Tai Wai Kin v. Cheung Wan Wah Christina

HCMP001858/2003

HCMP1858/2003

IN THE HIGH COURT OF THE

HONG KONG SPECIAL ADMINISTRATIVE REGION

COURT OF FIRST INSTANCE

MISCELLANEOUS PROCEEDINGS NO.1858 OF 2003

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Coram: Hon Tang J in Court

Date of Hearing: 7 May 2004

Date of Judgment: 18 May 2004

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J U D G M E N T

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Background

1.The plaintiff is the purchaser under an agreement for sale and purchase dated 7 January 2003 of the 2nd floor and the roof of the building ("the Building") erected on Lot 724 in DD227 ("the Lot") as such the plaintiff was also purchasing a one third share in the Lot. The plaintiff was the vendor. Messrs Johnnie Yam, Jacky Lee & Co ("the Third Party") who have been joined by order of Reyes J were the vendor's solicitors in this transaction. The purchase price was $1,650,000 and a deposit of $165,000 has been paid. Completion was to take place on 7 February 2003. However, pursuant to clause 37 of the sale and purchase agreement, it was postponed to 6 March 2003 because the plaintiff required a loan from the Hong Kong Housing Society ("HKHS") Home Starters Loan Scheme. It was also agreed that the defendant must prove good title to the HKHS at least 14 working days prior to the completion date, namely, 17 February 2003.

2.The transaction fell through as a result of requisitions raised by the plaintiff.

3.The question before me is whether the defendant has failed to answer adequately and/or satisfactorily the requisitions raised on behalf of the plaintiff and whether the defendant has failed to prove or make out a good title.

4.The Property is held under New Grant No.5501 ("the New Grant") dated 10 August 1973. The Lot is described as "as delineated and shown coloured red on plan annexed" to the New Grant.

5.By a Boundaries Agreement Memorial No.90124 dated 7 July 1977, the then owner surrendered part of the Lot coloured red on the plan annexed to the New Grant such that thereafter Lot 724 was as shown coloured pink on the plan annexed to the Boundaries Agreement.

6.The title documents were provided by the Third Party to the plaintiff's solicitors Messrs Terry Yeung & Lai ("TYL") on 6 January 2003. These documents included the New Grant, the Boundaries Agreement, the Modification Letter dated 12 January 1983 and a Certificate of Exemption of building works dated 12 October 1991.

7.It seemed that the building in which the Property is situated was erected after the date of the Certificate of Exemption, namely 12 October 1991.

8.The Modification Letter modified special conditions 3 and 5 of the New Grant such that a three-storey building as opposed to a two-storey building was permitted but its height must not exceed 7.62 metres and the maximum built-over area not to exceed 65.03 square metres.

9.The Certificate of Exemption was given pursuant to section 5 of the Buildings Ordinance (Application to the New Territories) Ordinance, Cap.121 ("Cap.121") to exempt the building(s) to be erected on Lot 724 from the provisions of the Buildings Ordinance, Cap.123. It was in terms a certificate of exemption of building works. It exempted the building to be erected from :

" ... the regulations made thereunder in relation to building works, subject to the conditions contained or referred to in the attached schedule and the terms and conditions governing the lot.

The Government reserves the right to revoke and cancel this Certificate in the event of any breach of any of the aforementioned Conditions in which case you would be required to apply formally to the Building Authority for approval of plans. The Government may also be entitled to take enforcement action under the Lease.

Please note that 'building works ' under the Buildings Ordinance (Application to the New Territories) Ordinance, Chapter 121 do not include site formation or drainage works and you are required to submit plans formally to the Building Authority under the terms of the Buildings Ordinance for the approval of such site formation and drainage works unless separate Certificates of Exemption are issued by me in respect of such works."

10.Another document that I should mention is a Toleration Letter Memorial No.203884. The letter confirms that :

" ... that the breach of condition contained in the Modification Letter dated 12.1.1983 set out in the Schedule below will be tolerated by Government only for the life of the building presently erected on the lot.

Schedule
Condition No.	Nature of breach
(1)3.(a)	House height in excess of 0.06m
As the building erected on the lot is exempted from the provisions of the Buildings Ordinance Cap.123, under the Buildings Ordinance (Application to the New Territories) Ordinance Cap.121, no site formation, building or other plans had been approved by the Building Authority in respect of the above lot and building erected thereon and accordingly this certificate is not to be construed as a representation by Government that the building erected on the above lot or any works in connection therewith are structurally safe and Government expressly excludes any liability arising out of such construction or works."

11.The Letter of Toleration concluded by saying "A Certificate of Compliance will/may be issued to you as soon as the registration formalities attaching to the duplicate of this letter have been completed."

12.The Letter of Compliance is dated 26 March 1993 and stated :

" The redevelopment of the house on the lot pursuant to the New Grant No.5501 as modified by Memorial No.104472 under which the above lot is held has been inspected and I certify that all the positive obligations imposed on the grantee of the above lot have been complied with the requirement of this office.

I have no objection to the structure to be occupied."

13.The letter of compliance is important because general condition 10 in the New Grant provides :

"10. (a)When the conditions herein contained have been complied with to the satisfaction of the District Officer, the grantee shall subject to approval of his title by the District Officer be entitled to a Crown lease of the lot for the term stated in the preamble to these Conditions."

14.Also under special condition 21(b) :

" No building at any time hereafter to be erected on the lot shall be occupied in any way except by not more than two watchmen, until the District Officer shall have certified in writing that these Conditions have been complied with to his satisfaction."

15.Under section 14(3) of the Conveyancing and Property Ordinance ("CPO"), a person who has a right to a Government lease upon compliance with any conditions precedent :

"...shall be deemed, for the purposes of this section, to have complied with those conditions -

(a) upon the issue by the Government of a certificate that those conditions have been complied with and the registration of that certificate in the Land Registry under the Land Registration Ordinance (Cap 128);"

Requisitions

16.The requisitions were first raised on 9 January 2003. The first related to the plans annexed to the New Grant and the Boundaries Agreement. It is said that the Lot could not be identified because the copies of the plans annexed to those documents were not coloured.

17.The second outstanding requisition related to the Certificate of Exemption of building works and it asked for Certificates of Exemption in respect of the site formation and drainage works issued by the District Lands Officer or proof that plans of such works had been submitted to and approved by the Building Authority.

18.The third related to the fact that no Certificate of Compliance had been registered and referred to section 14 of the CPO.

19.The reply by the Third Party dated 11 January 2003 was that there was no legal requirement that a plan annexed to a certified copy of documents should be coloured. And it also stated that the location of the property could be identified easily in accordance with the colour code inside the plan in question. I should mention that neither of the plan had any colour code.

20.As for the requisition relating to the site formation and drainage works, the answer given was that :

"Please refer to the aforesaid toleration letter and letter of compliance dated 2nd November 1993 whereby the building erected on the lot is exempted from the provisions of the Buildings Ordinance Cap.123, no site formation building or other plans have been approved by the building authority in respect of the lot."

21.On the question of the requisition of the Letter of Compliance the answer was that the issuance of the Letter of Compliance was "an evidence to prove that a crown lease is deemed to be granted in accordance with condition No.10 of the New Grant No.5501, the registration of the letter of compliance is meaningless". This is wrong and ignored section 14(3) of the CPO.

22.I will deal with greater detail with the second requisition because of its complication.

23.In response TYL by their letter dated 15 January 2003 wrote in relation to the site formation and drainage works :

"Nowhere in the said Toleration Letter and Letter of Compliance dated 2nd November 1993 (copy enclosed) states that Certificates of Exemption of the site formation and drainage works in respect the of Lot have been issued or that the plans in respect of the site formation and drainage works of and in the Lot have been submitted to and approved by the Building Authority. We repeat and maintain our requisitions. As noted from the said Toleration Letter, the height of the building of which the above property forms part exceeds 7.62m by 0.06m, please let us have an Occupation Permit in respect of the said building issued by the Building Authority."

It is to be noted that they asked for the Occupation Permit.

24.The reply from the Third Party came on 21 January 2003. In relation to the site formation and drainage plans they said :

"The toleration letter memorial no.203884 clearly stated that no site formation building or other plans has been approved by the Building Authority. However, the Government has exempted this requirement of Certificate of Exemption by way of issuance the compliance of the Lot an estoppel has been arise (sic) in favour of the landowner which prevent the subsequent request for evidential documents."

25.TYL replied on 24 January 2003 and referred to section7(2) of Cap.121 and said :

"... Since the height of the building of which the above property forms part exceeds the height of the building described in Part I of the Schedule to the said Ordinance, production of an Occupation permit in respect of the said building issued by the Building Authority is required. We repeat and maintain our requisition."

26.The Third Party replied on 5 February 2003 and enclosed a copy of the letter to the Building Authority dated 30 January 2003.

27.That letter after referring to the Letter of Toleration made the point that :

" In view of the case Ho Kwok Cheung & other v. Chai Li Jia HCMP No.555 of 1998 that the said toleration letter would not contain any representation that the statutory functions of the Building Authority was being assumed or exercised. We would be grateful if you could let us know whether the Grantee had submitted the plans for site formation and drainage works and/or the rebuilt works for your approval prior to the commencement of building works and/or rebuilt works of the property.

If your answer hereto is affirmative, please let us know whether an occupation permit could be issued by your goodself as soon as possible."

28.TYL replied on 10 February 2003 and said that since the height of the building exceeded the height of the building described in 1(1)(b) of Part I of the Schedule Cap.121 :

"... production of both Certificate of Exemption as well as Occupation Permit issued by the Building Authority under Buildings Ordinance Cap.123 in respect of the Building is required. Certificate of Compliance dated 2nd November 1993 does not remove the necessity for either the Occupation Permit or Certificate of Exemption. Consequently, we repeat and maintain our requisition for production of Certificate of Exemption in respect of the site formation and drainage works and Occupation Permit in respect of the Building. Your client is obliged to produce the aforesaid documents to show and give good title to the above property."

29.The next letter from the Third Party was dated 12 February 2003 and in relation to the Occupation Permit they drew attention to part I of Schedule of Cap.121

" ... which provides that the height of exempted House should not be more than 8.23 m. Please also refer to Modification Letter dated 12th January 1983, the permitted height of the subject House was 7.62 m. In the Letter of Toleration dated 26th July 1993, it was stated that the height of the subject House was in excess of 0.06 m over the permitted height of 7.62 m under the said Modification Letter. Therefore, the height of the subject House pursuant to the said Letter of Toleration and the said Modification Letter would be less than 7.68 m (i.e. 7.62 m plus 0.06 m excess).

As the height of subject House is of less than 7.68 m which is within the prescribed height limit of 8.23 m under Part I of the Schedule of Cap.121. Accordingly the subject House is exempted from the requirement of having the occupation permit under the Building Ordinance. Your cited cases do not apply to our present case.

3. We would give you on completion our undertaking to send you certified copy Letter of Compliance duly registered in Land Registry."

30.TYL replied on 13 February 2003 :

"... we repeat and maintain our requisition for production of Certificate of Exemption in respect of the site formation and drainage works and Occupation Permit in respect of the building of which the above property forms part now standing on the said Lot."

31.TYL also enclosed a copy letter from the Buildings Department dated 11 February 2003 and made the point that the Property might be subject to enforcement action.

32.It is necessary to refer the two paragraphs from the letter from the Buildings Department dated 11 February 2003 :

" I would like to advise you that there is no record of any submission of drainage plans under the Buildings Ordinance in respect of the captioned site. You may apply for certified true copy(ies) or viewing of the approved plans for the proposed site formation works by submitting the attached application form in order to clarify whether the extent of approved works covers any drainage works or not. You may then clarify with the District Lands Office on the subject of Certificate of Exemption on Drainage Works.

I would also like to confirm that for buildings exceeding the parameters on size stipulated under Buildings Ordinance (Application to New Territories) Ordinance, they are subject to compliances with the B O Cap.123. In the absence of approval & consent from the Building Authority in respect of their construction, they are considered unauthorized building works and may be subject to enforcement action under BO s.24(1) in accordance with the prevailing policy against unauthorized building works."

33.The next letter from the Third Party is dated 14 February 2003 in which it asserted :

"...It is an undisputed fact (please immediately correct us if it is disputed) that the subject House is of the height less than 7.68 m."

34.That was immediately disputed by TYL by their letter dated 15 February 2003 relying on the Letter of Toleration.

35.The Third Party's letter of 14 February 2003 went on to say :

"b.	If there is no excess of the said height limit stated in Part I of the Schedule to Cap.121, the Certificate of Exemption issued by the District Lands Office is sufficient proof that occupation permit is not required.
c.	We have produced the Certificate of Exemption in respect of building works. As Letter of Compliance has been issued, Certificate of Exemption in respect of drainage and site formation are not required."

36.It went on to say that the letter from the Building Authority dated 11 February 2003 did not support the requisition because the Building Authority had not said that the Property exceeded the parameters. Then it asserted as a matter of fact that the Property fell written the parameters because, according to them, the Property is of a height less than 7.68 m. Then they asked the purchaser to produce evidence to prove that the Property exceeded the height limit of 8.32 m.

37.TYL replied on 15 February 2003 and denied that it was agreed that Occupation Permit was not necessary or that the drainage and site formation works need not be approved by the Building office or be covered by a Certificate of Exemption.

38.The Third Party replied on 17 February 2003 enclosing a copy of a report issued by TMB Architects Ltd dated 17 February 2003. They drew attention to the analysis and conclusion in the said report and claimed that having regard to the report, the Property is exempted from the Buildings Ordinance and that, the building erected on the land does not exceed the dimensions under Part I of the Schedule to Cap.121. The Third Party concluded by asking for confirmation by 5 p.m. that the letter was accepted.

39.By a letter dated 19 February 2003 TYL said that the vendor was in breach of the agreement and reserved the purchaser's rights and remedies under the same purchase agreement.

40.By a letter dated 20 February 2003 the Third Party claimed that they had answered satisfactorily all requisitions and shown a good title on 17 February 2003.

41.By a letter dated 25 February 2003, TYL demanded return of the deposit.

Provisions of Cap.121

42.In order to understand the requisition relating to Cap.121, it is necessary to have to consider the provisions of Cap.121 in some detail. Under section 11 the powers of the Director of Lands under Cap.121, other than his powers under section 4, may be exercised on his behalf by any District Lands officers. The relevant section are sections 5, 6 and 7 and also Part I of the schedule :

Section 5:

"Subject to the provisions of this Ordinance, the Director shall issue a certificate of exemption in respect of building works in the New Territories -

(a) for a building to be built by any person and to be used for non-industrial purposes;"

Section 6 :

"Where the Director has issued a certificate of exemption under section 4 or 5 he may also issue -

(a) a certificate of exemption in respect of site formation works;

(b) a certificate of exemption in respect of drainage works."

Section 7 :

"(1) Subject to subsection (2) and to compliance with any conditions imposed by the Director under section 9 -

(a) sections 4, 9, 14, 21 and 30 of the Buildings Ordinance (Cap 123) and the regulations made under that Ordinance shall not apply -

(i) in respect of building works or site formation works; and

(ii) for any building,

specified in a certificate of exemption; and

(b) the provisions and regulations mentioned in paragraph (a) and section 28 of the Buildings Ordinance (Cap 123) shall not apply -

(i) in respect of any drainage works; and

(ii) for any building,

specified in a certificate of exemption,

carried out by or on behalf of the person named in that certificate of exemption.

(2) Subsection (1) shall not apply in relation to a certificate of exemption issued under section 4 or 5 in respect of a building of greater dimensions than the building described -

(a) in the case of -

(i) a certificate of exemption in respect of new housing; ...

in Part I of the Schedule;"

Part I of the Schedule :

" CONDITIONS

PART I

CERTIFICATE OF EXEMPTION IN RESPECT OF

NEW HOUSING OR COMMUNITY USE, OR

ISSUED UNDER SECTION 4

1.(1) The building, when constructed, will be a building of not more than 3 storeys and -

(a) of a height of more than 7.62 m but not more than 8.23 m and with a roofed-over area not exceeding 65.03 square metres, and in respect of which the thickness of each load-bearing wall-

(i) in the case of a load-bearing reinforced concrete wall is not less than 175 mm thick; or

(ii) of the lowest storey is in the case of a load-bearing brick wall not less than 340 mm; and

(iii) of any higher storey is in the case of a load-bearing brick wall not less than 225 mm; ..."

43.Here the Certificate of Exemption granted by the District Lands Officer was expressly granted under section 5 of Cap.121. It was in terms a Certificate of Exemption in respect of building works. Section 5 confers power on the District Lands Officer "to issue certificates of exemption in respect of building works". Hence a section 5 certificate of exemption relates only to building works. Building works does not include site formation works or drainage works. See section 2 of Cap.121.

44.Where a certificate of exemption in respect of building works has been issued under section 5 the District Lands Officer may also issue certificates of exemption in respect of site formation works and drainage works. See section 6 of Cap.121.

45.The effect of a section 5 or section 6 certificate of exemption would depend on section 7.

46.Under section 7(1) an occupation permit (section 21 of the Buildings Ordinance) is not required in respect of building works specified in a certificate of exemption.

47.Also under section 7(1)(b), section 28 of the Buildings Ordinance which regulates drainage works, shall not apply in respect of any drainage works; and for any building specified in a certificate of exemption. That I believe is the reason why in the Certificate of Exemption quoted in paragraph 9 above, the final paragraph noted that the Certificate of Exemption did not cover site formation or drainage works and that "you are required to submit plans formally to the Building Authority under the terms of the Buildings Ordinance for the approval of any such site formation and drainage works unless separate Certificates of Exemption are issued by me in respect of such works".

48.That being the case, separate certificates of exemption would be enquired in relation to site formation work or drainage works. As it transpired the Building Authority had approved site formation and drainage works in respect of the Building. However this was not made known to TYL by the Third Party prior to the rescission of the transaction.

49.But the matter did not stop there. It appears from the Letter of Toleration the height of the building exceeded 7.62 m by 0.06 m. Admittedly, it is not more than 8.23 m. Under section 7(2) the exemptions granted under section 7(1) regarding compliance with the requirement of the Buildings Ordinance would not apply if the building is of greater dimensions than as described in Part I of the Schedule.

50.Under Part I of the Schedule, if the height of the building is more than 7.62 m but not more than 8.23 m and if the roofed-over area does not exceed 65.03 m2, there is a further requirement that the thickness of each load-bearing wall :

"(i) in the case of a load-bearing reinforced concrete wall is not less than 175 mm thick; or

(ii) of the lowest storey is in the case of a load-bearing brick wall not less than 340 mm; and

(iii) of any higher storey is in the case of a load-bearing brick wall not less than 225 mm;"

51.Thus, the thickness of the load-bearing wall is significant and that is probably why in the report of TMB Architects Ltd there was an attempt to deal with this. According to the report :

"3. Thickness of Load Bearing Walls

3.1 Assuming the thickness of external wall finishing being 25 mm and the thickness of internal wall finishing being 13 mm, the actual thickness of Load Bearing External Wall is 185 mm.

3.2 The thickness Load Bearing External Wall, presumably of a Reinforced Concrete construction, exceeds 175 mm."

52.But unfortunately the report did not go far enough. First it did not say or certify that the load-bearing external wall was of reinforced concrete construction. It simply said that it was presumably of reinforced concrete construction. Furthermore, in regard to the thickness of the load-bearing external wall it should exceed 175 mm but only because of the assumption made by the maker of the report that the thickness of the external wall finishing was 25 mm and the internal wall finishing 13 mm. I am afraid that is not good enough. On the other hand, if the load-bearing walls were not of reinforced concrete construction they did not satisfy the thickness requirement of Part 1 of the Schedule.

53.Mr Lee Yee Hung, who appears on behalf of the defendant, has made the further point that it appears from the same report that the area of the house as measured by the architect is 65.079 square metres (paragraph 1.2.2). But that its conclusion that the area of the house does not exceed the prescribed maximum of 65.03 square metres under Cap.121 is based on "Assuming the thickness of external wall finishing being 25 mm, the actual area of the House measured to the structure is 64.509 s.m." (paragraph 2.1) Mr Lee made the point that the TMB Architects Ltd did not say that the roofed-over area of the house did not exceed 65.03 s.m. since under Cap.121 it is the roofed-over area which is relevant. He made the additional point that roofed-over area is defined as meaning "the area of a building enclosed within the external faces of the main structural wall (which includes any party wall) of that building ..." He said there is no justification given by TMB Architects Ltd why the thickness of the external wall finishing should be ignored for the purpose of the calculation of the roofed-over area. There is force in Mr Lee's complaint that TMB Architects Ltd had not explained why in the calculation of the roofed-over area the external wall finishing could be excluded.

54.I believe the thickness of the load-bearing wall is critical to the Third Party's case. In order for the exemption from the requirement of the occupation permit under section 7(1) of Cap.121 to apply to the building, the vendor must show that if the height of the building exceed 7.62 m although it is not more than 8.23 m the thickness of the load-bearing wall is not less than 175 mm thick if it is of reinforced concrete construction. The defendant had failed to show that. That being the case the Certificate of Exemption issued under section 5 would not have the effect of exempting compliance with section 21 of the Buildings Ordinance. In other words, an occupation permit was required. Thus, even though the District Lands officer had issued the Certificate of Exemption, the Certificate of Exemption was not effective in exempting compliance with section 21 of the Buildings Ordinance.

55.I should also mention that TMB Architects Ltd also purported to certify that the height of the building did not exceed 7.62 m. But having regard to the Letter of Toleration I do not believe the plaintiff could be expected to rely on TMB Architects Ltd's certification, which is based on the "normal" thickness of the make-up roof finishing, and not its actual thickness.

56.I turn to consider the fact that no certificate of exemption was issued in respect of drainage works or site formation work. It has transpired, though this only became known subsequent to 17 February 2003 and therefore does not avail the defendant, drainage works plans and site formation plans were indeed approved by the Building Authority in respect of the building.

57.What I should consider is whether on the assumption that they had not be approved by the Building Office, the fact that a certificate of compliance had been issued is sufficient.

58.I do not believe the Letter of Compliance or the Letter of Toleration would preclude the Building Authority from taking action. Both the Letter of Compliance and the Letter of Toleration were issued by the District Officer pursuant to the provisions of the New Grant and not under any statutory power. The reference to the New Grant in the Letter of Compliance, and the language of the Letter of Toleration have made that clear. Moreover, the District Lands office only has limited power under Cap.121, and as I have said, the effect of any certificate of exemption granted by him would depend on whether section 7(2) applied. Furthermore, the letter from the Buildings Department dated 11 February 2003, quoted in paragraph 32 above, shows that enforcement action might be undertaken.

59.Mr Samuel Chan who appears for the Third Party argued that the plaintiff should have applied for certified true copies or inspection of the approved plans for drainage works and formation work in order to preserve the bargain relying on Mexon Holdings Ltd v. Silver Bay International Ltd [2000] 3 HKCFAR 109 at 117D-H and 118G-119G. I do not think that can be right. During the requisitions it was maintained by the defendant that site formation and drainage works were not required to be approved nor certificate of exemption in relation to them necessary. Moreover, the letter from the Buildings Department dated 11 February 2003 which I have referred to in paragraph 32 above does not say in terms that there were approved plans for drainage works though it may be possible to gather from that letter that there were approved plans for site formation works. Also it is difficult to see on a transaction of this kind what more one could have expected the plaintiff to do to see the bargain through. Mexon Holdings Ltd requires me to approach the matter with common sense. I am concerned with a modest property and a purchaser who was applying for a Homestarter's loan from HKHS. I do not believe the vendor could refuse to do its part, wait for the time for completion to arrive and then forfeit the deposit when the purchaser failed to complete, putting the heavy burden on the purchaser to seek to recover the deposit paid. In this case, the deposit paid was $165,000. The costs of litigation in this case must be quite a heavy burden on the plaintiff already. Vendors must recognise that the duty is on them to show and prove good title. A falling property market does not relieve them from this duty. If anything, it behoves them to be more vigilant. Here I am not concerned with a falling market but that is an irrelevant consideration anyway. Depending on the circumstances, the purchaser may be expected to do more or less in order to see the bargain through. But that does not mean the vendor can shift his burden onto the purchaser.

60.In my opinion, the defendant has failed to answer the second requisition adequately or satisfactorily, nor was it able to show good title.

61.I return to consider the first requisition, namely, the colouring of the plan.

62.Section 13(2) of the Conveyancing and Properties Ordinance, Cap.219, permits the production of a copy, certified by a solicitor, "to be a true copy" of any document. Here the New Grant and the Boundaries Agreement were certified true copies. However, they were not coloured. It is quite clear that the plans annexed to the certified copies were photocopies so, although the colour red in the New Grant and the colour pink in the plan annexed to the Boundaries Agreement was not reproduced, one can see a shaded area or smudge in these plans. It has not been said, and I do not think it is the case, that it was not possible for properly coloured plans to be obtained. Presumably the government would have a copy with colours. The original grantee must also have a copy with colour. It may be as Mr Lee has submitted that the coloured copy had been given to one or other of the owners of the other third share in the Building. Be that as it may, if the question of the forfeiture of the deposit depended on it, I do not understand why the duty to cooperate relied upon by Mr Samuel Chan should make it fair that the deposit should be forfeited when it was within the power and ability of the vendor to procure certified true copies with colour or colour coded. As I have said it has not been asserted on behalf of the defendant that it was difficult or impracticable for the vendor to procure a certified true copy. If both parties to a bargain acted with a lack of common sense or unreasonably, I would let the loss fall on the party who had the primary duty to produce the document, leaving him to his redress, if any, against his solicitors. Here the Building was erected on a small lot of land with an area of 700 sq.ft only. As is clear from the Boundaries Agreement, "the situation, area and boundaries of the lot as re-sited shall as from the date of execution hereof be as shown coloured pink on the new plan annexed hereto and not as shown coloured red on the original plan". So the plan is important, I see no reason why the purchaser should be required to accept a smudge on the plan instead. So I am also of the view that the first requisition had not been satisfactorily answered.

63.Now I turn to consider the third requisition. It seems that by 14 February 2003, the Third Party realised that the letter of compliance should be registered and they said in their letter that they would register the letter of compliance before completion. In their second letter dated 14 February 2003 from the Third Party to TYL which reads: "We would inform you that the certified copy Letter of Compliance had been lodged to the Sai Kung New Territories Land Registry for registration with Memorial No.546680 refers. Copy receipt from the relevant land registry enclosed for easy reference." The receipt shows that a document has been submitted for registration and the Land Registry receipt reads : "We pledge to register and return the instruments by 12/03/2003 under normal circumstances (target 97%)." Now under the Land Registration Regulation, Cap.128, registration of an instrument when completed "take effect from the date recorded on the memorial of the instrument..." See regulation 16. However, that is so only after the registration has been completed. Here according to the receipt, there was a pledge "to register and return the instruments by 12/03/2003". The date for completion was 6/03/2003. TYL referred the Third Party to Lui Tak Kin v. Chan Yin Kai [1998] HKC 362 as early as 24 January 2003. The delay on the part of the Third Party to effect registration of the Certificate of Compliance is inexplicable. Their earlier assertion that registration was unnecessary was plainly wrong. Registration of the certificate of compliance was essential to the passing of legal title on completion. As of 14 February 2003, the certificate of compliance was in the course of registration. It is possible that the registration could have been completed by 7 March 2003. In that case on completion, legal title could be conveyed. This argument had not been fully explored at the hearing. TYL had not responded to the Third Party's 2nd letter of 14 February 2003. Had they done so the Third Party might have been able to demonstrate that the vendor would be in a position to convey the legal title on 7 March 2003. In all the circumstances I am of the view that this requisition has been satisfactory answered, or was not pursued by TYL after 14 February 2003.

Conclusion

64.For the above reasons I grant a declaration in terms of paragraphs (1), (2), (3) and (4) of the amended originating summons. I order that the defendant pays the sum of $165,000 and $5,000 together with interest from 30 April 2003 at the judgment rate until payment. As for the stamp duty of $12,475, I would grant a declaration that the plaintiff is entitled to be indemnified by the defendant in case the plaintiff is unable despite reasonable effort to reclaim the same from the Collector of Stamp Duties.

65.The Third Party took part in this part of the proceedings and agrees to be bound by its result. As for the claim against the Third Party, it was agreed that it should be tried separately.

Costs

66.Costs of the plaintiff's claim against the defendant should be borne by the defendant. Such costs to be taxed if not agreed.

67.The Third Party has argued that such costs should be on the District Court scale. I think the claim involves difficult points of law. An earlier application by the Third Party to have the proceedings transferred to the District Court was refused by Reyes J. I would not order costs on the District Court scale. Of course, the Third Party's liability for such costs will depend on the outcome of the Third Party claim.

Representation:

Miss Grace Chow, instructed by Messrs Terry Yeung & Lai, for the Plaintiff

Mr Lee Yee Hung, instructed by Messrs Danny Lau & Lam, for the Defendant

Mr Samuel Chan, instructed by Messrs Baker & McKenzie, for the Third Party