the deposit or as part payment of the purchase price is a question to which I will have to return for it is the subject of the cross-appeal.

7. It became apparent that the project (at any rate in so far as Blocks 3 and 4 were concerned) would be completed earlier than expected, and negotiations were entered into between the parties.

8. On the 10th June 1982 each of the Purchasers wrote (in effect to Provident) formally submitting their request that completion should be delayed until the 15th March 1983 which was the approximate date envisaged in the letters of the 6th October 1980; the letters of request record that the Purchasers had been informed that the project would be completed in September 1982. The letters pointed out that certain purchasers of Phase II of the project had been allowed a price reduction of about 30%. The letters conclude:-

"We are all aware of the fact that the property market has been softened and will be very difficult for all property developers. To assist each other at time of difficulties may subsequently be of mutual benefits. We have no intention rot to complete the deal in accordance with the Sale and Purchase Agreement nor to ask a price reduction of any, but would only request your kind consideration to allow us to complete the transaction in March 1983 which date, in fact, is one of the original and very prime factor of consideration for purchase of this block, as it would obviously determine our cash flow and also the market conditions."

9. Provident replied on the 22nd June saying that they much regretted that after careful consideration their Board was not prepared to agree to the Purchasers' proposals. However, they were prepared to agree "to a settlement within six weeks after the occupation permit being granted." Provident drew attention to the fact that, the agreements had recited that the building was expected to be completed "on or before 30th June 1983".

10. On the 27th July 1982 Provident, who had received no reply to their letter, wrote to the Purchasers again; asking them for a decision on the counter-proposal, failing which it would be withdrawn and completion would have to take place strictly in accordance with the agreements. They added that they expected to be ready to hand over the flats in the second half of September, and that specific dates would later be advised. Provident also drew attention to the contractual obligations regarding the time for payment of the balance of the purchase price.

11. Further negotiations took place, and they are summarized in the Purchasers' letters of the 26th August 1982. They set out the reasons why market forges "jeopardize completely any effort we might undertake to sell the units without increasing losses". There would have to be a substantial reduction in their proposed selling prices even at "the cost of sacrificing part of our investment". The letters end with plea "to share with us this situation", taking the stand that they were "very open" to reviewing any formula which might allow Provident to recover their part if the market should improve.

12. On the 9th September 1982 Provident replied saying that the Board of their parent group had decided not to grant discounts to any purchasers.

13. Up till then, the parties had (as is permitted by the Law Society) employed the same solicitors. By the 5th October 1982 the Purchasers had engaged new solicitors who wrote on that day asking the Vendors' solicitors to send the following - the approved general plans and specifications; the drainage plans and the structural plans.

14. On the 10th November 1982, Provident wrote to the Purchasers telling them that they required completion within 14 days (i.e. by the 25th November 1982). Certain information was given and an opportunity afforded to inspect the flats; and the relevant occupation permit was enclosed.

15. After more correspondence between the solicitors, those acting for the Purchasers were sent, on the 16th November 1982, attested copies of the Crown lease and of the occupation permit, and the draft assignments.

16. Matters took a different turn on the 24th November 1982. The Purchasers' solicitors, on that day, wrote direct to Provident saying that surveyors had inspected the flats, and although the survey was not yet complete "serious contraventions" of the Buildings Ordinance and Regulations had come to light. These were detailed in an appendix and the writer expressed surprise that "the responsible persons" had felt able to certify that the Ordinance and Regulations had been complied with in applying for the occupation permit, as the law required. Contraventions of such a nature constituted repudiatory breaches of the agreements and, moreover, they amounted to breaches of the Crown lease which rendered the Vendors' title defective. If further breaches were discovered when the survey was completed, they reserved their right to rely upon them.

17. The letter also alleged that another breach of the agreement was that glass mosaic tiles had been used for the external walls instead of the glazed mosaic tiles stipulated by the agreements. And concern was expressed about the possibility that the regulations which governed the "street shadow area" had been infringed and there was a request for a complete set of plans so that the Purchasers could see if their anxiety on this point was justified. The letter concludes by saying that the  Purchasers were entitled forthwith to accept the Vendors' breaches as a repudiation of the agreements, however, before exercising this right an opportunity would be given to the Vendors to offer any explanation they might have for "this serious state of affairs" by the 2nd December 1982.

18. The Vendors' solicitors replied to this letter on the 26th November 1982. Inter alia, they said that their architects maintained that the allegations regarding non-compliance with the Building Regulations were not correct. They had it in mind to provide a more detailed rebuttal of these allegations but, with a week-end in between, this might not be ready by the 2nd December. Attention was drawn to Clauses 2(iii) and 4 of the agreements and to the fact that the date for completion had passed, and apart from any other rights the Vendors might have, interest would be due from the time the balance of the purchase price should have been paid.

19. On the 1st December, the Purchasers' solicitors acknowledged this letter and said "In the circumstances, our clients are prepared to give you until Tuesday, 7th December 1982 to afford your clients a further opportunity of giving any further explanation they may have."

20. The Vendors' solicitors then wrote on the 6th December 1982, further to their letter of the 24th November. The actual terms of this letter are important and so I will read it in full:-

"        We refer to our letter of 26th November, 1982 in which we advised that our clients' architects would provide a more detailed rebuttal of your clients' allegations. We how summarise their findings and observations, referring to the numbered paragraphs of your letter of 24th November 1982.

21. On the next day, the following reply was received from the Purchasers' solicitors:-

22. Then, on the 23rd December 1982 two things happened - the Purchasers issued their writ, And the Vendors' solicitors forwarded copies of the permits granting certain modifications to the Building Regulations "on the footing that the agreements are still in force".

23. Provident later issued notices to the Purchasers to determine the agreements under Clause 16. This was on the 30th December 1982. On the 29th March 1983 the Purchasers were informed that Provident intended to re-sell the 200 flats and would claim relief under that Clause.

24. By their re-re-amended Statement of Claim the Purchasers pleaded breaches of the agreements because the flats were not constructed and completed in accordance with the Buildings Ordinance and Regulations; there was a failure to comply with the requirements of the Building Authority; glazed mosaic tiles had not been used for the external walls as agreed; and Provident had failed to show a good title to the flats. These breaches, it was averred, constituted a repudiation of the agreements.

25. I will not rehearse all the averments, but the Purchasers sought declarations that the agreements had been discharged by Provident's repudiatory breaches and by the acceptance thereof; the return of the money they had paid; and alternatively damages for breach of contract. In the alternative to these reliefs, the Purchasers asked for declarations that they were not obliged to complete; that they were not obliged to complete so long as the contraventions and breaches subsisted and Provident failed to show good title; and damages for breach of contract.

26. The Statement of Claim had been finally amended on the first day of the trial, on the 21st March 1984. Provident denied the allegations made against them and obtained leave, again during the trial - on the 27th March to re-re-amend their Defence and Counterclaim to indicate that the damages which they counterclaimed derived from, and ware calculated in accordance with, Clause 16. This claim was in respect of 54 of the 200 flats which had been resold within the time for which provision was made by that Clause.

27. The Purchasers appealed against the Judge's order giving leave to re-re-amend the Defence and Counterclaim to the Court of Appeal, but his order was upheld. The Court of Appeal ordered a separate trial of the issues raised by the amendments that had been allowed.

28. The trial with which we are concerned was heard over 28 days between the 21st March and the 18th May 1984. Liu, J. delivered a reserved judgment on the 29th June 1984.

29. The Purchasers' appeal falls under two heads (a) failure to show good title and (b) breach of contract. Since the alleged contraventions of the Building Regulations and the breaches of the agreements are relevant to both issues, I will turn first to them. As regards what were referred to throughout the hearing of the appeal as the "apparent contraventions" all that need be said at this stage is that section 42 of the Buildings Ordinance allows the Building Authority to permit modifications of the provisions of the Ordinance where it is of the opinion that "special circumstances render it desirable" so to do. It is common ground that modification permits in the prescribed form were in fact issued to Provident by the Authority and these, inter alia, related to the complaints regarding the "street shadow area", the ceiling heights in all the flats and the internal dimensions of the lavatory traps. And so, the issue of the proper deduction of title apart, no complaint can be made about these matters.

30. There was a complaint about the bay windows in the sitting room of each flat. It was said by the Purchasers that Regulation 30 (2)(a) of the Building (Planning) Regulations had been contravened because the aggregate superficial area of glass in the window was less than 1/16th of the floor area, in that the top of the opening of the window was less than 1.9 m. above the level of the floor. It was common ground, however, that if the bay window could properly be treated as incorporating the fanlights for the purposes of the Regulations, there was no contravention. The Purchasers contended that the lower part of the window and the fanlights above formed two distinct windows because they had separate frames; they were separated by a concrete transom which was substantial in size - the transom being of a piece with the other walls and structural parts of the building and two separate openings had had to be made in the walls. The transom, it was submitted, was put there to take an air conditioner and was not part of the window design. The two different parts of the window were on different vertical planes.

31. The learned Judge heard evidence about this matter, and although he recorded the impression he himself had formed on his view of the flats, he reached no firm conclusion on the question, preferring to state that he was satisfied beyond reasonable doubt that there was no risk of any Crown re-entry by reason of the window design. His impression was couched in these words: "These fanlights and bay windows did strike me as one window."

32. The word "window" is not defined and as we have seen, the Judge did not make a finding as to whether one or two windows were involved. However, in my judgment, the impression he formed on the view should be given some weight as well as the fact that he accepted the view of the Vendors' witness, that treating the matter as one of visual appearance and impact, the fanlight and the main window formed a single composite window. It should be noted that the opposing witness conceded that it was largely a matter of opinion on which professional men might have different views.

33. We have been shown excellent photographs of the windows, and taking all the evidence into account, in so far as evidence could assist, coupled with the impression I myself have formed, I am not satisfied that the Purchasers have proved that it could not fairly be regarded as a single composite window for the application of the relevant Regulations, and conclude that no contravention of those Regulations has been established. If I am wrong in making this finding, then I respectfully agree with what Liu, J. said on the matter.

34. I now turn to the complaint that there was a lack of proper bonding of certain non-load bearing walls, so that Regulation 47(a) of the Building (Construction) Regulations was contravened. This was what was said at the trial - the original complaint (later abandoned) had been that the hollow blocks of which the walls were made had been "chased". We were referred to a textbook which said "Bond in brick work is the manner in which the material is laid up in mortar so that bricks in any course cover the vertical joints of the course below." It was argued that the Regulation had been infringed because there was an absence of bonding at each metal conduit (for electrical wiring) and it was wrong to treat the wall on each side of the conduit as two separate walls.

35. These submissions by the Purchasers were based on the evidence of Mr. O'Sullivan. The Judge also heard the testimony, called by the Vendors, of two witnesses who had the necessary experience. Mr. Ng and Mr. Roberts told the Court that the method employed by the builders was the normal one and was structurally sound and well-planned.

36. The material part of Regulation 47(a) stipulates: "The walls of all buildings shall be constructed by bricks or building blocks bonded and solidly put together with mortar." The learned Judge went into the matter in great detail in his judgment (as with all the questions raised at the trial) and concluded that the Regulation had not been breached. In my view his finding was fully justified, and I would not depart from it. It seems to me that the Purchasers totally failed to establish the contention for which they strove because, as the clear photographs show, every hollow block in the partition wall was in fact bonded in that it overlapped, or was overlapped by another such block. The Regulation is not so tightly drawn that it will not permit edges abutting a conduit pipe.

37. On all the matters discussed so far, therefore, the Purchasers did not, in my judgment, make out a breach of the Building Regulations to affect the Crown lease or to amount to a breach of contract.

38. I now turn to consider the tiles with which the external walls of the buildings were encased. In the Third Schedule to the contracts was a stipulation (as we know) that glazed mosaic tiles would be used, whereas glass mosaic tiles were in fact employed. As the learned Judge noted, the Purchasers did not suggest how they could possibly have been prejudiced by this substitution. Their complaint was that the Vendors had decided to use glass tiles six months before the agreements were entered into, and they had not been informed of the change, or the reasons for it, until the letter of the 24th November 1982. While the agreement allowed a substitution of alternative fittings and finishes of closely comparable quality, inter alia, "fore any reasonable cause", it was submitted that this must relate to a cause arising after the contract.

39. I accept that this argument may well be sound in strict law, but where does it lead us? There was unchallenged evidence that the tiles actually used provided a better (and more expensive) finish and I do not see how any Court, finding a technical breach of this kind, could possibly contemplate awarding other than nominal damages, in the absence of any suggestion that the Purchasers had suffered in any way. It could not, on any reasonable view, be regarded as a repudiatory breach. I think it would be quite unrealistic to allow the substitution to be weighed in the scales, other than imperceptibly, on the issues which divided the parties at the trial, and Which divide the parties before us.

40. I will next deal with contraventions of the Building Regulations which the Purchasers did make out, and they relate to the kitchen windows, the bathroom, windows and the beam heights.

41. First the kitchen windows. The evidence established that Regulation 30(2)(a) of the Building (Planning) Regulations had been contravened in that the superficial glass area in the kitchen windows was less than l/10 of the floor area. The Judge accepted (in respect of the bathroom windows, too) that a 15% "rule of thumb" was applied by the Building Authority, excusing contraventions within this tolerance. There was ample evidence to justify this finding.

42. The kitchen windows had exhaust fans fitted in to them. This, of course, took up some of the glass area and contributed to the contravention. The evidence showed that if the "rule of thumb" were applied, then, by removing the exhaust fans the deficiency in the superficial glass area could be remedied completely for all the flats at a cost of $33,500, for only one of the four types of flat would be affected. Even if` the 15% rule were rot applied the deificiency (except in respect of that flat) would be remedied by taking out the exhaust fans at a total cost of $51,500. If the exhaust fans had to be re-located (exhaust fans were provided for in the agreements) another $260,000 would be involved.

43. There was evidence from one of the Vendors' witness (Mr. Roberts) to the effect that the Building Authority adopted a common-sense approach and did not in practice require the removal of exhaust fans. There was no evidence to the contrary, and no criticism was made when the Authority made their inspection before the occupation permits were issued, although some exhaust fans were in place. The Judge heard evidence (from Miss Tang) that the 15% rule was applied at the construction stage provided "normal" window frames were used, and from Mr. Roberts that these were "normal" sized windows.

44. The Judge formed the view that the shortfalls in the kitchen windows were trivial and that there was no risk of the Crown re-entering on account of the breaches of the Building Regulations in this respect.

45. The bathroom windows clearly contravened Regulation 36 of the Building (Planning) Regulations to the extent that (a) the superficial glass area of the bathrooms was less than 1/10 of the floor area and (b) the operable window area of the bathrooms in nearly all the flats was less than 1/10 of the floor area. But if the 15% rule were adopted (and the Judge held this was permissible) there was no deficiency as regards the superficial glass area at all except in the bathrooms of one of the four types of flat; and where there was a deficiency it amounted to .0082 of a square metre. In respect of the openable glass area, there was evidence that the lower panes had been deliberately fixed for the convenience of purchasers who might want to put "bathroom accessories" on the window sill. The total cost for all the flats of hinging the lower pane, which would cure the defects, would be $42,000. The Judge's conclusions on the submissions made in respect of the kitchen windows embraced the bathroom windows, for he dealt with the deficiencies together.

46. The final complaint about breaches of the Building Regulations concerns beam heights. The relevant part of Regulation 24(l) of the Building (Planning) Regulations provides that every room intended to be used for habitation shall have a minimum height of 2.3 metres measured from the floor to the underside of any beam. The learned Judge accepted the evidence of three witnesses called by the Vendors that the practice universally accepted by the professions and by the Building Authority was to take the measurements from one structural member to another.

47. I will say at once, in so far is this may be relevant, that in my view the true construction of `Regulation 24(l), read with the definition of the word "floor" in the interpretation Regulation (Regulation 2) is that, despite the marginal note "Height of storeys" to. Regulation 24, it is the measurement of rooms as finally constructed with which the Regulation is concerned. Be that as it may, although some breaches were undoubtedly proved, two matters must be noted. The beam heights in some of the rooms were caused to be measured by the Building Authority before the occupation permits were issued, and generally speaking, the offending beams ran along the top of the walls; where rooms were spanned by a beam, the height was right. I do not think if is necessary to review the evidence in any more detail. The Judge concluded, as I do, that the deficiencies in beam heights were minimal, and that if they could really be regarded as breaches of the Regulations, there was no risk of the Crown re-entering on this ground, or on all the grounds when considered cumulatively.

48. I will now turn to the question of title. Although a contrary argument was addressed to the Court at the trial by leading Counsel then appearing for the Vendors, Mr. Millett, before us, concedes on their behalf that the obligation of the Vendors went beyond merely "showing" a good title. He accepted that the learned Judge was right to reject the earlier submission and to hold that the Vendors were required to "show" title and then "prove" "verify" it.

49. Although sometimes slightly different terminology is used by the textbook writers, there is no difference in substance between them and I choose the formulation from WILLIAMS ON TITLE (4th Edition), p. 505:-

"The obligation [of the Vendor] is a double one. The first part of the obligation is to show a good title, i.e. to state all the matters essential to the title contracted to be made in an abstract of title, or, in other words to deliver a complete abstract. The second part of the obligation is to make a good title, i.e. to prove by proper evidence the matters stated in that abstract."

50. Nor does Mr. Millett seek to deny that the cases show that if the two-fold obligations of the vendor are not fulfilled by the time the purchaser legitimately elects to treat the contract as at an end (here the 7th December 1982) the vendor is not allowed to remedy the defect in title later, even if he could, at the relevant time have shown and proved a good title.

51. The next point seems to me crucial to this appeal, and it concerns the obligation of a vendor where a sale of a leasehold is involved and there is a provision in the head-lease for re-entry for breach of covenants. The obligation is put this way in DAVIDSON'S PRECEDENTS & FORMS IN CONVEYANCING (4th Edition ) at p. 536:-

"Upon a sale of leaseholds on an open contract the purchaser is entitled to require such evidence that the lease is not void or voidable, as is afforded by proof that the covenants and conditions in the lease have been performed and  observed; and as the burden which such a requisition throws on the vendor is, in fact, that of proving a negative, it is usual in conditions of sale to stipulate that the receipt for the last payment of rent due before the sale, or before completion of the purchase, shall be considered as evidence of the observance and performance of the conditions and covenants."

52. In WILLIAMS ON VENDOR AND PURCHASER (4th Edition), at p. 405-6 the purchaser's rights are explained in the light of section 45 of the Law of Property Act, 1925 (which replaced provisions in the Conveyancing Act of 1881, and which has no equivalent, we are told, in Hong Kong) : -

"When the property purchased is held for a term of years determinable by re-entry for non-payment of rent or breach of covenant, it is, of course, important to ascertain that no cause of forfeiture under the condition of re-entry has occurred. Before the year 1882, the purchaser in such a case was entitled, in the absence of stipulation to the contrary, to require evidence that all the covenants and conditions in the lease had been duly performed and observed up to the date of the actual completion of the contract. It was, however, usually stipulated that production of the receipt for the last payment of rent due before the completion of the sale should be conclusive evidence of this. At the present time, the purchaser's rights in this respect are regulated, in the absence of special stipulation, by the following provision of the Law of Property Act, 1925."

53. In the circumstances of the case, the Vendors say that they deduced a good title; and the Purchasers say they did not, because there was insufficient evidence to prove that the covenants had been complied with. Counsel appearing before us on this appeal agree, of course, that a defeasible title is not a good title. Mr. Ferris for the Appellants submits that it was for the Vendors to establish by evidence before the 7th December 1982 that the covenants in the Crown lease had been complied with. Mr. Millett contends that the obligation of the Vendors was limited to producing satisfactory evidence, if so required, before that date that the lessor had no grounds for forfeiting the lease - a de minimis breach, in the eyes of the law, was not a breach at all.

54. Among the cases relied upon by Mr. Ferris was Barnett v. Wheeler⁽¹⁾. There the defendant had entered into an express contract to deduce a good title to the premises by a certain date. It was held that the fact that the Plaintiff was aware of the defect of title by the breach of a covenant to repair afforded the defendant no reason for his not performing that contract.

55. The next case was Palmer v. Goren ⁽²⁾. There the condition of sale provided that the Product on by the vendors of a receipt for rent up to the date for completion would be conclusive evidence of the fulfilment of all covenants on the part of the lessees. The judgment of Kindersley, V.- C. is so short that I will read it out in full:-

"I think the purchaser in this case ought to be discharged from his purchase. It is clear that the property was so situated that the landlord might have entered for a breach of covenant. It appears to me that when a vendor of leaseholds is selling, subject to a covenant which is calculated to preserve the property, and when he agrees with the purchaser to complete the contract within or by a certain time, not an indefinite time but a certain time, he is bound to complete within that time, and to keep the title unimpeached. If he does not complete within the time specified, he is bound to keep the title in that condition until the contract is completed, unless, which is not suggested here, the delay arises from or is attributable to some act of the purchaser. It is, in fact, the duty of the vendor so to act that nothing done by him prior to the completion of the contract shall constitute a forfeiture of the lease. The policy of insurance not having in this case been kept up till the completion of the contract, - so rendering the property liable to a forfeiture, that was not done by the vendors which they should have done, and therefore, I think, the purchaser ought to be discharged from his contract."

56. I should here mention that Barnett v. Wheeler⁽¹⁾ was followed in In re Highett and Bird's Contract ⁽³⁾. These cases were distinguished by Parker, J. in In re Taunton etc. Building Society and Roberts' Contract⁽4) where at the time the contract was entered into there were continuing breaches of the lessee's covenants to repair and paint in respect of which the lessees were threatening action, but neither party knew or had notice of the breaches and the purchaser did not know of the particular covenant. He held that the vendors' obligations to make out a good title had not been discharged as the lease had become forfeitable.

57. Then there is Becker v. Partridge⁽⁵⁾. It was held by the Court of Appeal that where there were breaches of covenant in respect of unauthorised underletting and alterations (unless the latter had been waived) these were defects in the vendor's title of which he ought to have been aware and which he was under a duty to disclose. Since these breaches made forfeiture a possibility, the purchaser was entitled to rescission.

58. But these cases do not assist in answering the question as to the sufficiency of proof necessary to discharge the burden placed on a vendor in respect of the due compliance with the covenants in a lease.

59. Mr. Millett submitted that the extent of the vendors' duty is no more than to show in practical terms there is no risk of the lessor re-entering. In Re Heaysman's and Tweedy's Contract⁽⁶⁾ (the facts of which do not concern us) this is how Lindley, L.J. approached a claim that a requisition as to a missing lease had not been sufficiently answered (at p. 91):-

"I will assume everything in favour of the purchaser. What was the position of the mortgagee when that judgment was obtained? I will assume he knew nothing about it. He could not have obtained leave to defend, as he was not in possession either by himself or his tenant. No doubt the legal consequence is, that the judgment in ejectment would not bind him. His title is purely equitable. Any steps he must take would be in the Chancery Division to set aside the judgment on the ground of collusion. The equitable mortgagee has never made the slightest claim. He does not now. There is no reason to suppose that he threatens to bring any claim against the purchaser. Such a claim would now be ridiculous; he would be laughed out of court. The purchaser says that he may. But is it a reasonable blot to give effect to? I think not, I think the facts are such that this supposed blot is a purely theoretical and not a practical blot. Nothing could be made of it at law or in equity."

Lopes, L.J. came to the same conclusion on the basis that "the defect relied on has no solid foundation, and ought not to have been allowed to prevail" (in the Court below).

60. In Darvell v. Basildon Development Corporation ⁽⁷⁾ Megarry, J. (as he then was) after examining all the circumstances of the case before him, which was one where specific performance was resisted, held that there was nothing which could be called a substantial or reasonable probability of litigation (which might affect the title). Instead there was mere conjecture of an attack by what would be idle litigation, deserving to be given weight which he would describe as imperceptible in its impact.

61. Another case where specific performance was resisted was M.E.P.C. Ltd. v. Christian-Edwards⁽⁸⁾ and I quote a very short passage from the speech of Lord Russell of Killowen, at p. 220 where he said:-

"In my opinion, if the facts and circumstances of a case are so compelling to the mind of the court that the court concludes beyond reasonable doubt that the purchaser will not be at risk of a successful assertion against him of the incumbrance, the court should declare in favour of a good title shown."

A case on the sufficiency of evidence to show that covenants of the superior lease had been performed was Ringer to Thompson⁽⁹⁾. There the question whether the covenants had been performed was asked by means of requisition. The landlord was threatening proceedings for ejectment. An action had been filed by the landlord but a year hid passed since he been ordered to provide particulars of specific breaches within a week, otherwise there would be a final stay of the action. No further proceedings had been taken but the landlord had stated that he intended to go on with his action. The vendor swore an affidavit that he had been in possession of the premises without other disturbance than the action; that he had repaired he premises; and that to the best of his knowledge and belief the covenants had been performed. The purchaser had had access to the premises but had adduced no evidence of any breach. Fry, J. held that it was obvious that the burden of proof on the vendor involved to some extent the proof of a negative for what he really had to show was that the covenants had not been broken. He was of the opinion that there was before him sufficient prima facie evidence in the affirmative of the performance of the covenants as could reasonably be expected and therefore he would hold that the requisition had been complied with.

62. Sherwin v. Shakespeare⁽¹⁰⁾ is instructive and discusses the distinction between showing a good title on the abstract and verifying it. I will read from the judgment of Sir John Romilly, M. R., at pages 1039 and 1040 of the English Reports:-

63. As regards the standard of Proof of the abstracted documents and of the facts stated in the abstract that is necessary, the authors of WILLIAMS ON VENDOR AND PURCHASER (4th Edition) p. 157 say: "In both these respects the evidence accepted on sales is not quite the same as that which would be required to be given in a court of justice."

64. In our case the only complaint made as regards the title relates to the alleged failure to prove compliance with the lessees covenants in the Crown lease; we are not concerned with the proof of the documents forwarded by the Vendors on the 16th November 1982. Mr. Millett contends that the Vendors' obligation to prove the absence of any practical risk of re-entry by the Crown for breach of the Building Regulations was satisfied by the production of an attested copy of the occupation permit granted by the Building Authority and by specific reference to approved modifications in the letter of the 6th December 1982. He acknowledged that the permit was only prima facie evidence and not therefore conclusive. He accepted that a purchaser who failed to complete was free (if he were sued by the vendor) to prove that despite such prima facie evidence, there were in fact breaches of the Building Regulations warranting a genuine fear of re-entry by the Crown. But in such a case the burden of proof would rest on the Purchaser (In Re Highett and Bird's Contract ⁽³⁾) and the averments to that effect could be supported or rebutted by evidence not available prior to the purchaser's refusal to complete. And so, Mr. Millett argued, a purchaser who failed to complete on grounds of the kind advanced by the Appellants in the face of the prima facie evidence supplied, did so at his peril.

65. Mr. Ferris contended that the occupation permit was not any form of evidence of compliance with the Building, Ordinance and Regulations. It was concerned with occupation, not compliance (section 21 of` the Ordinance). Section 37(l) of the Ordinance showed that there was no obligation on the Building Authority to inspect before a permit was issued. In any event, once the Purchasers had sent their letter of the 24th November 1982 and had pointed out departures from the Regulations, the alleged prima facie evidence would not be enough to discharge the Vendors' obligation to prove compliance with the Regulations. The mere mention of other evidence (i.e. modifications, in unspecified terms) could not be said to convert what was inadequate prima facie evidence into sufficient evidence.

66. Mr. Ferris drew attention to the fact that the Vendors had made no mention of any inspection by the building Authority before the extended date for completion (the 7th December 1982) and therefore the Purchasers had no reason to assume that there had been an inspection. In the Purchasers did not know of the inspection until March 1983. It was also to be noted that the issue of an occupation permit, by reason of section 24 of the Ordinance, did not prevent the Authority from taking enforcement action. Mr. Ferris complains that, in any event, the inspectors spent such a short time in each block, and did so little, that they were not proper inspections. He also made the point that the occupation permit had not been put forward as evidence of title.

67. While much of what Mr. Ferris contended for in relation to the status of an occupation permit cannot be gainsaid, the essential fact remains that no new building may be occupied unless a permit has been issued by the Building Authority after receiving an application in the appropriate prescribed form (section 21(1) and (2) of the Ordinance). And despite the use of the word "may" in subsection (6) of section 21 relied upon by Mr. Ferris, as I read the subsection, the Building Authority is not entitled to refuse to issue an occupation permit (paragraphs (b) to (f) of the subsection do not concern us) if the applicant establishes that no part of the building work contravenes any of the provisions of the Ordinance and the Regulations made thereunder.

68. What I think is particularly important is that the prescribed form (Form No.20 set out in the Schedule to the Builling (Administration) Regulations requires the registered contractor (who must be a person whose name is on the register of registered building contractors for which provision is made in section 8 of the Ordinance) to certify that the building "has been erected in accordance with the provisions of the Building Ordinance and the Regulations made thereunder", of course, as modified by permits issued under section 42. In addition, a registered "structural engineer" has to certify that the structural elements of the building have been erected in accordance with the approved plan and are, in his opinion, structurally safe. This has to be endorsed by another certificate in like terms, signed by the "authorised person".

69. It follows, therefore, in my view that the Purchasers must be taken to have known the basis upon which the occupation permit was issued under the law and to have had notice of the certificates and the fact that the plans for the buildings had been approved.

70. I now turn to discuss what sort of purchaser the Court must have in mind when considering the issues that arise in this kind of case. The Purchasers were fully entitled to insist upon their legal rights whatever their motives for seeking to withdraw from their agreements, but they should not be surprised if (as happened here) their list of condemnations is very carefully scrutinised where, in the absence of any inclination by the Vendors to vary their bargain, they were so obviously looking for excuses not to complete. It is as if they were seeking to construe and apply the Building Regulations more harshly than does the Building Authority.

71. At the time fixed for completion, we are, it seems to me, concerned with a reasonable purchaser, and we must allow that such a person may be prudent and cautious, but here we have purchasers who showed themselves to be of an extravagantly doubtful disposition, exaggerating their fears where no one with a reasonable frame of mind would even see, still less raise, any difficulties.

72. It will be recalled that on the 16th November 1982, the Purchasers had been sent attested copies of the Crown lease and of the occupation permit. The most serious contravention alleged related to the "shadow area". The Vendors' letter of the 6th December 1982 explained that a modification had been granted, and the month and year in which this happened was stated. As regards the other "apparent contraventions" it was merely said that modification had been approved. In my judgment it was not necessary to produce the permits allowing the modifications to perfect the title.

73. The last paragraph of the Vendors' letter was, it is true, stern in tone, but it is not realistic to suppose that if the Purchasers were really worried about the truth of these statements, they would not have been supplied with copies of the modification permits (as, indeed, subsequently happened). I cannot believe it would be right to hold that there was a blot on the title because these permits were not enclosed in the letter of the 6th December 1982. Applying Sir John Romilly's test In Sherwin v. Shakespeare ⁽¹⁰⁾ there were no facts alleged in the notional abstract that required oral or documentary evidence to prove them; all that might have been required was "verification". Title was made out by the 7th December 1982.

74. Further, the Crown and the Building Authority are different legal entities, and the former is not bound by the actions of the latter. However, the Authority is the servant and agent of the Crown, and with the utmost respect to the forceful arguments addressed to us by Mr. Ferris, I am sorry to have to say that it is bizarre in the extreme to suppose that where the Authority has expressed itself as satisfied that a building is fit for occupation, the Crown would forfeit the lease, and for what can only be called trifling contraventions of the Building Regulations.

75. In my view it is not far short of ludicrous to conclude that any reasonably-minded lessor, with covenants in his favour of the kind we have here, would even draw near to the doors of the courts, so that he might be laughed out of court (Re Heaysman's and Tweedy's Contract⁽⁶⁾ Not only is there no risk of a successful assertion being made by a lessor in the circumstances of this case (M.E.P.C. Ltd. v. Christian-Edwards⁽⁸⁾)but there is not the smallest risk of an assertion being made at all.

76. I return to the complaints of breaches of contract only to dismiss them; they did not come even within measuring distance of the kind that could validly have been accepted as a repudiation, and in reaching this conclusion I have considered all the complaints taken singly and together. I would add that I do not regard the cost of rectifying the trivial contraventions to be relevant because the evidence mode it abundantly plain that they would never have been insisted upon, as a reasonable purchaser would know. In any event, the Purchasers would have a remedy in damages if the unexpected happened.

77. Although I have approached some of the issues raised somewhat differently, I respectfully and entirely agree with the general conclusions of Liu, J. in his full and careful judgment. I would dismiss this appeal.

78. I now turn to the cross-appeal. In respect of each of the 200 agreements, 20% of the purchase price was paid. There was no dispute between the parties that unless the Vendors were in default, the Purchasers were not entitled to the return of the first 10% of the purchase price paid for each flat, as being true deposits. The learned Judge reviewed the agreements (which, as we have seen, were all identical in terms) as a whole and found the answer to the question whether or not the second 10% payments were "deposits" lay in the true construction of Clause 16, which is as follows:-

"16.    Should the Purchaser fail to observe or comply with any of the terms and conditions herein contained or if the Purchaser shall fail to make the payments in accordance with the said Second Schedule whether of the deposit or the balance of the purchase price or of any instalment thereof or of any interest within seven days of the date stipulated for payment of the same in the said Second Schedule the Vendor may (subject to Clause 2(ii) hereof) give to the Purchaser notice in writing calling upon the Purchaser to make good his default and in the event of the Purchaser failing within twenty one days from the date of such notice fully to make good his default the Vendor may by a further notice in writing forthwith determine this Agreement and he shall thereupon become entitled to re-enter upon the said premises and repossess the same free from any right or interest of the Purchaser therein and he shall be entitled to forfeiture of the deposit and to receive from the Purchaser as occupation rent a sum equal to interest at the rate of 15 per cent per annum on the whole of the purchase price for the period during which the Purchaser was in occupation. Upon determination of this Agreement the Vendor may resell the said premises either by public auction or by private contract subject to such stipulations as the Vendor may think fit and any increase in price on resale shall belong to the Vendor. On a resale any deficiency in price shall be made good and all expenses attending such resale shall be borne by the Purchaser and such deficiency and expenses shall be recoverable by the Vendor as and for liquidated damages Provided always that the Purchaser shall not be called upon to bear such deficiency or expenses unless the said premises are resold within six months of the determination of this Agreement. The balance (if any) of the monies paid by the Purchaser under this Agreement after deduction of all sums due to the Vendor under this Clause shall be repaid to the Purchaser without interest costs or compensation within one month after such balance has been ascertained. Any notice given pursuant to this Clause shall be deemed to have been validly given if addressed to the Purchaser at the address of the Purchaser last known to the Vendor or the Vendor's solicitors and shall be deemed to have been served on the expiry of forty eight hours after the date of posting."

79. The learned Judge concluded that the phrase "The balance (if any) of the monies paid by the Purchaser under this agreement" could not have meant the final 80% balance of the purchase price which became payable only on completion, for of "the monies paid by the Purchaser under this agreement" before completion, the first 10% deposit was forfeitable and was not available for deduction and repayment under the clause. The 10 equal monthly instalments making up the second 10% were the only moneys left for meeting these purposes. He held that the earlier part of Clause 16 was designed to regulate the rights and obligations of the parties up to completion, and monies payable before completion were classified as "deposit" or "the balance of the purchase price or any instalment thereof". He felt that the latter expression referred unequivocally to the second 10%. In his view the effect of Clause 16 was to restrict Provident's power of forfeiture to no more than the first 10%.

80. The Judge was addressed on the dichotomy between certain clauses in the agreement and the Second Schedule but in the light of his views about the effect of Clause 16, he did not seek to resolve them. The Second Schedule of a typical agreement was in these terms:-

81. Our task is, of course, to determine what the parties meant by the words they have used; the agreement must be read as a whole so that the true meaning of its several clauses is ascertained. If it is possible so to do, effect must be given to every provision in every clause.

82. And so, everything turns of the construction of the instrument as a whole. In Mayson v. Clouet⁽¹¹⁾ the contract made provision for the payment of the purchase price by a deposit and the balance by instalments. In default, the deposit was to be forfeited. When the purchaser defaulted in the payment of the last instalment, the vendor rescinded the contract. The Judicial Committee of the Privy Council held (approving and applying Howe v. Smith ⁽¹²⁾) that the rights of the parties depended on the terms of the contract, and, therefore, although the purchaser could not recover the deposit, he could recover the instalments he had paid.

83. Mr. Ferris took us through tire main body of the agreement and showed us, plainly enough, that a number of clauses could not be made to work, if I may use this expression, if the contentions of the Vendors about the nature of the second 10% payment were valid.

84. I accept that several of the clauses in the agreement when referring to the payment of money by the purchaser cannot be made to apply to the arrangements set out in the Second Schedule. There is no dispute that many of these were standard clauses, insisted upon by the Law Society where agreements for buildings in the course of construction are involved, and where the vendor and the purchaser engage the same solicitors. But the parties were free to agree to what they wished about the nature, time and manner of any payments by the purchaser. Clause 2 begins by saying "The purchase price shall be the sum set out in the Second Schedule hereto which shall be paid by the Purchaser to the Vendor's solicitors as stakeholders in the manner set out in the said Second Schedule .... " and I find no ambiguity in the words used in that Schedule to designate what shall be regarded as "deposit". In this particular agreement there was simply no provision for the payment of instalments of the purchase price after the deposits had been paid. What remained outstanding after the two equal sums of $101,960 had been paid, was due in whole on completion.

85. I can find no escape from the plain and ordinary meaning of the Second Schedule read by itself. The purchase price is stated as $1,019,600. Part payment of "deposit of purchase price" is stated as $101,960. The balance of "deposit of purchase price" is stated as $101,960 to be paid by 10 instalments. The full balance of the purchase price $815,680 is to be paid on completion.

86. Mr. Ferris drew attention to the somewhat unusual term "part payment of deposit of purchase price" but it is to be noted that the expression construed in Howe v. Smith(12) was "as a deposit, and in part payment of the purchase-money" and yet the plaintiff, having failed do perform his contract within a reasonable time had no right to the return of his deposit.

87. The payment of a deposit by instalments is not unknown and I do not see how the position would have been different if our contract had provided, in place of paras. (1) and (2) of the Second Schedule, a provision which said "the sum of $203,920 being payment of deposit of the purchase price to be paid in 20 equal monthly instalments of $10,196."

88. I do not think it would be right for us to look at the letters Mr. Ferris invited us to examine, which were written before the agreements were drawn up; more particularly since it is clear that he "second 10%" payments were all made on and after the 1st May 1981, after the agreements had been entered into on the 7th March 1981 (by Eskensen) and on the 14th March 1981 (by Woomera), and therefore under the agreements as finally drawn up and signed.

89. As I read the agreements I see no difficulty in construing them while giving to the Second Schedule what I consider to be its plain and ordinary meaning. All that has happened is that certain provisions do not apply in the light of the particular arrangements made under Clause 2 and the Second Schedule, arrangements which the Purchasers were free to accept or not as they wished.

90. For these reasons, I respectfully disagree with Liu, J.'s conclusions on this issue, and am for allowing the cross appeal.

(1)    (1841) 7 M. & W. 364; 151 E.R. 806

(2)    (1856) 25 L.J. Ch. 841

(3)    [1903] 1 Ch. 287

(4)    [1912] 2 Ch. 281

(5)    [1960] 2 Q.B. 155

(6)    (1893) 69 L.T. 89

(7)    (1969) 211 E.G. 33

(8)    [1981] A.C. 205

(9)    (1881) 51 L.J. Ch. 42

(10)    (1853) 17 Beav. 267; 51 E.R. 1036

(11)    [1924] A.C. 980

(12)    (1884) 27 Ch, D. 89

Silke, J.A.:

91. I have had the advantage of reading in draft the judgment of my Lord Fuad, J.A.

92. As to those which might be called the "subsequent breaches": the bay window and fanlight were considered as one window by the trial judge. Speaking for myself, I think he was entitled to take the view he did and with that view I would not be prepared to interfere. The further complaints of breach, both as of contract and as relating to a possible right of re-entry, were of such a minor nature that I cannot conceive of their giving rise to the possibility of the right of re-entry argued for nor do I think them sufficient to give rise to a repudiatory breach, sounding as they do, if they can be heard at all, in damages.

93. For me the real issue in this appeal was the verification of title: it being accepted that the word "show" in Clause 14 meant both to show and to prove.

94. By the 7th December 1982 the purchasers were aware of the conditions of the head lease and its obligations upon the vendor to build in accordance with the terms of the Building Ordinance and Regulations, of the approved plans, of the apparent breaches of the Regulations and of the issuance of the Occupation Permit. They were also aware, for they had been told, of the existence of Modifications.

95. The criterion to be applied is that of an ordinary, prudent and willing purchaser and that of an ordinary, genuine and willing vendor. Such a purchaser, even if the disclosure of the Modifications was made late in the day, could, from caution, have taken one of two courses: asked for a sight of those Modifications and their terms before proceeding to the completion table or: ask for them to be on that table for inspection. Matters of evidence and not of title. The purchaser here took neither course though he did, from curiosity, ask to see them subsequent to the 7th December.

96. No vendor would suggest that he held Modifications for contraventions which were, so to speak, plainly apparent on the face of the building, if he did not. He would lay himself open to a rescission of the sale on the basis of misrepresentation. A factor the purchaser should have had in mind.

97. There was, in my judgment, no risk of re-entry by the Crown emerging from the title documents as of the completion date - nor indeed any possibility of a refusal of the renewal of the lease in years to come. The vendors were within the tests laid down by Sir John Romilly, M.R. in Sherwin v. Shakespeare ⁽¹⁾ as to their duty.

98. I too would dismiss the appeal and allow the cross appeal.

(1)    17 Beav. 267; 51 E.R. 1036

Kempster, J.A.:

99. I also have had the advantage of reading in draft the judgment just delivered by my Lord Fuad, J.A. and, save that I would not, for myself, find as a matter of mixed fact and law that the bay and fanlight windows in the sitting-rooms of the flats constituted one window, agree both with his reasoning and his conclusions. In relation to "bonding" I would add that the terms of Regulation 55 of the Building (Construction) Regulations impliedly permit openings and, a fortiori, conduits in non load-bearing as in load-bearing walls providing, as was the case here, an adequate lintel is provided to support the superstructure over the opening.

100. I too would dismiss the appeal and allow the cross-appeal.

Representation:

Mr. F. Ferris, Q.C. and Miss Maria Yuen (Philip K.H. Wong & Co.) for the Appellants

Mr. P. Millett, Q.C. and Mr. R. Kotewell (Deacons) for the Respondent.