Lee Yuk Sum and Another v. Lead Bright Ltd

HCA000673/1999

HCA 673/1999

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

ACTION NO. 673 OF 1999

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Coram: Deputy High Court Judge To in Court

Dates of Hearing: 27-31 October 2003

Date of Judgment: 2 July 2004

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J U D G M E N T

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Background

1.This is an action for damages for breach of contract, misrepresentation and breach of duty of disclosure arising out of a contract for sale and purchase of a duplex unit in Majestic Park at 11 Farm Road, Kowloon. Majestic Park is a property development project of the Sino Group developed by the Defendant. It is located near the former Kai Tak International Airport. At the material time, it was still under construction and the flats were sold subject to the "Law Society Consent Scheme". Majestic Park comprises of four blocks which are connected together enclosing an open square inside. The blocks are numbered Block 1, 2, 3 and 5. There are seven units on each floor in each block identified as Flats A to G. The units on the top floors are duplex units and were sold with the flat roof above.

2.At the time of sale in May 1998, Blocks 2, 3 and 5 of Majestic Park were subject to a height restriction imposed by the Hong Kong Airport (Control of Obstructions) Ordinance (Cap 301), which the majority of Hong Kong people knew would be lifted when the airport moved to Chek Lap Kok. On 20 February 1998, it was announced that the height restriction would be lifted on a date to be notified in the Gazette. However, Block 1 was not subject to that restriction. The duplex units in Block 1 were marketed as "Type 1 Duplex" units and were sold with internal staircase access to the flat roof, stairhood and parapet walls on the flat roof. The duplex units in the other blocks were marketed as "Type 2 Duplex" units. Because of the height restriction, the building plans for Type 2 Duplex units approved by the Building Authority did not provide for construction of the internal staircase, stairhood and parapet walls on the roof and access to the roof of these units would be by way of a cat ladder in the common area outside the units. In anticipation of the lifting of the height restriction, the Defendant sought approval from the Building Authority on 9 April 1998 to amend the building plan for the Type 2 Duplex units for building an internal staircase to access the flat roof through a hatch cover, but no approval was sought for building the stairhood and parapet walls. On 2 May 1998, the Plaintiffs purchased a Type 2 Duplex unit known as Flat G in Block 3 (the "Duplex Unit"). The above amendment to building plan was approved on 14 May 1998 and the Defendant duly constructed the internal staircase and hatch-cover but not the stairhood or the parapet walls for the Type 2 Duplex units. The dispute between the parties is whether the Defendant was under any obligation to construct the stairhood and parapet walls on the Type 2 Duplex unit purchased by the Plaintiffs.

The issues

3.The Plaintiffs' case as pleaded was based on express and implied terms under the sale and purchase agreement. However, at the conclusion of the trial, Mr Hung, on behalf of the Plaintiffs, abandoned their claim based on express term, save as to delay in delivering possession of the flat roof of the Duplex Unit. The issues which I have to decide are:

(1) Whether the Defendant had represented to the Plaintiffs that it would build the stairhood and parapet walls on the flat roof of the Duplex Unit;

(2) Whether there was any implied warranty under the sale and purchase agreement that the Defendant shall deliver a flat roof which is reasonably fit for human habitation; and if there was, whether the Defendant was in breach of the said warranty and whether there was any implied obligation to build the stairhood and parapet walls on the flat roof of the Duplex Unit for the Plaintiffs; and

(3) Whether there was any duty on the part of the Defendant to disclose that it did not intend to build the stairhood and parapet walls on the roof of the Duplex Unit.

4.The Plaintiffs' case is based on the evidence of the 1st named Plaintiff only. The Defendant's case is based on the evidence of its sales director, ("Mr Yu") and Mr Yu's evidence of what he was told by his staff and the staff of the Defendant's estate agent. He was not directly involved in the pre-sale negotiation with the Plaintiffs. Neither party called any witness from the estate agent who handled the sale and purchase. There is no major dispute between the parties as to what happened during the pre-sale negotiations. A peculiar feature of this case is that the parties were silent as to the facilities to be provided on the flat roof and there was no evidence that the Plaintiffs were shown or had seen a model of Majesty Court showing the features of the flat roof. However, what happened when the Defendant attempted to deliver possession of the Duplex Unit to the Plaintiffs is in dispute. For reasons as I shall explain, I consider the 1st named Plaintiff exaggerating and incredible when his evidence is tested against the incontrovertible evidence and the inference to be drawn from the correspondence between the parties and their solicitors. I do not accept the 1st named Plaintiff's evidence.

The relevant chronology

5.The following chronology is not in dispute and is supported by incontrovertible evidence or documents.

The facts

6.The Plaintiffs had three daughters, aged 8 to 12 at the material time and used to live in a house in Ting Kau with a garden. They wished to move to the popular school area in Kowloon and looked for residential property with a roof, which the Plaintiffs' family can use for leisure purposes. On 1 May 1998, the Plaintiffs went to the sales office of the Sino Group in Tsimshatsui. They were received by Miss Choi of Sino Real Estate Agency Limited (formerly known as Chi Cheung Limited), which was a subsidiary of the Sino Group. They asked to be shown duplex units, but such show units were not available. They were given a brochure. Miss Choi introduced them to the sales manager of the Defendant, Mr Lee. Mr Lee gave them the price list of the flats and duplex units. A discount of 5% was shown on the price list of the duplex units. The 1st named Plaintiff bargained for 10% discount. Mr Lee said it was already a good bargain and there was an additional flat roof for the Plaintiffs to use. Indeed, the price list showed the construction area, actual area and flat roof area of the duplex units.

7.At the behest of Miss Choi, the 1st named Plaintiff went to the sales office and saw Mr Lee on the morning of 2 May 1998. Mr Lee said he could only offer 5% discount because the price of the duplex units included a flat roof. The 1st named Plaintiff left.

8.On the same day, again at the behest of Miss Choi, the 1st named Plaintiff went to see Mr Lee, Miss Choi and a Mr To in the conference room of the Sino Group. Again, the 1st named Plaintiff bargained for further discount. After seeking instruction from his superiors, Mr Lee confirmed that the maximum discount the Defendant would give was 5% and repeated it was a good bargain as there was an additional flat roof for the Plaintiffs to use. Mr Lee added that the roof was regular in shape. Thinking that he was purchasing a duplex unit with a flat roof which could be enjoyed and used by his family, the 1st named Plaintiff signed the provisional agreement on 2 May 1998. The formal agreement for the sale and purchase was signed on 6 May 1998 for completion on or before 30 September 1998. The formal agreement provided for an interest of 2% per annum above prime rate on all amounts paid under the formal agreement for the period of delay of completion. On 4 June 1998, the Plaintiffs paid the balance of the purchase price of the Duplex Unit.

9.On 20 July 1998, the Defendant's solicitors informed the Plaintiffs of the Building Authority's approval of the amended building plans and that an internal staircase to the roof and a hatch-cover would be constructed. On 5 October 1998, the Defendant's solicitors informed the Plaintiffs that the Duplex Unit was ready for completion. The Plaintiffs signed the assignment of the Duplex Unit on 12 October 1998.

10.When the Plaintiffs went to inspect the Duplex Unit on the following day, they found that the internal staircase leading to the flat roof was not railed at the outer edge and that access to the flat roof was blocked by hoarding boards, which were in fact thermal insulation boards. They assumed there was no hatch-cover and refused to take delivery of the Duplex Unit.

11.On 14 October 1998, the 1st named Plaintiff made a complaint to Mr Lee. He and Mr Lee went to Majestic Park and inspected the Duplex Unit with the project manager and a security guard. The 1st named Plaintiff alleged that Mr Lee promised to rectify the defects and to inform him when the Duplex Unit would be ready for delivery. The Plaintiffs followed up with a written complaint to the Defendant on the following day and demanded compensation. Though Mr Lee was not called to give evidence on behalf of the Defendant, I reject the 1st named Plaintiff's evidence that Mr Lee promised to rectify the defects as it is inconsistent with Mr Lee's reply on 24 October 1998 and with what Mr Lee said at the subsequent meeting on 29 October 1998.

12.On 24 October 1998, Mr Lee replied that the Defendant would not pay any compensation as the Defendant had built the Duplex Unit in accordance with its obligation under the agreement and the Duplex Unit was ready for delivery.

13.On 29 October 1998, the Plaintiffs wrote to the sales director of the Sino Group, Mr Yu and repeated their complaint that they could not access the flat roof and held the Defendant liable for failing to deliver the Duplex Unit in accordance with the brochure. At 3 p.m. that day, the 1st named Plaintiff, Mr Yu, Mr Lee and Miss Choi had a meeting in the office of the Sino Group. No minute was prepared by the Defendant, but the 1st named Plaintiff prepared a minute which he sent to all the attendees stating that they should inform him if they disagree with the contents of the minute. None of the attendees responded.

14.The minute recorded the following speeches from the attendees which are of significance. Mr Lee said during the negotiation of the sale and purchase, he had never discussed with the purchaser about the facilities of the Duplex Unit, in particular, the stairhood and that before marketing the Majestic Park, he had informed the manager of Sino Real Estate Agency Limited, Mr Chan, that sale of the roof did not include safety installation such as railing and stairhood. Miss Choi confirmed that she was with Mr Lee during the negotiation and the focus of the negotiation was on the price. There was no particular mention about the facilities as there was no show unit available. She said in her experience, duplex units including a roof were sold with stairhood and parapet walls. She said no one had ever told her that these facilities were not included. She expressed surprise that the Sino Group sold the Duplex Unit without these facilities. The 1st named Plaintiff reiterated that the access to the roof was blocked and repeated his demand that the Defendant should complete the stairhood and parapet walls as soon as possible.

15.In addition to the above conversation, the 1st named Plaintiff said that Mr Yu admitted that originally the Defendant had intended to construct the stairhood and parapet walls, but due to the sudden change of the market situation, the Duplex Unit had to be marketed before the completion of the stairhood and parapet walls. Mr Yu disputed he had made this statement during the meeting. But as he did not raise any objection to the minute prepared by the 1st named Plaintiff, I reject his evidence. In any event, this statement is neutral and of no significance.

16.Much of what happened thereafter as mentioned in the chronology was not in dispute, except as to what happened during the inspection on 7 December 1998. According to the Plaintiffs, on 7 December 1998, they inspected the Duplex Unit with Mr Lee. On being told that there was a degree of danger going up to the flat roof, they left and refused to take delivery. On 13 January 1999, the Plaintiffs instituted the present action against the Defendant. Eventually, on the advice of their solicitors, the Plaintiffs took delivery on or about 23 March 1999 and reserved their rights to claim. The Plaintiffs took about three months to decorate the Duplex Unit and moved into the unit in early July 1999. In reply to the Plaintiffs' solicitors' inquiry, the Building Authority replied on 19 August 1999 that the roof was intended for maintenance as the perimeter of the roof was only protected by a curb of 15 centimetres in accordance with the approved plan.

17.On 13 September 1999, Ng of Grand Tech Construction Co Ltd ("Grand Tech") contacted the Plaintiffs to make arrangements for the installation of the stairhood and parapet walls and told them that the Defendant would pay for the construction costs. On or about 20 September 1999, the Plaintiffs' solicitors wrote to the Defendant's solicitors requesting clarification about the work to be carried out by Grand Tech on the Plaintiffs' roof. The Defendant's solicitors replied on 15 October 1999 that the works were related to other units and not the Plaintiffs'. Some work had in fact been carried out on the Plaintiffs' roof but the roof was later reinstated by Grand Tech. I accept Ng's explanation that he contacted the Plaintiffs about the erection of the stairhood due to his own mistake. Subsequently, the Plaintiffs engaged Grand Tech to construct the stairhood and parapet walls at a cost of $380,000.

The misrepresentation

18.The Plaintiffs' case on misrepresentation is unusual. The representations relied upon by the Plaintiffs were that Mr Lee told him on 1 May 1998 that there would be a flat roof for his use and that the purchase was a good bargain, and that Mr Lee told him on 2 May 1998 that there was an additional flat roof for his use and it was regular in shape. Mr Hung submitted that despite the proceedings commenced just a few months after the dispute in January 1999, neither Mr Lee nor Miss Choi were called by the Defendant. Mr Yu said that Mr Lee had already left the employ of the Defendant but that does not explain why no steps had been taken to keep track of his whereabouts before he left in view of the pending litigation. The failure to call Miss Choi was unexplained. These were staff of the Defendant or its subsidiary. The Defendant's failure to call these witnesses leaves it open to the Court to infer that the evidence these witnesses would give would be detrimental to the defence. In the absence of these witnesses, I accept the evidence of the 1st named Plaintiff as regards the pre-sale negotiation. For reasons as I shall explain, I have reservation about the 1st named Plaintiff's evidence as to what happened after completion of the sale and purchase.

19.Mr Wong, SC, attacked the credibility of the 1st named Plaintiff in that he was inconsistent in his answers under cross examination and that much of what he attributed to have been said by Mr Lee was not recorded in his witness statement. I do not think that a fair view of the 1st named Plaintiff's evidence. What the 1st named Plaintiff added was about the advantages of having the flat roof, its regular shape and that it could be put to good use. He had not departed from the statement of claim. The roof was one of the attractions of the Duplex Unit and accounted for $1,243,040 of the price for the Duplex Unit. I would be surprised if these attractions were not mentioned by any salesman. I would also be surprised if a salesman would not have tried to persuade a potential buyer by saying words to the effect that the purchase was a good bargain. These are what one would usually expect to be said by someone trying to push the sale of a flat with a roof. As neither Mr Lee or Miss Choi were called to give evidence, I have no difficulties in accepting the 1st named Plaintiff's evidence about the representations made by Mr Lee which was what would most likely have been said in the circumstances.

20.In essence, the Plaintiffs' case of misrepresentation is that Mr Lee told them that the purchase was a good bargain and that it included a flat roof of regular shape for their use. Whether a purchase is a good bargain or not is a matter of opinion. Certainly, what Mr Lee said must be his own opinion of the bargain and is not capable of being a representation of fact. In any event, it was just commercial puff. Even if it were a statement of fact, it is not an actionable misrepresentation.

21.As for the flat roof, there is no dispute that the flat roof was included in the sale and was so included in the assignment. The flat roof could be used by the Plaintiffs, though the purpose for which it could be used was limited because of the lack of safety barrier or parapet walls and access to the roof through the hatch-cover was inconvenient. To that extent, there was no misrepresentation. It never was the Plaintiffs' case that Mr Lee represented to them that there would be a stairhood or parapet walls on the flat roof, though those were the structures which the Plaintiffs thought would come with the roof. As recorded in the minute of the meeting on 29 October 1998, Mr Lee denied ever discussed with the 1st named Plaintiff during the pre-sale negotiation about the stairhood. The 1st named Plaintiff did not dispute this at the meeting. Miss Choi also confirmed that the negotiation was mainly about the price and not about the facilities.

22.It is the Plaintiffs' case that they entered into the sale and purchase agreement as a result of what Mr Lee said on 1 and 2 May 1998. Thus, it appears that they are relying on their implication of what was said by Mr Lee. However, the 1st named Plaintiff is a qualified building services engineer and operates his own engineering company. He agreed that the top floor plans for the Type 1 Duplex units show internal staircase access to the flat roof but the top floor plan of the Duplex Unit does not, though he said he was not aware of that at the time. However, he admitted under cross-examination that before signing the provisional sale and purchase agreement, he was aware that there were stair wells shown on the roof plans for the Type 1 Duplex units but not on those for the Type 2 Duplex units. He must have realised that there would be no stairhood in the Duplex Unit. Furthermore, in all the correspondence prior to the amendment of the Statement of Claim on 26 October 1999, there was never any allegation of misrepresentation by Mr Lee. For example, in the Plaintiffs' letter of demand dated 29 October 1998, the Plaintiffs demanded delivery of the Duplex Unit in accordance with the sales and purchase agreement, the Defendant's solicitors' letter of 20 July 1998 and the sales brochure. Compliance with all these three requirements did not require the building of the stairhood or parapet walls at all. In fact, compliance with these three requirements means that the Defendant shall not build any stairhood or parapet walls because of the height restriction and the approved building plan then in force.

23.I therefore come to the conclusion that the Plaintiffs' case that they were induced by Mr Lee's representation to enter into the contract is a recent concoction. I am also unable to find that what Mr Lee said could be taken as an implied representation that the stairhood and parapet walls would be erected on the roof. If the Plaintiffs are to succeed on the basis of an implied promise, they would have to do so by reliance on breach of implied warranty and implied term. There is no substance at all in the Plaintiffs' claim of misrepresentation.

The express contractual obligation

24.The Plaintiffs' claim on contract is essentially that the Defendant was under an express or implied contractual obligation to deliver them the Duplex Unit upon completion with internal staircase with railing to the flat roof, a stairhood and parapet walls on the flat roof similar to the Type 1 Duplex units. Probably through recognising their difficulties with founding a claim on express term, the Plaintiffs no longer pursue their claim on the express term save in respect of delay in delivering vacant possession of the Duplex Unit. The Plaintiffs' claim under the implied terms is rested on two limbs. It is Mr Hung's submission that to give business efficacy to the sale and purchase agreement, it has to be implied into that agreement, firstly, a term that the flat roof would be completed in a proper and workmanship manner and would be in a reasonably fit state for human habitation and, secondly, a term that the Defendant would seek appropriate approval from the Building Authority and would construct a stairhood and parapet walls on the flat roof when the height restriction was lifted. Both limbs of the Plaintiffs' claim are related. The second limb of Mr Hung's argument to a large extent depends on the first limb.

25.Though the Plaintiffs have abandoned their claim based on express term, it is nevertheless necessary to ascertain what was the Defendant's contractual obligation under the express terms of the sale and purchase agreement in order to consider the Plaintiffs' claim under the implied terms. The Defendant's obligation under Clause 4(1)(c) of the sale and purchase agreement was to complete the Duplex Unit in compliance with the building plans on or before 30 September 1998. "Building plans" is defined under Clause 1(1)(c) to mean the general building plans and specifications prepared by the Authorized Person and approved by the Building Authority under Reference No. BD2/4040/94 and includes any approved amendments thereto. The right to amend the building plans whenever it considered necessary was reserved to the Defendant as the developer under Clause 20(1). There was no need to seek the purchaser's consent to any proposed alteration, save that the developer was under an obligation to notify the affected purchasers of any alterations to the building plans after they have been approved by the Building Authority. Another safeguard to purchasers is that if the alteration resulted in a difference in saleable area for more than 5%, the purchaser is entitled to rescind the sale and purchase agreement. There is no argument that these conditions were unfair or unconscionable. The Defendant had also duly notified the Plaintiffs of all proposed amendments and approval by the Building Authority.

26.When the sale and purchase agreement was signed on 6 May 1998, the applicable approved building plans in respect of the Duplex Unit did not provide for an internal staircase to the flat roof or hatch-cover or parapet walls because of the height restriction in force at the time. Access to the flat roof was by way of a cat ladder from outside the Duplex Unit. The flat roof was only protected by a curb of 15 centimetres. The brochure given to the Plaintiffs was consistent with the approved building plans applicable at the time in that it showed there was no stairhood and internal staircase to the roof. On 9 April 1998, in anticipation of the move of the Kai Tak International Airport, the Defendant applied for amendments to the building plans to provide for an internal staircase and hatch-cover for the Type 2 Duplex units, but not stairhood or parapet walls. The amendment was approved on 14 May 1998, soon after the Plaintiffs entered into the provisional sale and purchase agreement. The Defendant's solicitors duly notified the approval to the Plaintiffs. Thus the Defendant's express contractual obligation was to build and deliver the Duplex Unit with a flat roof with external access initially, which was later enlarged to include the internal staircase to the flat roof with access through a hatch-cover. Having made these findings of facts, I now turn to the implied warranty and implied terms.

Implied s warranty and implied term

27.Mr Hung submits that in the sale of a flat to be built by a developer there must be an implied warranty that it will be completed in a proper and workmanlike manner and will be reasonably fit for human habitation. He referred me to the following passage in Halsbury's Laws of England, Vol 42 at paragraph 48:

"..... where a house in course of erection is sold by the builder there is an implied warranty that it will be completed in a proper and workmanlike manner and will be reasonably fit for human habitation; but, even in such a case, no implied warranty is applicable if there is an express contract between the parties as to the way in which the building is to be completed ..." (italicised part was not quoted by counsel for the Plaintiffs but was relied upon by counsel for the Defendant)

He also cited para 13-015 of Chitty on Contracts which is to the same effect:

"It is well established that prima facie upon a contract for sale of a piece of land with a house on it, there is no warranty as to the habitability of the house. The same rule would apply in the case of an uncompleted house, which is the subject-matter of a sale, where the structure stands at the time of the sale. But where the vendor sells a piece of land and covenants to build or complete a house on it, there is, at common law, an implied term (i) that the work will be done in a good and workmanlike manner, (ii) that he will supply good and proper materials, and (iii) that the house will be reasonably fit for human habitation when built or completed. This implication may, however, be rebutted where the purchaser has himself expressly prescribed the way in which the work is to be done, and the work has been completed in accordance with his instructions." (italicised part was not quoted by counsel for the Plaintiffs but was relied upon by counsel for the Defendant)

28.Mr Hung then referred me to Lam Man Fung Mamie and Active Benefit Ltd HCA No. 11556 of 1997, unreported. In that case, the plaintiff bought a top floor flat with the roof top in Monterey Villas in Peng Chau from the defendant property developer. Monterey Villas was also a development project covered by Law Society Consent Scheme. After the plaintiff took possession of the property, she found that the access to the roof top was by way of a trap door and the roof top was unfenced. The building was built to the maximum height permitted under the Special Conditions of the Conditions of Sale of the land on which the property was built. To erect a stairhood or fencing would be in breach of the Conditions of Sale of the land. After quoting the above passage from Chitty on Contracts without the last sentence, Chung J held that the sale and purchase agreement was one whereby the defendant sold a piece of land and covenanted to build or complete a building on it and a term should be implied in the agreement that the roof top should be reasonably fit for habitation.

29.Mr Wong, SC, submits that the rule cited by the learned authors of Halsbury and Chitty was only a prima facie rule and such implied warranty may be excluded by express terms of the sale and purchase agreement if the parties agreed to the way in which the building was to be completed. He submits that Mr Hung's argument is misconceived because in citing the passages in Halsbury's Laws of England and Chitty on Contracts, Mr Hung omitted an important qualification as contained in the second half of the sentence in Halsbury's Law of England and the last sentence in Chitty on Contracts that the implication is rebutted if there is an express contract between the parties as to the way in which the building is to be completed. He further submits that the decision in Lam Man Fung Mamie and Active Benefit Ltd was reached per incuriam because this important qualification to any finding of implied warranty had not been considered by Chung J at all nor had the English Court of Appeal decision in Lynch v Thorne [1956] 1 WLR 303 been referred to.

30.In Lynch v Thorne, the plaintiff agreed to purchase from the defendant builder a plot of land with a partially erected dwelling house on it and the defendant undertook to complete the dwelling house in accordance with the plan and specifications annexed to the agreement. It subsequently appeared that water penetrated into the house through a nine-inch wall built in accordance with the plan. The plaintiff's claim based on implied warranty was rejected by the Court of Appeal. It may be useful to quote in full two very useful passages from Lord Evershed MR's judgment as they cover practically all that could have been argued in favour of implying such a warranty in favour of a purchaser. Lord Evershed MR held at 307:

"The effect of that evidence and those findings is that the contract having provided that the house should be built and completed in a particular way by the use of particular materials of particular characteristics, the builder precisely and exactly complied with his obligation. And he is also found to have shown through his servants a high standard of workmanship. Prima facie that finding seems to me, on the language of Romer LJ, necessary to exclude the operation of any implied contract. May I repeat the language of the Lord Justice: 'Where, however, the contract is for the sale of a house when completed, there is an implied contract on the part of the vendor, in the absence of there being any express contract as to the way in which the house is to be completed, that the house shall be completed in such a way that it is fit for human habitation.' Here there was an express contract as to the way in which the house was to be completed. The express provisions were exactly complied with, and any variation from them which would have rendered this wall water proof would (as Parker LJ observed during the course of the argument) have been a deviation from the express language of the contract.

Mr Garland has sought to avoid that result in one of two ways. He has said, first, as I have followed him: even though there is here an express contract precisely prescribing the way in which this work is to be done, still there is an overriding promise or warranty that the edifice, when built in strict accordance with those terms, will be a habitable house. That seems to me to involve an extension of the principle of implied terms for which I can find no authority, and which indeed seems to me to be in direct conflict with the authorities to which I have already referred. Then, secondly, he says - and Mr Garland uses this rather to emphasize and support the main contention already stated: after all, the plaintiff, the unfortunate Mr Lynch, no expert himself in the mysteries of architecture and house building, relied, and the judge found that he relied, upon the skill and the judgment of the defendant, the builder. I am unable to derive from that fact the conclusion which commended itself to the judge. Of course, if a skilled person promise to do a job, that is, to produce a particular thing, whether a house or a motor-car or a piece of machinery, and he makes no provision as a matter of bargain as to the precise structure or article he will create, then it may well be that the buyer of the structure or article relies upon the judgment and skill of the other party to produce that which he says he will produce. But that, after all, is only another way of formulating the existence in such circumstances of an implied warranty. On the other hand, if two parties elect to make a bargain which specifies in precise detail what one of them will do, then, in the absence of some other express provision, it would appear to me to follow that the bargain is that which they have made; and so long as the party doing the work does that which he has contracted to do, that is the extent of his obligation."

31.Both Lam Man Fung and Lynch v Thorne were considered by Burrell J in Chan Yeuk Yu & Anor v Church Body of the Hong Kong Sheng Kung Hui & Anor, [2001] 1 HKC 621 in which the same argument of implied term was pressed by the plaintiff seeking to set aside the sale and purchase agreement. The issue for determination in that case was whether the internal spiral staircase to the roof was defective. Burrell J found it was not. But on the issue of implied warranty, he declined to follow Lam Man Fung but applied Lynch v Thorne. He held that as a matter of law it could not be an implied term that a different staircase would be built as that would be inconsistent with the express term that the developer would build a flat in accordance with the detailed specifications. This was, of course, obiter. Mr Wong, SC urged me to follow Chan Yeuk Yu v Church Body of the Hong Kong Sheng Kung Hui.

32.Terms are not implied into a contract merely because it would be more expedient or would make better business sense. Terms are only implied to give business efficacy to a contract and as a matter of necessity. The court will not imply any terms into a contract which the parties are too lazy to make for themselves. In Kensland Realty Ltd and Whale View Investment Ltd & Another [2001] 4 HKCFAR 381 at 392, the Court of Final Appeal adopted the decision of the Privy Council in BP Refinery (Westernpoint) Pty Ltd v Shire of Hastings (1978) 52 ALJR 20 and held that any term to be implied must be: (1) reasonable and equitable; (2) necessary to give business efficacy to the contract, so that no term will be implied if the contract is effective without it; (3) so obvious that it goes without saying; (4) capable of clear expression and (5) not contradict any express term of the contract. So, we have a clear statement of the law that no term is to be implied into a contract which contradicts any of its express terms. The rule stated by the learned authors of Halsbury's Laws of England and Chitty on Contracts is only prima facie and, as the authors wrote, may be rebutted by express terms. If the parties have by express agreement specified how a house is to be built, and if the house so built in accordance with the agreed specification is unfit for human habitation, there can be no room for any warranty of fitness for human habitation to be implied into the contract.

33.Turning to the facts of the case, the Plaintiffs walked into the sales office of a property developer marketing a development project under construction. They looked for a duplex unit with roof. They were shown price lists of the flats and the duplex units and a brochure. As compared with the flat immediately below the Duplex Unit, the price differential between the two units was $680 per square foot. The price attributable to the roof of 651 square feet was therefore $1,243,040 ($680 x 1,828) or $1,909 ($1,243,040 ÷ 651) per square foot as compared to $7,406 per square foot for the flat immediately below. The price paid for the flat roof was very substantial. It must be within the parties' contemplation that the flat roof was to be used for leisure purpose and not for maintenance. Thus, prima facie, there is an implied warranty that the flat roof of the Duplex Unit will be completed in a proper and workmanlike manner and will be reasonably fit for human habitation in that the roof may be safely used for leisure purpose.

34.As I have found above, under the express term of the sale and purchase agreement, the obligation of the Defendant was to build the flat roof without the stairhood and parapet walls but with a curb of 15 centimetres and a hatch-cover in reserve for erection of a stairhood in future. The height restriction was lifted on 10 July 1998. Had the Defendant wished, it could have applied to the Building Authority to amend the building plan to provide for the construction of these structures. It did not do so and it was not obliged to. The express obligation of the Defendant was to build a curb and a hatch-cover. This has been complied with. To build a parapet walls instead of a curb and a stairhood instead of a hatch-cover to render the roof habitable for leisure purpose would have been a deviation from the express obligation under the sale and purchase agreement. Mr Hung argues that the warranty could still be implied if it is only partially inconsistent with the express term. However, on the facts of this case, there is no room for such warranty to be implied based upon partial inconsistency.

35.Quite apart from inconsistency with the express terms, the other conditions required for the warranty to be implied are not met. While some kind of barrier may be required to ensure the flat roof may be safely used for leisure purpose, there is no business efficacy to require a stairhood to be built. The type of barrier to be built is also incapable of precise formulation in the absence of express agreement as to the material, design and specification. In the circumstances, I am unable to find there was an implied warranty that the flat roof should be habitable and accordingly no term could be implied into the sale and purchase agreement to the effect that the Defendant shall construct the stairhood and parapet walls on the roof. The Plaintiffs' claim based on implied warranty and implied term must fail.

36.In view of the above finding, there is no need for me to find if the flat roof was indeed unfit for human habitation. If I have to, I would follow Chung J in Lam Man Fung v Active Benefit Ltd and find in favour of the Plaintiffs. I reject the Defendant's expert's evidence that compliance with Building Regulations and issue of occupation permit are conclusive that the roof top was fit for human habitation. The Building Authority may refuse to issue an occupation permit to a new building under circumstances specified in section 21(6) of the Buildings Ordinance. There is no need to go into details about those circumstances. They are technical and are in essence concerned with compliance with approved building plans. The Building Authority was not concerned with the specific purpose for which the flat roof was to be used. Obviously, on the applicable building plans, the Building Authority envisaged that the flat roof would be used for maintenance purpose and not leisure purpose as could be inferred from the restricted access through a hatch-cover and the minimal protection of a 15 centimetre curb. In its letter dated 19 August 1999, the Buildings Department was conscious of the danger due to the lack of barrier provision on the flat roof and advised the Plaintiffs to stay away from it other than for maintenance purpose. Whether the flat roof is habitable is a question of fact for the Court. It is foreseeable that children will play or carry on activities of some kind on the flat roof. It is plainly obvious the flat roof is dangerous and unfit for habitation if unfenced.

Non disclosure

37.Mr Hung argues that the design of the flat roof, especially so far as it was affected by the height restriction was peculiar, that the flat roofs of Type 2 Duplex units may be put to other uses after the height restriction was lifted was also peculiar and that all these were within the knowledge of the Defendant but not the purchasers. Hence, Mr Hung argues that the Defendant was under a duty to disclose to the Plaintiffs that the Defendant did not intend to build the stairhood and parapet walls and if the flat roof is to be enjoyed in the usual manner as part of their residence the Plaintiffs have to wait for closure of Kai Tak International Airport and removal of the height restriction and then to apply to the Building Authority to erect the stairhood and barrier on the flat roof. In effect, the Plaintiffs' case boils down to the issue whether in view of the peculiar design of the Type 2 Duplex units, the Defendant was under a duty to inform the Plaintiffs of the aforesaid matters.

38.Silence, as opposed to a positive representation, is colourless. It cannot influence a person to act to his detriment unless it acquires a positive character and that there must be a duty to speak owed to the person prejudiced. In Moorgate Mercantile Co Ltd and Twitchings [1977] AC 890 at 903A, Lord Wilberforce said:

"... inaction or silence, by contrast with positive conduct or statement, is colourless: it cannot influence a person to act to his detriment unless it acquires a positive content such that that person is entitled to rely on it. In order that silence or inaction may acquire a positive content it is usually said that there must be a duty to speak or to act in a particular way, owed to the person prejudiced. ..."

Such a duty may arise if a party is under a legal duty to dispel the other party's misunderstanding as to some essential matter. In Pacific South (Asia) Holdings Ltd and Million Unity International Ltd, Godfrey JA (as he then was) said at 1244:

"Where one party to a transaction perceives that the other party is labouring under a mistake as to some essential matter, he comes under an obligation to undeceive the other party if his omission to do so will 'foster and perpetuate the delusion' (as it is put in Spencer Bower and Turner, Estoppel by Representation, 3rd edn., (1977), at para. 59). In such a case silence is in effect a misrepresentation that the facts are indeed as the other party mistakenly believes them to be; and the first party is estopped from ascertaining otherwise."

39.Was Mr Lee under a duty to speak and dispel the Plaintiffs of their misunderstanding? On the facts, the Plaintiffs walked into the sales office of one of Hong Kong's leading property developer which was marketing the Majestic Court. They were looking for a duplex unit with a roof. One would expect, as did the Plaintiffs, a stairhood and parapet walls would be standard features of a roof. Indeed, the Defendant's own estate agent, Miss Choi, said during the meeting on 29 October 1998 that she was surprised that these structures were not included in Majestic Court. As far as the Defendant's intention not to build the stairhood and parapet walls for these units are concerned, it was clearly disclosed in the building plans and the brochure. There was no staircase well shown in the roof plan in the brochure and the staircase depicted in the top floor plan of the Duplex Unit in the brochure was marked with a one way arrow towards the floor below. This indicates that there would be no internal staircase access to the flat roof and no stairhood would be built. The plan for the Type 1 Duplex unit is distinctly different, showing the stairhood on the roof plan and two way arrows on the staircase on the top floor of the duplex unit. There are similar roof plan and floor plans attached to the sale and purchase agreement to the same effect. As the intention not to build these structures had been disclosed, was the Defendant still under a burden to draw that to the attention of the Plaintiffs? There was no evidence that the Plaintiffs had seen any model of the development representing the features on the roof. The Plaintiffs asked no question about the features on the roof on both 1 May 1998 and 2 May 1998. There was nothing to suggest to Mr Lee that the Plaintiffs were acting under any misunderstanding. The price of the Type 2 Duplex Units was lower than that of the Type 1 Duplex Units to take into account the lack of the stairhood and parapet walls. The 1st named Plaintiff read the brochure and the plans therein for about ten minutes on 1 May 1998. He took the brochure home. Under cross examination, he admitted that before signing the provisional sale and purchase agreement he was aware that there were stairhoods shown on the roof plans for the Type 1 Duplex units but not on those for the Type 2 Duplex units. In the circumstances, it cannot be said that the Defendant perceived that the Plaintiffs were labouring under a mistake as to some essential matter. It cannot also be said that the Defendant's silence rendered what was represented by the brochure or the plans in the sale and purchase agreement untrue. The Plaintiffs' claim based on breach of duty of disclosure must also fail.

The Defendant's failure to give access to the roof and to provide railing for part of the staircase

40.The Plaintiffs' case is that when they inspected the Duplex Unit on 13 October 1998, they found the upper flight of staircase to the flat roof was completely blocked by hoarding boards and they could not access the roof at all. The 1st named Plaintiff said that when he visited the Duplex Unit again on 14 October 1998 with Mr Lee, Mr Lee promised to rectify the defect. That evidence, I have rejected as an exaggeration because it is inconsistent with Mr Lee's reply on 24 October 1998 and with what Mr Lee said during the meeting on 29 October 1998. Mr Yu said that the hoarding boards referred to by the 1st named Plaintiff were thermal insulating boards to keep away the heat from the metal hatch-cover. That is supported by the photographs. I have no doubt that the hatch-cover had been installed at the time and that the flat roof was accessible through the hatch-cover which was locked for security reason. According to what Mr Yu was told by the Defendant's staff, the Plaintiffs had not requested to open the hatch-cover for inspection of the flat roof but took the view that no hatch-cover had been built and left. This is hearsay and the staff and Mr Lee who attended to the Plaintiffs on 13 and 14 October 1998 were not called to give evidence. However, in the Plaintiffs' letter dated 29 October 1998 and their solicitors' letter dated 26 November 1998, the Plaintiffs alleged that the access to the flat roof was blocked and there was no hatch-cover. It is thus apparent from these letters that the 1st named Plaintiff assumed there was no hatch-cover access to the flat roof. Mr Yu explained in his letter dated 4 December 1998 that the hatch-cover had been installed in accordance with the amended building plan. The 1st named Plaintiff was obviously mistaken and refused to take possession.

41.According to the 1st named Plaintiff, when he visited the Duplex Unit with Mr Lee on 7 December 1998, he was not allowed access to the roof for safety reason. But according to Mr Yu's inquiry, the 1st named Plaintiff did not conduct the inspection upon being told there was a degree of danger going up the roof. Though this is also hearsay, I have no difficulty in rejecting the 1st named Plaintiff's evidence as I consider him exaggerating. The hatch-cover had been installed. There was no reason why the Defendant's staff should refuse to let the Plaintiffs access the flat roof for inspection for the purpose of taking delivery of the Duplex Unit. The 1st named Plaintiff is a building service engineer by profession. He could not have mistaken insulation boards for hoarding boards. The opening in the insulation board to access the hatch-cover was apparent from the photographs. These suggest his evidence is biased and exaggerated. His evidence about what Mr Lee admitted on 14 October 1998 was shown to be unreliable. I am not satisfied that he was not exaggerating as to what happened on 13 and 14 October 1998 and on 7 December 1998. The Plaintiffs bear the burden of proof. The Defendant had completed the Duplex Unit in accordance with the applicable approved plans. In the circumstances, I am far from being satisfied that they have discharged the burden of proving that the Defendant failed to deliver possession of the Duplex Unit on 13 or 14 October 1998 or on 7 December 1998. The Plaintiffs' claim for non-delivery must also fail.

42.As for the complaint that no railing has been installed on the top flight of the staircase leading to the flat roof, the defence relies on the occupation permit, which is prima facie evidence that the building plans have been complied with. There is no evidence from the Plaintiffs to the contrary. This claim must therefore also fail.

Conclusion

43.For the above reasons, the Plaintiffs' action is dismissed. However, this is a case in which it can fairly be said that the Defendant brought litigation upon itself. The Defendant is one of Hong Kong's top property developer. Stairhoods and parapet walls are usual features which a consumer reasonably expects would be erected on a flat roof to be sold. If these were otherwise, it should be clearly brought to the notice of an intended purchaser. It was not. It would not have been difficult to include a brief note in the brochure or price list to the effect that upon removal of the height restriction the Defendant would apply to the Building Authority on behalf of all owners for amendment of building plan to enable the owners to build these structures at their own costs and for their better enjoyment of the duplex units. It would have made a good marketing point also. The above views are not to be taken as inconsistent with my finding on implied warranty and non-disclosure. The Defendant narrowly missed liability on fine points of law. For these reasons, I consider the Defendant brought litigation upon itself and should be deprived of its costs. Accordingly, I make a costs order nisi that there be no order as to costs.

Representation:

Mr Andy Hung, instructed by Messrs W.L. Yuen & Co., for the Plaintiffs

Mr Wong Yan Lung, SC, instructed by Messrs F. Zimmern & Co, for the Defendant